Evening star. [volume] (Washington, D.C.) 1854-1972, 1899-12-27
TRADING ON MARGINS
Cause of Financial Collapse and Monetary
stringency.
Mr.. Roberts, Director of the Mint, on
Panics-Increase in Domestic
Gold Production.

Mr.. Roberts, the director of the mint,
when asked whether the present alleged
monetary stringency in his opinion signIii9d
an actual scarcity of money to meet the
present requirements OF trade said:
mo possible supply Of money can prevent
stock exchange panics or periods of none
tary stringency, because speculation and
rising prices will absorb any possible in
crease until the pressure for ready cash is
just as great upon the new plane as 1t was
upon the old. The cry for more money is
as unappeasable as the demand for more
wealth. new supply instead of satisfy
ing the demand stimulates it. Men want
money to buy things with-good things that
they think are going higher Given easy
money in the banks and we have bankers
encouraging borrowers. AS a result stocks
go up and as they go up more people want
to buy. and SO the demand for money in
creases You can't furnish money fast
enough to meet the demand of all who
would like to borrow while prices are going
up. nor could all the gold and silver mines
In the world together keep prices going up
forever
"a marvellous era of increasing money
stocks began in 1850, and started a period
of speculation which ended with a grand,
worldwide smash in 1857, when even the
Bank Of England had to suspend payment
without any decline in production and with
the mints everywhere open to both gold
and silver.
Speculation on Margin.
THE real secret of these reactions is in
speculation on margins. These people who
are crying that they have been forced to
throw away their property had never paid
for their holdings. They borrowed money
on call to make small payments. hoping
that right turn in the market would give
large profits. But in that class of opera
lions losses come as easily as profits. That
is one of the conditions of the game. When
they have profits they call it prosperity, but
when they have losses they think the coun-
try has come to standstill, and want to
know who is to blame. Nothing has hap
pened, except that they have been asked TO
pay what they owe.
1T is impossible to do away with such
speculation by any increase in the money
supply. If a stock selling at 500 per share
has an advance of $40. the investor who
owns 1t outright makes but 10 per cent,
while the specuIator who has up only a
margin of $40 makes 100 per cent. That is
the secret Of marginal trading.
I'm short, 1t is not legitimate business
that causes the enormous imitation of
credits, multipies the bank reserves re-
quired, and thus absorbs any possible
money stock. Speculation, greed, will in
evitably do 1t, and as it is obviously I'M
possible to satisfy that appetite, it is alb
surd to point to tight money market as a
proof of an insufficient supply of money.
Gold Supply Checked.
Undoubtedly the war in the Transvaal
has had influence upon our money market.
Anything that disturbs normal conditions,
which turns the currents of business out of
the course they have been expected to fol-
low, will affect business. With trade bal
ances as they are, our bankers early in the
season had reason to expect gold imports
this fall, and probably directed their bust
ness accordingly. The war has not only
cut on a remittance of about 50, 900 900 per
week to London from South Africa, but
compelled heavy shipments the other way
Such reversal of the regular and antici-
pated order makes money tight in all CEN
tiers until affairs are readjusted to the new
condition.
THE world does not depend upon the
Transvaal for its stock of gold. Colorado
will produce more gold in 1900 than all
North America yielded ten years ago. and
this continent will yield more next year
than the whole world did ten years ago
Cripple Creek Is up to the record of the
Transvaal five years ago, and Grippe
Creek, with Alaska and the Rondike. viii