Chapter 29
SPECULATION: INTRODUCING the Mechanical Stock Exchange
2All living mechanisms, that is, mechanisms commanded by the phantom captain (abstract life) are characterized by selective compositional growth organisms as distinguished from the erosive dissipations by all inanimate organizations. All living organisms have a SPECULATIVE trait. Living entities MUST SPECULATE TO GROW. Speculation is the first conscious stage of the teleological trial and error process.
3 A vine speculates with its tendril, geometrically spiralling it to find a point to which to cling. The insect speculates with its sensitive feelers. All speculations are trial leads for the detection of favorable survival conditions. Science calls speculation ‘‘assumption to be proven.’’ Several speculations provide a progression trend for objective selection. At the point of imminent selection, teleologic rationalization occurs, objectivizing itself in a ‘‘doing’’ that will be proportionately adequate to the inclusiveness of the speculation.
4 Much contemporary ‘‘hue and cry’’ against the ‘‘speculator has provoked a derogatory, special meaning for the word speculate. This derogatory inference is born of a careless lack of search into the subject, for it is not speculation per se that is anathema to the sense of universal social fairness, but the employment by financial speculators of not only their own credit but the credit of others who have no wish so to speculate their credit. They are able to do this simply because credit is abstract and intangible and, therefore, uncircumscribed by the strict legal and ethical protection accorded the tangible property of individuals. This is indeed paradoxical, for SPECULATION, CREDIT, IMAGINATION, INVENTION, et cetera, are exquisitely more unique to the individual than manipulatably acquirable physical properties. A nose may be completely altered by a surgeon, and land by a landscapes, but not so character. It is character alone that has developed the protective bulwark against the wolves, the sleet, the ravages of pestilence and all the forces of destruction. Why should society not nurture, cherish and protect these prime assets with far greater zeal than it furnishes to its secondary assets of physical time limited tangibility? It is then not speculation but misappropriation of speculation by peculators of the individuals abstract assets that is at the root of popular condemnation of financial speculation.
5 People have not only the right but the utter necessity, as living mechanisms, to speculate their OWN credit. When persons speculating their own credit speculate, for instance, that it will be safest for survival to place their accrued earned credit in a bank against an emergency, they assume that that credit will remain as an intrinsic entity in their chosen depository.
6 Some peoples knowledge that it does not stay ‘‘deposited’’ in no way changes the fact, from the depositors viewpoint, that the popularlysubscribed-to ‘‘banking’’ idea was developed under the specific notion that the deposit was to go no further than the vaults of the bank, wherein they had placed it in preference to hiding it under the mattress. Bankers have shrewdly promoted the continuance of this ‘‘illusion’’ by architectural devices, appealing to the eye as ‘‘securely vaulted,’’ and other psychological means.
7 The bankers’ plea that the deception is economically justified because a bank cannot be maintained without some earnings is ‘‘reasonable.’’ So, also, is the thief’s explanation that his family needed the loaf of bread. The bank, viewed as a private institution, does have necessity of earning ‘‘overhead’’ as contrasted to a federal depository such as the post office which, as an instrument of all people, needs no behind-the-scenes manipulation, being maintained by direct stamp revenue charge. This ‘‘reasonable’’ maintainance claim by the bank in no way justifies a continuance of the bankers’ pretense that deposits go no further than the vault. Nor does it justify profits to bank underwriters, or a dozen $25,000 salaries within one such institution. Banks have actually speculated the credit of their depositors in, for instance, real estate, with regard to which the depositors themselves would not intuitively have wished to speculate. Banks, moreover, have loaned their depositors’ credit ‘‘on call’’ to stock market speculators, and the credit has gone into stocks oft-times quite uncreditable to the original depositor. Definitely, this is not only speculating with another’s credit but is nullification of it.
8 Stock markets are an essential mechanism to an industrial society, for it is essential that the relative credit popularity of an industrial undertaking be constantly articulated in order that useful industry may be abetted and non-efficient industry discredited. In no other way can the populace furnish the credit support required in tool-up cost prior to product revenue, which credit is so essential to the growth of vast industrial undertakings.
9 The discredit of stock market operations has been occasioned by the pooling operations of ‘‘privileged’’ characters speculating with vast loans of others’ credit, either from banks or from their safe keeping trusteeships. This has allowed of manipulation, rigging, etcetera, bringing about arbitrarily false relative credit values of industrial issues non-indicative of the relative service, afforded and potential, of the industry involved.
10 As soon as speculation is confined to outright purchase and sale individually, without margin, the stock market will become a truly indicative graph of popular speculation as to the social welfare effectiveness and potentialities of all industries relative one to another.
11 It is parried immediately that popular purchases would be limited to units so small as to be utterly unfeasible if not impossible from the mechanical viewpoint of handling in stock exchanges. The usual units of popular speculation, it is argued, range from a ‘‘high’’ of two or three dollars on a race horse to a ‘‘low’’ of five cents in a slot machine. This mechanical limitation is true only so long as the stock exchange trading has to be done by the evidently limited human robot, the stock broker. What can we do about it?
