The manawatu daily tIMES MONDAY, AUGUST 17, 1936. The Maligned Speculator

Manawatu Times, Volume 61, Issue 193, 17 August 1936, Page 6

The manawatu daily tIMES MONDAY, AUGUST 17, 1936. The Maligned Speculator

There is a widespread belief that a speculator is some form of public enemy. Indeed to judge from many political utterances it would be inferred that he was Public Lneniy iNo. 1. Is this really a correct assumption?

"When Mrs. Housewife buys twenty dozen eggs in the early summer and preserves them for next winter’s use, shc_ is indulging in a speculation, but none would think of criticising her action, Ict she has bought on a low maiket, anticipating a future advance. That is the essential element of speculation.

By a study of this homely example, we may obtain an insight into the" principles of speculation. Only when these are understood, can a reasoned judgment be given. Consider the economic effects of Mrs. Housewife’s speculation. The puichase of eggs at a period of low prices, coincided with a period when supply was greatly in excess of current demand. Without that purchasing for future use, the price would have fallen to fantastic depths. Here the speculative purchaser has held up the market and saved the producer from loss. Months later, when production is low, eggs rise and would rise even highei, were it not tor reserves held by Mrs. Housewife and others. At this stage, speculation prevents prices from rising unduly and is thus of public service to consumers. The influence of speculation has been to give stability to the market.

Whatever be the subject for speculation, the principles remain the same. What applies to eggs applies to shares, butter, houses, wool, land or sheep. Perhaps the crime most heinous to the minds of many persons is that of speculating in land. Consider the part here played by that bold bad buccaneer, the speculator. He comes on to the market because more land is offered for sole than there is a normal demand for. Owing to this superfluous offering, prices have been driven downward. The low prices induce the speculator to buy. How low they might go but for his buying no man could tell. When a market breaks, it is the speculator who stops an utter crash.

Later there is a demand for land exceeding the available offerings. Prices arc driven upward; higher and higher they rise. Then the speculators offer their properties and this stops any further advance. The property held in reserve is now brought forth to meet the keen demand. If fortunate, the speculator is able to show a profit upon his transaction. The question arises: Is he entitled to his reward? Morally, a service should be rendered to justify a reward. What service has been rendered? The speculator in this case has given a definite service at risk to himself; lie lias really acted as an insurer to the value of property. His activities have given stability to an otherwise erratic market. He has protected the vendor in a time of stress from a market collapse. In a time of boom, lie has made available lands then urgently required and so kept prices within bounds to the benefit of purchasers.

Whether the transactions apply to eggs or land, or to any other commodities or property, the underlying principles remain the same. Criticism of speculation is founded almost entirely upon ignorance or envy. Speculation is a perfectly legitimate activity, defensible morally as well as legally. To earn his reward, when he gets it—which is not by any means always—the speculator has supplied courage, capital and judgment. He has been the market shock-absorber. The public lias been given a service that it was not prepared itself to supply or undertake. Those who would criticise should first ponder the results of the entire cessation of speculation.