ABSTRACT
Generally speaking, commercial speculation is the operation of buying commodities with the aim of reselling them. More specifically, financial speculation, or speculation proper, is the phenomenon of buying the title deeds of shares or bonds, that is to say, title of ownership of fixed capital with the intention not of keeping them but of reselling them, either at a profit, or, of course, incurring a loss. Hence, in one word, it is trade in securities. Credit institutions, called companies for industrial or capital credit, or financial companies are set up precisely for this business. They are also speculators par excellence. However, besides these institutions there are bankers, also specialists in the trade in securities, who are to capital credit companies more or less what retail-wholesalers or retailers are to veritable wholesalers, and they speculate too, because of their profession. Finally, there are just private individuals who, without making a profession of dealing in securities, buy them to resell more or less expensively, thus making a profit or incurring a loss. They are speculators as well, but their interventions are not always made regularly. These purchases and sales of deeds of ownership of fixed capital, moreover, are made in special markets, the stock exchanges, just as purchases and sales of merchandise are made in commodity markets. The stock exchange is therefore the theatre of [402] speculation. It is also that of agiotage, the excess of speculation; and this is why many people eye speculation unfavourably. It is obvious at first sight that most people who judge the stock exchange and its operations without knowing much about them go far further in their repugnance than they should do, inspired by the fantasies and bombastic speech of men of letters who are equally ignorant. People who find it quite simple to prohibit something in order to prevent its abuse are not lacking in the case of trade in securities, or in other cases. It is no
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less certain, however, that use and abuse coexist, and it would be very interesting to know where speculation ends and where agiotage begins, what harm agiotage causes to nations and private individuals and how it could be anticipated or checked. These are obscure and difficult questions, however. Operations on the stock exchange are highly diversified and complicated and economists generally know nothing about them. They are understood only by people in the business, who have no interest in divulging and discussing them. So a new subject lies before us which we want to try and tackle in public. Allow us first to explain the object and mechanism of speculation carefully. We shall then be able to state its normal and rational conditions with some confidence.
