270 SPECULATION 



stored goods is private, and consequently the speculative risk 

 remains. Cooperative organizations of farmers frequently erect 

 warehouses, and thus provide storage without asking this service 

 of the speculator. There is an increasing number of farmers' 

 organizations that provide storage and pool the product over a 

 period of time, so that all price fluctuation speculative risks 

 are distributed among those using the organization. But the fact 

 remains that at the present time the bulk of our storage facilities 

 for food products is provided by speculators, and that these persons 

 are thereby performing a necessary social service. If the farmers 

 can perform this service through cooperative organizations in a 

 cheaper and better manner, and thus introduce savings, they are 

 at liberty to do so and ought to do so. 



These three functions of the speculator in food products hold 

 true for both organized and unorganized speculation. Unques- 

 tionably the great bulk of speculation in the United States is 

 unorganized speculation; unquestionably also the bulk of the 

 public attention and discussion of speculation centers around 

 organized speculation, the lesser of the two forms. This is due 

 to the concentration of organized speculation in a few great 

 exchanges, and to the superficial spectacularity of its methods. 



Speculation on the Organized Exchanges. Before considering 

 the services of speculation on the organized exchanges, it is well 

 to look at three common errors in the public mind on this question. 

 (1) Does speculation cause high prices? In the popular mind it 

 does. "Cornering the market" a form of speculation now prac- 

 tically extinct on the organized exchanges may cause a temporary 

 rise in price, but speculation as defined in this chapter does not 

 cause high prices. (2) Does speculation cause low prices? Oddly 

 enough, speakers who accuse speculation of causing high prices 

 when addressing city audiences, will, when addressing producers, 

 make the claim that speculation makes low prices. The super- 

 ficial theory here seems to be that Mr. A. by selling short one 

 hundred thousand bushels of wheat to Mr. B. (wheat that A. does 

 not at the moment own) thereby depresses the market by this 

 artificial supply. But Mr. B. can equally well say that by buying 

 this wheat he has thereby created a demand, strengthening the 

 market. Obviously the amount bought equals the amount sold. 

 Speculation on the organized exchanges does not cause low prices. 

 (3) Does speculation cause prices to fluctuate? Here is the most 

 persistent fallacy of all, the most widespread confusion of cause 

 and effect. The one and only reason why men speculate is because 



