Whirlwinds of Speculation
“The pouring forth of this great torrent of new units of speculation results in the inevitable consequences dictated by the law of supply and demand.”
The demon speculation, scattering wild booms and still wilder panics, hovers over us as the abiding affliction of our machine age. Yesterday it was the demon of disease sweeping periodically across great continents, or the demon of scarcity arising from the niggardliness of earth in the face of mounting populations. From these and from other similar afflictions science has set us free, only to leave us in the sardonic plight where fertility and the oversupply of every commodity from petroleum to silk, under the hand of the playboy speculation, have become abundant sources not of happiness but of misery. Seemingly a savage jest is being played upon our self-sure, scientific generation.
For speculation is the ghost of everything abhorrent to science in industry, which worships, before all else, foresight and cautious calculation. And yet scientific business leadership seems able to do no more than attempt to talk speculation to death by cryptic public appeals. Our communist friends in the meantime praise speculation as the borer that will surely destroy the tree of capitalism. Our moralists anathematize it furiously as human effort gone wrong, because the end which it seeks to attain—gain through quick wits rather than through slow toil—is ethically indefensible. Our psychologists dismiss speculation as a minor phase of mob psychology. Our politicians and our bankers blame each other and everyone else for fomenting rather than curbing the evil. Yet the ebb and flow of speculation, in regular cycles, go on without check and give promise of going on disastrously.
This passion for speculation, seemingly innate in human nature, must be viewed apart from certain more basic causes of our present business distress. For speculation is not a controlling force. Rather it seems akin to an impenetrable fog that periodically settles down upon the busy channels of business activity, causing innumerable collisions and widespread blindness. It quickens or retards basic economic tendencies instead of creating them. It destroys by causing our business leaders and our investors, and above all our investment and our commercial bankers, to ascend to dizzy heights self-delusion only to plunge helplessly and hopelessly toward the pits disaster. Thus, scientific industrial acumen is deflected from the control and adjustment of those more basic factors which are retarding and shaping our modern civilization of wealth. Technological unemployment due the substitution of machines for men, with the consequent ills of a steadily increasing army of unemployed; distortions of the direction of commodity prices by reason of a lagging and insufficient production of gold or by reason of the sterilization of our existing supplies of gold through nationalist provincial outlook; disturbances arising from stupidly adjusted war debts or from tariff barriers; the ever-pressing problem, in an industrial age, of devising consumption to absorb the waxing output of improved productive machinery, born of technical skill and accumulated earnings—these riddles of our modern age must be considered from speculation. The demon of speculation is merely the bull in the china shop which raises havoc with all schemes and all devices to understand master such economic tendencies. Our immediate economic task, therefore, is to make progress toward fettering this mad disturber.
But can speculation be fettered? Are we dealing with human emotions which defy control? Certainly we cannot fetter speculation by our naïve American tendency immediately to enact a law. Making short selling—a that bête noire of the amateur economist—a crime, or attempting to forbid speculation in securities by imposing a heavy tax upon the resale of stock recently purchased, would obviously be impractical as well as futile in a democratic state. So, too, an effort to distort and distend the functions of the Federal Reserve System, by charging it with the power and duty to ration supplies of credit to the stock market, would be an unworkable and paternalistic venture.
But to dismiss speculation despairingly as mass madness which descends the public in recurrent waves, and to insist that such mob folly is incurable, must remind one of the medievel attitude of despair toward the great plagues that then raged through Europe. The havoc and poignant suffereing which these whirlwinds of speculation leave in millions of hearts call for at least an attempt at more than a fatalistic, primitive-minded meekness. One thing at least can be made clear by a survey of the monotonous regularity of the internal processes of speculation—its roots run far deeper than the shallow soil of the public’s emotions and intelligence.
For speculation is but a necessary and a beneficent human instinct gone wrong. So long as we have an individualistic, capitalistic system, the impelling force to human action in industry must be a self-reliant though discerning eagerness to profit personally. And as a part of such an economic system there must be an adequate flexibility permitting unrestrained freedom, on the part of those who manage and invest, to buy and sell the elements of wealth—commodities, land, securities. Fraud and coercion the State can restrain; but, unless we wish to go the road toward communism, the State must leave every buyer and every seller free to act as wisely or as foolishly as his intellectual and emotional capacities dictate.
In the last ten years we have had in America three unequaled uprushes and collapses of speculation in the three chief elements of wealth: commodities, land, and securities. After the Great War, in 1919 to 1920, we suffered a mad speculation primarily in commodities, although there were great accompanying excesses in securities. Shortly after that bitter experience, we rushed into a mad and unparalleled speculation in land in Florida. We are closing these eventful ten years with a unique, international economic disaster, partly resulting from six years of turbulent, world-wide speculation in American common stocks. The record is a dismal one. It becomes dismaying if we must fear that during the next decade we must reel under similar periodic whirlwinds.
