By JONATHAN.
As a commercial term the word which heads this article stands for one
of the marked tendencies of the times. Speculation is not a new thing.
Words in the book of Proverbs suggest that the practice may have been
rife twenty-five hundred years ago. “He that maketh haste to be rich
shall not be innocent,” said the wise king; and it was his testimony
that, even then, there was “nothing new under the sun.” But it is safe
to say that seldom in history has a spirit of speculation so potent and
wide-spread appeared among a people as in our own land in recent years.
We often advert to a period in France. It was when John Law deluded
himself, was deluding the people with his gigantic financial schemes.
The “Mississippi Bubble” arose before the eyes of men, a fascinating
thing, and grew larger and larger. Then everybody seemed seized with the
fever of speculation. In 1719 it reached its height. All France was in
a ferment, and every one bent on getting speedily rich. From all parts
of the kingdom, and from other countries, people crowded into Paris to
speculate in the enterprises of Law, who was the idol of the populace,
with more than regal power. The disastrous results to the French nation
flowing from the popular mania of that day are a matter of history, whose
lessons may be pondered. Our country has seen no epoch which could match
that in France of over a century and a half ago. There has been here no
equal national convulsion resulting from the same cause. But the spirit
of speculation to-day is in the air all over the land. We have seen it
grow and widen; we have seen communities agitated by it, and suffering
from its work; we have seen operations of a speculative nature carried
on by our bold and skillful men of affairs, whose magnitude would have
astounded the fathers; and mischievous consequences of speculation we
have seen which were felt in every part of our country. Bishop Butler’s
idea that insanity is not only an affliction of individuals, but likewise
at times of communities, has abundance of historical facts to stand upon.
It is hardly exaggeration to say there have been times when certain of
our communities were beside themselves with the mania of speculation.
The time was, and not very long ago, when a millionaire in America was
almost unknown; now men with a million of money are common enough, and
those with their hundred millions are likely soon to be so. These great
fortunes, we understand, were acquired for the most part by fortunate
speculation. This new western world has presented such a field for
speculation as was never known elsewhere, and of the multitudes who have
entered it, some have had success.
The word speculation is a broad one, and covers an immense class of
transactions. It may do, for a general definition, to say that it means
the risking of money with the hope of gain. The element of contingency
enters into all veritable speculation. The speculator assumes a risk;
he makes a venture; he takes a chance. He may be entirely confident of
gaining, but there is a possibility of his losing. The man who buys a
piece of real estate, or any commodity, expecting that it will rise in
value and he will make money by selling at a higher figure, speculates.
The man who invests money in some undeveloped enterprise, believing it
will prove a “bonanza,” speculates. The man who, in our stock and produce
exchanges, deals in “futures,” and “options,” and “margins,” calculating
upon a contingent rise or fall in the market to return him the amount of
his venture increased, speculates. The man who risks his money in “pools”
at the horse race or rowing match, hoping to double it, the man who tries
his luck on the gaming table, hoping to win, speculates. In making this
classification, however, the writer would not, of course, be understood
as making these different transactions named in a moral point of view
the same. Distinctions will presently be made which it is hoped to the
reader’s mind will be clear.
The great arena of operations in the line of speculation in our land is
found in the Exchanges and Boards of Trade of the cities. These have
become numerous, and of various kinds, and the growth of some of them
has been prodigious. We now have stock exchanges and produce exchanges,
cotton exchanges and oil exchanges and coffee exchanges. Thirty years
ago the Chicago Board of Trade was just making a beginning, and feeble
enough it was at the start. It is now by far the greatest exchange for
produce in the world, and in the year 1882 not less than three billion
dollars’ worth of business was here transacted. A seat in the New York
Stock Exchange costs thirty thousand dollars; and it has been shown that
the yearly transactions of this wonderful mart, represented in dollars
and cents, are but little less than three times “the taxable valuation
of all the personal property in the United States.” Our exchanges have
become marts of speculation. The business now done in them, aside from
that which falls properly into the speculative class, is inconsiderable.
