Praise for speculation (Wall Street murderers and innocent Pretty Woman)

Are speculators just parasites who produce nothing, drive up prices, cause crises and bankruptcies of honest people? Or can the work of speculators be a blessing for "honest people"?

Speculation - source: stavebni-formu.cz
Speculation - source: stavebni-formu.cz

Speculator he buys cheap to sell expensively. So simple is that this definition can apply to all of us. We all want to buy cheap and sell expensively, we want your benefit. At work, in love, in experiences, in their education.

Yet most speculators do not feel.

We do not succeed, we cannot materialize our natural desire for our own benefit in real money. We do not know what will happen, where and how, and we do not have the courage to bet our own savings on vague suspicions. If we knew, we would all like to become successful speculators. This line is as thin and invisible as it is hard to reach, so it separates not only success from failure, but also recognition from utter hatred.

And on our side of the border, there is just as much ignorance as to what good speculation of the successful ones actually brings to us, the less successful ones.

Sense of speculation

The basic benefit of every speculation, which is mentioned in every economic textbook, is risk reduction at a time or place. What does it mean?

The most typical example of speculation is harvest speculation. During the autumn harvest, there is plenty of barley and its prices low. At the beginning of the summer again a shortage - waiting for another harvest, market prices are rising. So the speculator buys barley in the fall (drains his stocks and pushes the low fall price up) to him launched on the market in the summer (then it increases its quantity on the market and thus somewhat reduces the high summer price).

Several hundred years ago, these merchants actually bought bags of grain, stored them in their barns, and then drove them to market. Today, the whole process is so automated that the speculator does not even see the grain, he buys and sells the future crop on paper (today only by electronic transfer). This is a very simplified example of price equalization over time, which has a positive impact on all members of the system - farmers, traders, food processors and their consumers.

Basically the same is the leveling of prices in place: if a speculator finds that barley is more expensive in Prague than in Brno, he will start transporting it from Brno (where he will reduce its stock and thus increase the price) to Prague (where increasing its quantity on the market will push prices down). The result will be a much lower price difference between Prague and Brno than if there were no speculation, and thus also an increase in the wealth of the majority of the population of both Prague and Brno.

Of course, the real world is much more complicatedthan these idealized examples. The basic tool of speculators are informace and the winner is the one who has them better or can read them better. The harvest is always different, its size is affected by the weather and dozens of other factors, it is speculated on the price of unmined raw materials or the price of future shares, it is speculated on products, career of artists and a thousand other things. Prices fly up or down, depending on the rarity of the commodity in the human mind, and so good for the last consumer.

Because the movement of the price naturally regulates consumption as well, and it would, without free speculation, balance between far sharper extremes - from desperate shortage to complete waste. This is precisely what speculation, unintentionally, but very effectively prevents - it helps to use resources more economically.

The attentive reader will surely notice that behind the word speculation can be substituted for another word, namely - the free market. They are both one and the same, because it is a fundamental condition for the whole to work and prosper svoboda. Freedom to offer, buy and sell without restriction and fear. Any restriction - even if it is introduced for the best of intentions - can have only slight and short-term positives. From a longer period of time, regulation always yields worse results than free spontaneous human activity.

Speculative bubbles

The conflict between freedom and market regulation is also the invisible essence of a situation where - as left-wing opponents of the free market say - the "market has gone crazy", "the market has failed", etc. A careful analysis of virtually every crisis caused by soaring government interventionwhich allowed other people to behave irresponsibly.

An example might be US government pressure on banksto provide mortgages to a wide range of people and the consequent "rescue" of selected businesses in recent times mortgage crisis 2008. These government interventions, on the one hand, provoked price bubble in the real estate market (which normal real estate speculation would never let so swell), on the one hand, it indirectly held the shares of mortgage institutions (which ordinary stock speculation would send to the bottom long before their poorly covered loans rose to astronomical heights).

The free market (which is just another name for free speculation) has the ability to deal with ruthlessly but very quickly thereby preventing their mistakes from spreading like a virus to the rest of society. The government, under populist pressure, often acts to prevent these individual "market atrocities" from being mistaken, but this only spreads the disease to society as a whole and thus draws it into a long agony of crisis. Yes, Were it not for the specific government interventions of the Bush and Obama administrations, the crisis would not exceed the limits of the local mortgage sector, let alone the US border.

The speculative bubbles are therefore not the "greed of speculators" (which has a rather stabilizing effect), but various protectionist regulations, which always come out of some back door.

The greatest value of speculation

The greatest benefit that society's speculation gives is that it determines the value of things.

Nothing has an absolute value, only a relative value, given by current supply and demand. Even a new house can have a "true value" of zero if no one wants it buy and the stubborn owner may be as upset as he wants that "he gave a million for bricks and concrete alone." More than anyone else, speculators test and determine the current real values ​​of things. It creates values ​​from underappreciated things and reveals what is meaninglessly overestimated.

Who doesn't know Hollywood lemonade with Richard Geer and Julia Roberts: Pretty Women. So far, the greedy millionaire has made a living by ruining "healthy" businesses, depriving hundreds of fathers from their families.

He selected a shipyard that had been building good ships for decades. He bought it, canceled production, divided its property and sold it in parts, sent the workers to the employment office and raised money. In delusion in love, however, he "saw" and showed the good of the eyes of a poor girl and changed his actions. He forgot his profit and let the workers continue to build ships, after all they - unlike him, the speculator, "create something useful"…! Millions of eyes did not stay dry by turning the villain upside down, and the film brought out well-deserved sales.

In the real world, however, misfortune is different. Fortunately, not only for millionaires, but also for those poor girls. Why? In fact, the speculator (R. Geere) found a way to use the yard's assets better than the company itself. Otherwise, there would be nothing left for them after the division and sale.

New buyers of docks and parts of buildings will show that he can use the given property better than the old shipyard by years of shipbuilding (maybe there will be solder chips to laptops). Only the threat of the existence of the "Wall Street Sharks" (played by R. Geere) it forces companies to perform and their management to be constantly on the lookout, which in turn means better products, more efficient businesses, more prosperity and progress for all. So the speculator Geere created something fundamental: he invented and, by cutting into pieces, he created a better use of resources worth millions of dollars. The idea created more real value than the workers by continuing to build average ships.

However, the sentimental film reality is different - what is good and fair is best known to a poor girl, and she is convinced that it is better to continue building ships.

However - judging by the film's sales and public hatred of speculators, "white-collar criminals" - How many of us live in the world of Pretty Women rather than in the real world…?

Vít Kučík also publishes his (interesting!) Articles on his blog at iDnes.cz.

Comments are off.