Ten years ago America became the economic master of humanity, and Wall Street the financial centre of the world. Have we proved adequate to the heavy burden of power and responsibility thus assumed? Were our English friends farseeing when they consoled themselves with the prophecy that our banking inexperience and our emotional, financial ineptitude would force us to let unparalleled advantages fall from our hands? The past decade of speculative excesses must at least suggest that we scrutinize speculation objectively and dispassionately, in its relation to our American financial methods, if we would glimpse the future of American financial supremacy and of American prosperity.
The first stage in each of the three outbursts of speculation which occurred during the past ten years was an apparently miraculous opportunity for industries and investors permanently to enlarge earnings, or profits on re-sales, through a deep-seated though sudden change in economic tendencies. These economic changes to the calm observer seemed superficial and illusory; but, by reason of the staggering profits made by those who acted on the contrary conviction, even the wise were led to distrust their own reasoning.
In 1919, because of novel economic factors created by the long war, the demands of the American market for luxuries and for general commodities seemed so vast and unending as to be certain of continuing in increasing vigor for several years—even for several decades . . . . Next, we concluded that a great migration of population was in process that would suddenly convert Florida, America’s most backward and neglected pioneer state, into an Arcadia of mingled play and industry. Or we accepted Pollyanna assurances that an abundance of gold and of credit and prosperity meant that everyone would invest in land and at the same time take a winter vacation—in Florida . . . . And finally, four years ago, we became convinced, once and for all, that the earnings of our great industries—by reason of the magic of a superior business technique directing superior machines—would expand miraculously, without rest or interruption. Silly conceptions these all seem to-day; yet the initial profits made by those who accepted these extravagant theories were more potent than experience or reason. Such is the outstanding characteristic of the first stage of speculation—momentary results are more potent than logic.
The second stage of each of these speculations was a seemingly urgent scarcity of the units of speculation—commodities or real-estate lots or sound common stocks—and an outburst of imaginative eloquence in picturing the results of an enduring scarcity. Reasons for the continuance of any scarcity are never lacking. Suave, even sincere propaganda, in the guise of ultramodern economic theory, always becomes a characteristic of the second phase of speculation. For these new economic theories become part of the sales propaganda of those who imprudently, rather than maliciously, exploit the opportunities offered by the new economic era.
Because of this fancied scarcity of the units of speculation, and because of the consequent mad scramble to acquire them, the basis of computing price factors in this second stage is slowly, though boldly, changed. No longer are prices fixed by the usual method of utility—the capitalization of the income obtained as rents or dividends from land or stocks by multiplying such income by some such numeral as ten. No longer are the prices of commodities fixed by the standard of what they can be resold for in manufactured form. Slowly, optimistically, we tend to accept, as the master index of value, the price at which the unit of speculation can be resold to other speculators. Market prices and market trends become supreme. The conservative speculator, who seeks to delude himself into believing that he is buying solely for a long investment holding, is largely controlled by the conviction that prices will mount, without more than minor fluctuations, in about the same general ratio as in the immediate past. Without much difficulty he convinces himself that earnings and therefore prices will increase yearly after the manner of an arithmetical progression.
This rapid rise of prices, because of fancied scarcity and because of the new methods of fixing prices, creates the other marked characteristic of this second phase of a speculative boom. Credit becomes scarce. But the restraining powers of credit scarcity are somewhat exaggerated. Speculation, it is usually said, ends either because prices topple of their own weight or because credit becomes so scarce that new buyers are prevented from buying. And the conventional theories of controlling speculation are either that speculation must be left to run its mad course until prices topple over or that, since a credit shortage alone can serve to end a speculative excess, the rationing of credit is the only effective method to end speculation.
But an examination of these maxims must make us suspect their soundness. For the belief that speculation ends because prices topple of their own weight must mean that prices reach such absurd heights that even the insane refuse to pay them, and that, buyers being lacking, the whole structure falls over like a house of cards, of its own weight. Yet the general range of prices reached at the crest of any speculative boom to the vast body of speculators never seems absurd—not even after the collapse of the boom. We are familiar in this country with the phenomenon of sound stocks, after an intervening panic, exceeding the top prices of the previous boom. So, too, with the price of selected parcels of land in outstanding localities. The permanent increase in value over a period of years is staggering and confirms previous seemingly extravagant estimates. Commodity prices, also, make new highs as well as new lows. For the rise and fall of prices involve extremes. The occurrence of unexpected events, which affect prices favorably as well as unfavorably, renders it unwise for any person to insist that any range of prices is absurd. The stubborn hope of a speculator who buys at the top is to hold on in the hopes of getting out without a loss; and often his patience and courage are rewarded. Thus it is difficult to say, at any time during a speculative boom, that prices become so absurd that they topple over of their own weight.