They are not, simply or chiefly, places to which producers bring their
products for sale, and where men buy commodities, and sell at a fixed
advance, which pays for the trouble of handling them. For the most part,
those who trade here buy and sell calculating upon a rise or fall in
the market which shall yield them a gain. Their gain is a contingent
matter; they run the risk of a loss. This is speculation. It is a fact
well understood that, in by far the greater part of the transactions in
our exchanges, there is no veritable buying and selling of merchandise,
the buyer paying the price demanded and receiving his purchase. The
buyer neither pays for nor receives his purchase. His purchase is not
a purchase. With a hundred or two dollars he buys merchandise to the
value of thousands. The fact is, he pays, not for the commodity, but for
a chance to make money from a rise in the price of the same; and his
money goes to insure the one through whom he operates against loss from
fluctuations in the market. On the other hand, the sale of the seller
is not a sale. He sells what he has never seen and never bought. It
is a chance he sells; and if fortune has favored him, he receives the
difference between the price of the commodity at the time of buying and
the time of selling. This is speculation, and something more. To one who
had just come out of a Rip Van Winkle sleep and knew nothing of customs
which in recent years have come into being in our land, there are things
which would be decidedly puzzling. The present production of petroleum
is estimated at about sixty thousand barrels a day; but in the different
oil exchanges of the country nearly one hundred times this amount is
daily bought and sold. Our farmers all together produce only one-fifth
the number of bushels of grain per year as reported as changing hands
in the Chicago Board of Trade; and the hogs of trade here are easily
twice as many as the whole land affords. In the New York Stock Exchange
stocks and bonds are daily bought and sold more by a million dollars’
worth than exist; and the statement has been made that “when the cotton
plantations of the South yielded less than six million bales, the crop on
the New York Cotton Exchange was more than thirty-two millions.” It was
from expressions in the speeches of General Butler upon finance that we
formed the phrase “fiat money;” and it would seem that fiat wheat, and
fiat pork, and fiat cotton, and fiat stocks, and fiat oil abound in the
exchanges of our cities.
It may be well, for the sake of the uninitiated, to attempt an
explanation of certain terms in common use in connection with modern
speculation. A man is “long on the market”—signifies that his buying
has been in excess of his selling. He has oil, or grain, or whatever
the article of merchandise may be, on hand—though perhaps not in fact;
he has bought more than he has sold. A man “sells short”—means that
he sells more than he has bought; he has an amount of merchandise to
deliver in excess of what he has purchased. The trading in “options” has
played an important part in the transactions of our exchanges. “Options”
are of two kinds; buyers’ options and sellers’ options. In the case of
the former, a man engages to take at a stipulated price merchandise to
a certain amount, within a specified time; while the seller’s option
binds one to deliver merchandise as aforesaid. The term “futures” in
significance is not essentially different from “options.” “Puts” and
“calls” are speculative terms which have become very familiar. A person
thinks there is to be a decline in the market. He pays to another a
sum agreed upon for the privilege of “putting” so much of an article
in trade, or disposing of it to him at a price named, within a certain
time—a privilege he may, or may not use, as he sees fit. Or, he believes
the market will advance; and he pays for the privilege of “calling” or
taking so much merchandise, as aforesaid. Buying and selling “on margins”
is very common. In some exchanges the most of the business done is of
this class. The method is easily understood. A man wishes to buy for
speculation, a thousand barrels of oil. He pays into his broker’s hands a
hundred dollars, more or less, and the broker buys the oil. The hundred
dollars is a “margin.” The phrase of trade is “putting up margins.”
The margin is the broker’s security. In case the market falls, and the
oil remains on his hands, it secures him from loss. So much for the
vocabulary and methods of speculation.
But there is an aspect of this large question which must not be
passed by. What is to be said of speculation regarded from a moral
point of view? Unquestionably there is such a thing as legitimate
speculation—speculation which is not to be condemned as morally wrong.
The man who invests money in some commodity, paying for and receiving
it, with the hope that he will be the gainer from its rise in value, it
is right to call a speculator, but not right to call an immoral one.
