Speculation

SPECULATION. - A financial operation in which the gain, generally to a degree far above normal in relation to the capital employed and to the duration of the operation itself, does not derive from a production of goods, but from an exceptionally favorable fluctuation of prices. The operator profits from it, having foreseen it, or else seizing it on the wing before others and to the exclusion of others, or else deliberately and fraudulently bringing it about.

Often, in fact, the speculator is induced to buy and then to sell, or vice versa, because he comes into possession of information that others do not have concerning the causes of sudden rises or falls in price that certain lands, or goods, or securities, or else gold or a given foreign currency, will undergo: or else he intuits them. If in that case it is still intelligence at work, and initiative and risk are rewarded, in the other cases it is merely a question of cunning, of readiness and of audacity. Sometimes, in fact, the news and the alarms are spread by design, or purchases of goods are made for the precise purpose of engendering apprehension or panic, and consequently a fluctuation of prices to an unforeseen and unforeseeable degree, such as to allow rapid and huge gains to one who is ready and prepared to seize them 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 first of all in the ethical sphere. Tolerated, on the other hand, on the same exchanges, is the "forward contract," notwithstanding that, by allowing one to sell securities one does not possess and to buy with money one does not have, it lends itself to easy maneuvers of speculation on the rise and on the fall. A healthy and measured speculative spirit helps to tone up the market and entices capital to face short and risky employments, where or when even a high rate of interest would not succeed in attracting it. But if speculation becomes reckless, and is attempted with vast means and with an absence of scruples, it is often a cause of confusion and of ruin, it intimidates capital instead of encouraging it, inclining toward the systematic organization of artificial alterations of prices. This excites the spirit of adventure at the expense of intelligent industriousness, and contributes to keeping economic life in a restlessness little favorable to its healthy development.

Understood in an even broader sense, speculation is a little bit everyone's, especially that of the merchant class whose trade entails precisely having to foresee the prices and tastes of tomorrow: whence, practically, in the act of commerce, but to a certain extent also in the productive act, there is always a speculative content, that is to say an element of consciously faced risk, which reality then takes upon itself to resolve into a success or a failure.

This instinct for speculation is at the bottom of the human spirit, so that with great difficulty does man renounce the attempt to achieve an exceptional profit that promises to change rapidly his own personal or family situation: and this with all the greater tenacity the more relaxed the moral custom, and the more halting and inadequate the gains permitted by the normal life of work and of saving. Whence one witnesses, in difficult times, vast frenzies for stock-market gambling, for games of chance, lotteries and prediction contests, sporting and advertising ones.

A speculative element composed of courage and of hope, on a basis of reality and of logic, is implicit in every initiative, and is innate in that characteristic gift of generous and dynamic men and peoples that is called the spirit of enterprise. Unfortunately, if the moral forces are not firm and operative, every reckless attempt, every brazen audacity and every unhealthy spirit of adventure and of plunder risks passing for the spirit of enterprise, which is a virtue.

Mario Baronci