Yorkville enquirer. [volume] (Yorkville, S.C.) 1855-2006, 1913-12-16
STATE WAREHOUSE QUESTION
Market Now Dominated by speeula-
tive Opinion Must be Governed by
Healthy Economic Conditions. in
Marketing staple-How a satisfae-
tory eveI Nav Be Reached.

tive Opinion Must be Governed by
Healthy Economic Conditions. in
Marketing staple-How q satisfae-
tory Level May Be Reached.
Columbia State, December IL.
In the settlement of the question Of
marketing cotton, the establishment
of warehouses to carry the surplus Is
the first step.
The second Is cheap money to fl
nance the holding Of the cotton.
The grading and inspection by the
government, marked on the receipt
with perhaps later good contract for
the sale and future delivery Of cotton,
ought to constitute the very best kind
of a collateral to loan money on; In
fact the time will surely come when
banks will bid for such collateral In
preference to any other, and the con-
gestion during the crop marketing
working period will relieve itself in
this way.
The cotton market is now dominat-
ed by speculative opinion, this must
be changed by the introduction Of
healthy economic conditions in the
marketing Of the crop.
am a Democrat, and do not wish
to see my party make such serious
legislative mistakes as the Clark
amendment would have been, and in
addition I really enjoy the study Of
economic problems in my spare time.
So much has been said about the
proposition to force deliveries OF cot
ton In the south, and there seems such
a vague idea Of what 1t means, that /
will ask you to publish this letter.
I believe that bushes can be con-
Quoted on the principle Of the square
deal" better than through a system of
exploitation. The land owner, the Ia
borer following the plow, the cotton
merchant and manufacturer, should
get his just proportion out Of making.
handling and manufacturing cotton.
I will undertake to show that 1t Is i'm
possible under present conditions, and
point out the remedy.
In order to arrive at comprehen-
sive understanding, 1t Is necessary to
PROFOUND and answer four questions:
1. Is speculative trading in cotton
necessary and beneficial alike to pro-
ducer and consumer?
2. What is the effect Of speculative
trading on prices as compared to ac-
tual supplies?
3. Is the system Of cotton trading
as carried on a square deal?'
4. What influence, II any, does this
system exert on prices?
The first question 1 approached un-
der the supposition that commodity
market is organized for the purpose
of carrying and distributing the sup
plies of the staple traded in, and
assumed that this market was estab-
lished on perfectly correct economic
principles. In such market, / argue,
the total volume Of trades must be
considered the economic force which
carries out or accomplishes the pur-
pose for which the market Is establish
ed. We can infer then that the abil-
ity or capacity Of the market to- car
ry and distribute supplies increases In
proportion to the increase in the vol
ume of trades. In business Of this
kind there are two distinct risks, one
emanating from the side Of the pro-
ducer and the other from the side of
the consumer-risks which neither OF
them is always in a position to as
sumo, and 1t Is the placing Of these
risks which creates the speculative
market. Now the broader this mar
ket and the more traders there are,
the easier it Is to distribute the risks,
or supplies, over as many shoulders
as possible. The conclusion must
therefore be that speculation Is not
only necessary but useful, provided,
of course, that the conditions under
which 1t Is carried on are economical
ly correct.
The difference between speculation
and gambling is that one is the taking
of business risk after careful calcu-
lation, while the other seeks after
chances, a game, or a system that can
be beaten. Speculation Is legitimate
business, gambling IL a vice.
In trying to solve the second ques-
ton / assumed the existence OF the
same sound economic conditions as
in the first, also a perfectly neutral
and impartial system Of trading. To
determine the effect Of speculative
trading under such conditions 1t is
necessary first to define the difference
between purely speculative trades and
physical trades, that Is. such that or
iginate from or are based on actual
supplies. The purely speculative
trades remain open until they are
settled" by the payment OF the differ
ence in price, and both seller and buy
er remain interested in the market un-
til this settlement Is made. In the
case Of the physical trades 1t is only
the buyer who Is interested In the
market because the seller has parted
with his interest at the time when he
sold his supplies for future delivery
These latter trades, representing the
actual supplies, exert a physical ef-
feet on the market, while the purely
speculative trades, being two sided
and representing imaginary supplies.
are compensating in their effect. This
latter effect is subject to this quail
fication, that the force Of prevailing
opinion, or sentiment Of the market.
usually carries the price past the nor
NAL price level, but whenever that
happens the opinion becomes wrong
and begins to exert an influence in the
other direction. Price fluctuations are
created In this manner which, how