SPECULATION AND THE PUBLIC INTEREST 273 



by the speculators. For instance a large feeder in Texas wires 

 an order to his dealer in Kansas City for 200,000 bushels of oats, 

 December delivery. The order is accepted and placed in part 

 in the Kansas City market a market too narrow to absorb 

 instantly such a big order and in part in the Chicago pit. The 

 first seller is the speculator, ready to sell at any instant, at his 

 price. Later he buys back from a dealer who is interested in 

 handling the oats, and thus the speculator, after absorbing the 

 order, passes it on to others ready to take it. This practice keeps 

 the market constantly open for the actual commercial needs of the 

 country. (3) Wheat, oats, corn, and cotton are handled at a lower 

 margin of cost because they are hedged in the pit. The risk is 

 shifted to the speculator, whose choice is to bear the risk, with the 

 profit or loss going with it. 



The actual mechanics of speculation must be discussed in the 

 chapter dealing with the grain trade (Chapter XXII). 



3. Speculation: Its Evils. The chief evil of speculation, par- 

 ticularly on the organized exchanges, is the participation therein 

 by the unfit. The financially unfit constitute the bulk of this 

 class of unfit persons. It is true that some speculative houses 

 an increasing number carefully scrutinize the record of each cus- 

 tomer and would-be customer, to determine his financial ability 

 to speculate and stand the probable losses. A few houses are 

 lax in this. Again, some persons are unfit to speculate by reason 

 of the position of trust which they occupy, such as bank clerks, 

 or cashiers in banks. These should be rigidly excluded from open- 

 ing a speculative account with any member of any organized 

 exchange. No member, in turn, can afford to enter such an account 

 on his ledger. 



The cornering of the market is sometimes mentioned as one 

 of the evils of speculation. But since this activity is strictly 

 forbidden by the rules of the organized exchanges, it cannot in 

 fairness be considered as a part of the activities of these exchanges. 

 It is an activity the importance of which, so far as it has any, is 

 practically confined to the unorganized markets. 



4. Speculation and the Public Interest. Under our present 

 system of producing crops in the summer time, of financing them, 

 of storing them, and of consuming them during twelve months of 

 the year, speculation is an inevitable economic necessity. There- 

 fore efforts aiming to reform or abolish speculations should be 

 directed towards the foundation of the system, namely, the system 

 of distributing, warehousing and financing those products in 



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