SPECULATION. – A financial operation in which the gain, generally far exceeding the normal in relation to the capital employed and the duration of the operation itself, does not derive from the production of goods but from an exceptionally favourable fluctuation in prices. The operator profits from it by having foreseen it, or by seizing it before others and to the exclusion of others, or by artificially and fraudulently determining II.
Often, in fact, the speculator is induced to buy and then sell, or vice versa, because he comes into possession of information that others do not have regarding the causes of sudden rises or falls in the prices that certain lands, commodities, securities, gold, or a given foreign currency will undergo; or else he intuits them. If in such a case it is still intelligence that is at work, and initiative and risk are rewarded, in other cases it is merely a matter of cunning, quickness, and audacity. Sometimes, indeed, the news and alarms are spread deliberately, or stocks of goods are cornered with the precise aim of inducing anxiety or panic, and consequently a fluctuation in prices to an unforeseen and unpredictable extent, such as to allow rapid and substantial gains to those who are ready and prepared to seize upon it before the truth is revealed and equilibrium is restored. Operations of this kind are not infrequent, particularly on the stock exchanges, where they constitute the crime of agiotage (v.), punished by the Code and condemnable above all on ethical grounds. What is tolerated instead, on the stock exchanges themselves, is the “forward contract,” despite the fact that, by allowing one to sell securities one does not possess and to purchase with money one does not have, it lends itself to easy speculative manoeuvres for bull and bear raids. A sound and measured speculative spirit is beneficial to invigorate the market and encourages capital to undertake short-term and risky investments, where or when even a high rate of interest would fail to attract II. But if speculation becomes reckless and is attempted with vast means and without scruples, it is often the cause of confusion and ruin, intimidates capital instead of encouraging it, and inclines towards the systematic organisation of artificial price manipulations. This excites the spirit of adventure to the detriment of intelligent industry and contributes to maintaining economic life in a state of unrest unfavourable to its healthy development.
Taken in an even broader sense, speculation is a little of everything, especially of the commercial class, whose very trade involves having to foresee tomorrow’s prices and tastes: hence, practically speaking, in the act of commerce, but to a certain extent also in that of production, there is always a speculative element, that is to say an element of risk consciously faced, which reality then resolves into success or failure.
This instinct for speculation is at the root of the human spirit, so that man very rarely renounces the attempt to achieve an exceptional profit that promises to rapidly change his personal or family situation: and this with all the more tenacity the more relaxed the moral customs are, and the more meagre and inadequate the gains permitted by normal life of work and saving. Hence, in difficult times, one witnesses vast frenzies for stock exchange gambling, games of chance, lotteries, and promotional and sporting competitions.
A speculative element composed of courage and hope, based on reality and logic, is implicit in every initiative and is innate in that characteristic gift of men and peoples that is called the spirit of enterprise. Unfortunately, if moral forces are not strong and operative, every reckless attempt, every brazen audacity, and every unhealthy spirit of adventure and plunder risk passing for the spirit of enterprise, which is a virtue.