ABSTRACT
In general, stocks are expected to pay a higher return than bonds but are much more irregular and the risk of total loss is greater. In a period of declining prices, the process is reversed. Lenders receive their money back when it is worth more. Borrowers have to sell a greater quantity of goods than they had anticipated in order paying debts. The devices of stocks and bonds for financing industry are a method of shifting risks. The stockholder guarantees the bondholder a fixed income. From 1880 to 1896, the ratio of world gold stocks to production of other commodities declined about one-fifth, and the yield on railroad bonds declined about one-fifth. The loss of passenger business to the automobile, and the maintenance of multitudes of branch lines which are obsolete now that trucks and automobiles are available, make the outlook for prices of railroad stocks less favorable than formerly.