But there is another kind of speculation. A careful consideration of
some of the practices set forth in this article should convince the
candid that, though there are many good men engaged in them, they can
hardly be justified in the light of the moral law. With regard to the
character of gambling there is no controversy. Every one admits its
immorality. And gambling is a broad genus; its species are many. This
excellent definition has been given of it: “The art or practice of
playing a game of hazard, or one depending partly on skill and partly on
hazard, with a view, more or less exclusive, to a pecuniary gain.” The
old Romans prohibited gambling, not on account of its immoral character
and influence, but because its tendency was to render the people too
effeminate; and for the same cause at first, laws against gambling were
enacted in Great Britain. But in our own land the law forbids gambling of
various forms because it is felt to be a vice, wrong and demoralizing.
We have laws against lotteries and against betting. These, and other
practices, are generally recognized as species of this vice. But our
courts have decided that other things come under the same head, as to
whose character there is not the same general consent. By judicial
decision the person who takes a chance in a “grab-bag” at a church fair
gambles; and in a most unequivocal manner, in the courts of different
states, the opinion has been given that certain popular forms of
speculation are gambling. Our judges have repeatedly said that those who
speculate on “margins,” or trade in “options,” and have to do with “puts”
and “calls,” gamble; and it is difficult to see how the decision can be
gainsaid. Some people may be able easily to see that buying and selling
“on margins” is not playing a game of chance for money; that taking an
“option” is not like buying a ticket in a lottery; and that the method
known as “puts and calls” is not very much the same as betting; but there
are many thinking people who have not the ability.
Just an allusion may be made to a practice of modern speculation, of
which some one has forcibly and truthfully spoken as “exaggerated
gambling.” It is what is known as “cornering the market.” Speculators
by forming a combination gain a control of the market, and force it up
and down to serve their own interests. In this way immense fortunes
have been made. The writer’s limits do not allow of his entering into a
discussion of the methods employed. Heartless, cruel, wicked, are mild
terms to apply to this “exaggerated gambling.” It is true that, by this
cornering of the market, men are “squeezed” and fleeced and ruined who
are not themselves scrupulous as to their methods; but the effects of
the pernicious practice often do not stop with these men. Great corners
in grain markets, by raising the price of bread-stuffs, have resulted
in untold suffering among the poor, and affected in a most unhappy way
the whole country. In 1879 there were two famous corners which will not
soon be forgotten, a corner in wheat, and the “Armour pork corner.” As a
result of these, the price of pork was more than doubled, flour advanced
two dollars a barrel, and there was a general decided rise in value of
the necessaries of life. Millions of money were made, but the loss to the
country was immense, and the suffering occasioned incalculable. It was
estimated, in a report made to a state legislature, that the syndicate
which manipulated the wheat corner was the occasion of a loss to the
public in different ways of not less than three hundred millions. As yet
there is no punishment by the law of the enormity of which these cases
are illustrations.
A final word can hardly be omitted with regard to the effects of
speculation in general upon those engaged in it, and upon communities
where the spirit is rife. Even those who are so hardened that they are
unable to see that certain peculiar forms of it are immoral and wrong, as
is claimed, will hardly deny that speculation is a pursuit which is to be
censured on other grounds. The excitement of it is neither physically,
mentally, nor morally healthful. It has a fascination which is dangerous;
to break away from it comes to be like the Ethiopian’s changing his skin,
or the leopard’s his spots. The cases are sadly frequent where it unfits
one for the enjoyment of home, the pleasures of society, the duties
of the citizen and the Christian. And in a multitude of cases it has
brought those absorbed in it to the mad-house and to an untimely grave.
The judgment of the candid and reflective must be that “making haste
to be rich,” even by ways confessedly proper, is not best. Moreover,
terms too strong can hardly be used in speaking of the harmful effects
upon a community of a spirit of speculation filling the air. There is
seen a feverish condition of things which is not well. Regular business
is neglected; duties are passed by; the action of others is blindly
and rashly followed. And it is always the case that, sooner or later,
to by far the greater number who give way to the spirit and embark in
the glittering speculative schemes, there comes disaster. Communities
could easily be pointed out in whose condition of prosperity strikingly
reversed one might read: “The demon of speculation hath done this.”