, 1872-12-15

To The Editor Of The Chicago Tribune:
SIN: VIII you pe:se explain how reel eetate specu-
tsou teads, you say, 70 p7oduce tgEtness in the
Eoney market? Since ill the money invested in lard
remains in the country, and generally in tie vicinity!
Ct The land speculated upon, it appears 10 that
there .nrst be mistake in the co1rmoa1y-re-
ceived idea that such speculation tends to produce
financial Str1agency- can understand how the build
Es Of unrrodacive RAILWAYS may tend to that result
since the building Of such railways involves the
Elupdon o. food, iron, timber, and other materials
which constitute part OF The surplus capital Of the
world and which ought = ia applied to purposes Of
reproduction. Being employed in constructing rail-
wy Or other work which does nos1tprn fair inter-
est On the capital consumed, together with fund to
repaee wear :1d tear the process Of destruction has
evidently Set in. G in the Ct real e:tts specu-
atons, no capita: IL consumed. It is Einply tie
1.-TWO or more shtst up II swapping jack
Knives O. gambling with gcn-w.ds-is it not?
1:ounEa.
ASswEn: The reasoa Why speculation in IN
occupied land tends to proGnco financial etr;n-
gcncy, and, it carried far enough, a financial
crisis is to be found principally in the fact that
it leads to the creation Of debt. It is quite true
tLat none Of the accumulated capital OF the
world is consumed OF destroyed in buying and
selling land; but such capital is usually pledged
to the amount Of three-fourths OF the price OF
the land in future payments, dependence being
placed On the capahility Of the land itself to sub
serve some human purpose equal in value to the
agreed price, together with interest for the
meantime. Il this dependence is mistaken,
somebody must bear the loss, and, whsn these
losses become great enough to produce bank
zuptey, the consequences will extend not merely
to the speculators themselves, but to ell their
creditors- And when the epecu1atinG class
embraces almost tho entire community,
as in 1887, the bankruptcy will be genera, that
Ie, il the transactions have been based upon fc-
titious values.
Everything depends, therefore, on the wisdom
OF the Investment, or tho financial ability OF the
last purchaser. If the last purchaser is able to
meet his payments even though resulting in a
permanent loss to himself We cannot see how
the money market should be affected either way,
no debt having been created or how the COM
.nunity generally should be any poorer in conse-
qnence of his improvident Investment. True, it
be hadfnvested it in farming or manufacturing,
OF other productive industry, the community
would have been the gamer, but the presump-
ton is that the person to whom he paid it will
invest it in productive industry; for, If ne ex-
punge money from tho transaction entirely Gas
We ought, in order to understand it's ultimate
economic etfects), and suppose that given
amount OF wheat, Or pork. or lumber,
xes given in exchange for the land, it is ineVzta-
bic that tho seller ct the land will employ this
capital for purposes Of reproduction, or tranEfer
it to somebody who Will. The only 1css in this
case to the community at large arises from the
consumption or personal expenditure OF the
Speculation while ho Is living on the anticipated
income from his speculation.
In practice, however, real estate specG11t;ons
are based upon cn2-fourtA capital and three
3ourthH credit. If the advance il price result
ing from the general movement OF society
migration, population, and growth OF business
does not keep pace with the expectations Of pur-
chasers at least sufficiently to pay the interest
On their purchases, there will be stringoncy
among themselves anu all persona to whom they
are indebted, and i, Ill tha meantime, q
etringcncy O.! anot:.az Kind occurs, their
obligations will add to and aygrayato
it. This is truz1 to be cure, but no Discus
sion of the question would be complete without
{. statement Of it. Tee question whether values
Of real estate in this city and vicinity have been
c1aggerated-wl.otller the dccts incurred Will
pay themselves nu1 yield e margin Of profit out
of the Uses to which land may be puts an I'M
portant one by itself, end tho opinions of those
vro bu; and sell real estate @1e CT the whole
better than those Of persons not go employed,
for however much their judgment may be
c,cudcd in individual instances, it is their special
business to learn and know the facts applicable
to such Investments cs . has;s for tho employ
meut of their own capital The evidence OBJ
fainable from this source would imply that ne
teTc &c! 7cs 1ea2aed :aa 1'.sEi'7's1 v2iao Of roal