Wessington Springs herald. (Wessington Springs, Aurora County, Dakota [S.D.]) 1883-1891, 1884-07-25
Panics and Speculations.

In tho early part of May a storm
swept over Wall street. For 3 short
time there was almost a panic in stocks.
Everybody wished to sell, and nobody
dared to buy. AS a consequence the
prices of railroad and other stock went
tumbllng down with a crash.
Had il not been for two circun
stances of the time, this dlsturbanl
in Wall street would have been suit
cient to cause a repetition of the
great disaster of 1878. One of these
Circumstance was that stocks had been
declining so long that conservative
men had not been large purchasers,
and were not in acondition to be ruined
by a sudden drop in prices. The other
was that general business was on a
sound basis. For outside of the stock
market there had been very little specu.
lation, and prices of merchandise were
low.
The May panic was caused by the
misconduct OF y few men, who had
specialized with the funds. that had Deer
intrusted to them for safe-keeping and
investment. he discovery of these
facts had two effects. 1t caused
the failure of the business firms and
corporations with which the offenders
were connected, and of others which
had business relations with them.
Moreover the distrust and alarm which
the knowledge of the misdeeds pro-
duced. led men to fear that others had
been guilty of like acts, and it was
only when the fierceness of the struggle
failed to reveal any more weak spots
that confidence was, in a measure, re-
stored. The storm proved to be only a
local one, and no doubt it helped to
clear the air and prepare the elements
for a season of fair weather, which we
trust good crops will bring about.
Everybody knows that panics are
caused by speculation. But it does not
follow that all speculation is wrong, or
that it always leads to disaster. To
illustrate this fact, let us suppose that
there are two cotton factories, each Of
which consumes three thousand bales
OF cotton a year.
The agent of one believes that the
price of cotton is likely to advance, and
he makes a contract at once TO. a whole
years supply Of cotton. The other
agent expects to see cotton decline, and
he buys from time to time only enough
to keep his mill running. Tie second
of the two has speculated jus, is truly
as has the other, and if cotton does adj
vance, he loses money Just as certainly
as the first agent has made it.
Another fact whichis known 10 every
body is that it is speculation on credit
which cause panics. Nevertheless,
experience has shown that the credit
system under wise limitations is not a
vicious one, nor is speculation with bor-
rowed money wrong in itself. Of course
the money borrowed must be also lent
by the owner, otherwise the use of it
is embeTzlement, which is another
word for a certain kind Of stealing;
and the use of trust funds in specula-
ton; unless the owner is aware that
they are to be so used, is also criminal.
Much the largest part of all that the
energy and enterprise of man has
accomplished on the earth has been
the result of speculation, and in mod
ern times money borrowed and lent
has been the capital employed for the
purpose. 4
What makes speculation and the use
of credit dangerous as wei! as improper
and immoral in certain cases, can be
very easily told. In the first place it is
when the Spectator ventures into en-
terprises out Of his w business, and
into fields with the condition of which
he is not acquainted.
The factory agents referred to above
were perfectly justified in specializing
in cotton according to their best judg-
ment. 1t was their duty to do 80. But
when q clerk or a horse-dealer or q
lawyer buys on a speculation cotton
which he can never use, he is doing
that which may end in disaster to HIM
self, and, if many other persons have
speculated in the same way, may end in
disaster to the community.
Speculation is also dangerous and
wrong when it is excessive. And it is
almost invariably excessive when it
takes the form of trading on a ..mar-
GIN" In suchcases the gambler depos-
its a certain amount Of money with a
broker to protect the latter against loss,
and thus protected, the latter ''buys"
for him, or agrees to ''buy'' for him, ten
times as much as his money would pur-
chase.
If the price advances, of course the
man makes ten times as much as he
could by a plain purchase and sale.
But, on the other hand, if the price de-
clines, he loses ten times as much.
Just as in any other kind of gambling,
the chances are largely against the
''greenhorn.n
But the passion for excessive specula-
ton, like the passion for other kinds of
gambling, is an overmasterino one, and
There arc OeriO1S whom If booo,,oe on
strong n general that all prices be-
come high, all business is on a false
LASTS, and men lose their Judgment
completely. Then comes a failure in
an unexpected quarter of some great
business firm OF some large banking
house, all confidence is lost in a mo
ment, men become frightened, and
down comes the whole structure Of
speculation, like a house built of cards.
-poub's Companion.