12 Historically, ‘‘exchanges’’ have developed in the manner of all other monopolies. Merchants, specializing in specific products in season and having nothing to occupy them during out-of-season periods, began to anticipate or speculate regarding ‘‘futures,’’ i.e., crops to be grown or produce in general, basing their speculation of prices to obtain when the ‘‘season’’ arrived upon factors of weather, population shifts, and so on, thus creating markets in advance that progressively corrected themselves in terms of the in season ‘‘spot market.’’
13 Likewise the money market, anticipating export, import and future industrial dividends and borrowing, developed an anticipatory activity among its traders, particularly the traders in shares of industrial activities, which latter have grown to such tool-up cost proportions as to call forth a widespread sharing of the tremendous investment not only for equipment but for working capital.
14 Eventually those traders who controlled to a high degree the real estate, including the buildings, of the locality in which they traded, grouped together and agreed upon a monopoly by membership limitation, lest the trading be spread out so thinly as to preclude the high earning on the part of its members. While ‘‘curb’’ markets grew outside the ‘‘big board’s’’ doors the latter held the reins through reliability, self imposed for survival efficiency, by control of the wired reporting system, and habit prestige.
15 The trading markets in abstract futures, abstract shares, and abstract moneys enabled industry and commerce to function smoothly, as far as liquidity of credit was concerned, despite seasonal intermittencies.
16 Inasmuch as it is perpetually NOW, the PAST is really only a mental extension backwards on a defined progression of experience which is extensible, in terms of experience, far beyond the limits of actual experience. In identical manner, the FUTURE is extensible in terms of a progression of actual now experiences into the ramifications of now existent phenomena. For instance, a New Yorker who has never been to the Argentine, finding cause to go there, can assume that there will be a specific hotel and specific people in the Argentine when he arrives there nine months HENCE, and the assumption will have an analytical reliability certainty of equal accuracy to his analysis of events of a political campaign nine months past. The degree of speculative certainty of analysis of past and future trends is teleologically predicated upon the degree for factor inclusion in the NOW observations.
17 Eddington says, ‘‘Science is simply the sincere attempt to set in order the facts of experience.’’ Within the meaning of this tenet, speculative future prediction is equally valid to speculative historical interpretation Neither past nor future speculation may be reliable if the ever NOW experiences are not inclusively set in order.
18 The constant setting down of scientific-world-experiencefactors in analytical order for the guidance of market speculators has developed an high order of useful prediction-ability. It is only the excluding prejudice of special interest that permits (through the incompleteness involved in the extraction of special interest factors from the full array of ordered experience) the constantly recurrent improbable ‘‘street’’ predictions that give rise to the rather popular notion that accurate prediction is impossible. For example, a specialist in metal ‘‘stocks’’ who overlooks the fact that housing is predicated upon scientific sociological trends and dismisses the profusely available and concise data of these trends as mere political pish posh, obviously cannot visualize or realize the ‘‘future’’ of the role of metals in housing, and, therefore, cannot make other than erroneous predictions about metals futures.
19 Furthermore, the illusory prejudice of the fictional ‘‘property’’ viewpoint has made the predictions of predominantly property-ized ‘‘authorities’’ (property-ized both as to things and people) so unreliable as to have established the popular opinion that prediction per se is unscientific.
20 This popular notion consequently assigns reliable prediction to the category of mysticism insofar as it pertains to personal and
21 social developments, but contrariwise, accepts as highly authentic and non-mystical the predictions made by so-called PURE scientists with regard to astronomical bodies’ behavior for advance periods of hundreds of years. This general acceptance of pure sciences reliability is, however, relatively new. Five hundred years ago such astronomical predictions would also have been popularly consigned to the category of pure mysticism.
22 The entry of the true scientific attitude into statistical recording market-establishments, super-rich in orderly but uncorrelated data due to ‘‘prejudiced’’ dumbness requirements, will, in the near future, through broad integration, provoke an astoundingly high order of reliable prediction ability. This will transpire as rapidly as propertyloaded individuals are replaced as the dominant market speculators by a vast population of non-property-ized industrial co-workers whose leaders must, of necessity, be highly scientific.
23 As industry and commerce grew apace, the exchange monopolies became sources of tremendous revenue to their limited number of members. Memberships, appropriately called ‘‘seats,’’ became saleable property of high value. When, however, the industrial era developed a popularly supported ‘‘market’’ in the late 1920’s, the limited human-mechanism-exchanges proved utterly inadequate to the maintenance of a continuity of representative activity. In view of the exquisite importance of the ‘‘timing’’ of ‘‘shots,’’ they failed completely as ‘‘true’’ representatives of buyers and sellers. Sales fell hours behind instructions.
24 The financial monopolist, ever fearful of machines though profiting in multi-billions thereby, has failed to recognize the extraordinary efficiency that could be invoked by mechanizing the whole speculative exchange activity. This can be readily done as of present, elsewhere-proven mechanical means.
