272 SPECULATION 



namely, in the year 1916; that oats showed a similar variation 

 but twice, namely, in the years 1901 and 1902; but that barley 

 showed such a price variation eight times in eighteen years, namely, 

 in the years 1904, 1907, 1908, 1910, 1911, 1912, 1913, and 1916. 5 

 Wide price fluctuations are thus seen to be, in part, prevented 

 by speculation. Instead of the wider swings of the market which 

 occur yearly in barley, oats and wheat show many small-price 

 fluctuations. In the sense that speculation prevents wide swings, 

 it stabilizes prices. Since speculation is carried on in the open 

 market, it is, in a very true sense of the term, a great auction 

 market, where buyers and sellers (of grain for future deliver}^) 

 are making bids and offers, and hence this form of speculation is a 

 correct register of values not a maker of values. Supply and 

 demand are here reflected, each instantly manifesting itself either 

 through the bids or the offers, and hence in the price. Prices 

 fluctuate according to this pressure of supply or demand. The 

 speculator is in the market and is governed by these forces if 

 he survive long as a speculator. And his speculations, as stated 

 above, tend to put the brake on both bulges and slumps in the 

 price. The many small fluctuations in price in oats, wheat, 

 and corn (on the future market, i.e., in the pit) accompany 

 trading by many traders at small profits (or losses) on each 

 trade. Where there are no organized exchanges, a few big 

 traders absorb the profits or losses (bigger profits or bigger losses, 

 and bigger margins). 



The services of speculation on the organized exchanges take 

 three principal forms: (1) It furnishes a wide market. The 

 speculators stand ready, any hour of any day, to take any trade 

 regardless of the size, without having the market upset by the 

 transaction. This was amply illustrated during the World War, 

 when the Government was forced to place order for large quanti- 

 ties of oats for future delivery. Some markets could not receive 

 an order for 300,000 bushels of oats, without having the price 

 forced up unduly thereby, whereas the Chicago pit, by reason of 

 its heavy speculative trade, was able to absorb orders for many 

 hundreds of thousands of bushels of grain without causing a bulge 

 in price. This could only happen in a wide market. And now 

 that our country is so large, such a wide market is a commercial 

 convenience of great value. (2) A constant market is afforded 



5 For the complete price table on barley, see Appendix to this chapter. 

 As to grades of grain used in above tabulations: for wheat and oats, contract 

 grades are used; for barley, brewing barley. 