25 A mechanical synthesis of pari mutuel horse-racing machines, calculating machines, and averaging machines could easily be devised which would provide a continuous registry of the sum total of shares-for-sale and sum total of shares-required-for-purchase in any category, with a constant electrical integration of the coincidental bid and asked values and ‘‘sales,’’ as well as a constant registration of the spread between required and offered, and cumulative volumes of transactions. Thus would be created a truly mechanical, nondoubtable and, therefore, POPULARLY ACCREDITABLE abstract industrial trend MARKET of inestimable value for industrial and governmental guidance and social progress.
26 As soon as shares are exchangeable mechanically, much of the popular discredit of the ‘‘broker’s’’ ability or willingness to execute orders in the best manner possible will be dissipated.
27 The people will DARE again, as they did in ‘28 and ‘29, to speculate in industrial activity. This, for them, is a much more RATIONAL and FASCINATING form of speculation and one of greater inherent interest than their horse-racing and slot machine speculations to which they were forced back, first by manipulated losses and latterly by financial reform. In the ‘‘horses’’ and ‘‘slots’’ the possible chance of winning, which is scientifically stated as the ‘‘amplifying of speculative credit,’’ is about 1 to 100 in proportion to the possible ‘‘amplifications’’ of their speculative credit of rationalizable industrial issues, granted the latter’s relative value movements are mechanically insulated against false manipulation.
28 During the height of industrial speculation in the 20’s, the people were enabled to participate in exchange activity through loans to them of other people’s credit, known as ‘‘call money.’’ Whereas they speculated basically with a small amount of their OWN credit, ultimately they were speculating with a large amount of OTHERS’ credit, as high as 1/10 in ‘‘reputable’’ brokerage offices and 1/20 in multitudes of ‘‘questionable’’ houses. Naturally they lost quite consistently, due to the ability of those with vaster pools of others’ credit to manipulate the market. Enormous ‘‘pool’’ buying and selling usually ‘‘wiped out’’ the small individual’s OWN credit ‘‘margin’’ by virtue of this borrowed credit’s false amplification of his original speculative INTENTION. That is, by using twenty ‘‘parts’’ of others’ credit to his own one ‘‘part,’’ he was unintentionally betting that the value of a share would amplify by twenty units; actually, he meant by only one unit. It was this false amplification of prediction that inflated the market to the 1929 ‘‘impossibility.’’ Had popular man speculated solely with his own credit, he would still be custodian of his specific credit shares, regardless of the ‘‘relativity’’ fluctuation of the market.
29 Regarding the Exchange-members’ protestations of impracticably—in the matter of the mechanical ability of the Exchanges handling of small-denomination-sales, or sub-fractional ‘‘odd lot’’ transactions, denominationally representative of the specific excess credit of the popular-average individual speculator, it may be stated that as soon as such a mechanical exchange is in operation its first function will be to eliminate the bottle-neck in the current mechanism, which is the human robot. The machine, being not only untiring but unlimited in its figure handling (an adding machine does not care whether it computes millions or tens), the ‘‘market’’ will be open 24 hours every day, everywhere in the world, and not only ‘‘odd’’ lots but minute fractional share-purchases, for example, 100 worth of U. S. Steel, will become possible of purchase as easily as would 10 thousand dollars worth.
30 Another objection that may be offered to the MECHANICAL EXCHANGE is that of the legal necessity of the actual delivery of shares involved in any transaction. This can be obviated, also, by the machine. It will be quite possible to place telegraphically connected ‘‘repeater’’ Stock Exchange Machines in every ‘‘United Cigar’’ or ‘‘Liggett’s Drug’’ store anywhere in the world, each equipped with a means of revealing the spread and market of any issue and a means of executing any order (no matter how fractionally small), by purchase from the machine of a ticket imprinted with the quantity, price and share symbol of the issue being purchased. This ticket may represent: (1) an outright purchase to be held indefinitely, or (2) an addition to an accumulating quantity of fractions ultimately sufficient for the practical transfer on the books of the corporation of shares purchased, or (3) it may be turned in at any EXCHANGE MACHINE STORE immediately for cash gain or loss.
31 The ‘‘voting’’ right of shares on the basis of numerical holdings, necessitating ‘‘delivery registry’’ will, of course, have to be recalled. If every one dollar bill had one political vote we should have daily to register each and every dollar exchanged with the federal government. Preposterous! And the antithesis of the principle of democracy. Yet every single dollar bill is a share certificate in the industrial commonwealth. How will the directors be elected who in turn elect the administrative officers or the corporations? By ONE vote per capita by each stockholder, and by each worker for the corporation, of one years holding, or employment, respectively. Mechanization of the Stock Exchange together with the cancellation of the arbitrary-by-legislation disproportional voting-right imposition on industrial shares bid fair to instrument the populace into a daily and hourly ‘‘vote of confidence’’ on all national-industrial problems.