Scarcity of credit, moreover, though it always becomes acute toward the end of a speculative boom, is hardly the controlling cause of the collapse. So long as great profits can be made through rising prices, credit can be obtained by diversion from other channels of trade. A complete inability to obtain credit on the part of those who are behind the boom will end speculation; but high interest rates alone are not a final, deterring factor to speculative buyers. Indeed, high interest rates are scarcely a vigorous deterrent so long as the course of prices remains upward. The three speculative booms of the last decade, for a considerable period of time, all successfully overcame the handicap of scarce and costly credit.
The controlling factor which ends a speculative boom, rather, is the third phase—the phase of a forced and rapid multiplication of the units of speculation. In a commodity boom, the high prices prevailing—as was true in 1920—cause heightened productivity and induce a wild onrush of foreign products. No matter how definitely statistics may prove an apparent world shortage,– for example, during the sugar scarcity in 1919,—sufficiently high prices somehow always result in an unexpected outpouring of commodities at the point of scarcity. In the case of land speculation, like that of Florida, there is a furious opening of new subdivisions pouring an almost unlimited number of lots and plots of acreage upon the market. Stupendous enterprises are undertaken which fire the buyer's imagination; but such enterprises in essence are but a multiplication of the units of speculation.
During a stock-market boom almost all financing, of course, is done in the form of common-stock issues. The so-called Coolidge bull market resisted a vast and constantly increasing stream of new stock issues, split-ups, and stock rights, but it was finally brought to an end by a great flood of investment-trust, bank-stock, and miscellaneous unseasoned cat-and-dog issues which form a vivid illustration of the extremes to which this tendency to multiply the units of speculation can go. The pouring forth of this great torrent of new units of speculation results in the inevitable consequences dictated by the law of supply and demand. Eager buyers are literally submerged into quiescence by the deluge. So, just as the beginning of every speculative boom involves a fancied scarcity of the units of speculation and an excess of buyers over sellers, with a consequent uprush of prices, so every boom ends with a mad multiplication of the units of speculation, and a consequent collapse due to the excess of sellers over buyers. This overbalancing of buying power is made more marked, of course, by credit difficulties; but the controlling factor is the oversupply of units of speculation rather than the difficulty of obtaining credit.
It is at this point, during this final phase of the wild and furious multiplication of these units of value, that speculation reaches its most danger aspects. Sales propaganda, particularly in the form of boosting speculative prices to induce buying through pool manipulation, becomes fast and furious and reckless beyond belief. And the outpouring of these vastly increased units prolongs and intensifies the subsequent panic and depression. For the larger and wilder the outpouring of new units of speculation, the more acute and distressing is the consequent panic. And, what is most significant, it is precisely as to this wild tendency to multiply the units of speculation that responsibility can be fixed.
The recovery from a panic passes through somewhat similar phases—each phase, however, representing a reverse process. The decline of earnings and the collapse of prices convince everyone that a new economic phase of disaster has come into existence. Where, as happened in 1928 and 1929, the consumer buys luxuries on credit and spends furiously, in reliance upon the paper profits made from speculation, the economic disturbance becomes more labored. The capacity to consume is submerged for a time beneath the dark waters of debt. And during the time consumed in paying off debts and accumulating funds the facts of falling prices and of declining earnings are again more potent than logic, in the same manner as during the beginning of a boom the facts of rising prices increasing earnings overwhelm logic. Again, just as there arises in the second stage of a boom a conviction that there is an urgent scarcity of units of speculation, there comes in the second phase of recovery from a panic a conviction of an apparently permanent oversupply of units of speculation—commodities or lands or securities. And just as the controlling feature of a boom is the multiplication of the units of speculation, so the controlling factor in the recovery from a depression is the absorption of these excess units of speculation.
Usually in land speculation, as was true in the case of Florida, the oversupply of lots is so great that absorption into useful occupancy is impossible. So land booms do not tend to recover; there is, instead, an abandonment of the units of speculation and a finis of complete disaster. Unless the inflow of population is steady and persistent, a start, if ever made, must be made from the very beginning. In the case of commodities, of course, low prices encourage increased consumption as well as the wasteful use of existing supplies; but, what is more important, low prices decrease production, and an equilibrium, once production is checked, is quickly reached.
In the case of securities, we are reminded once more of the familiar and apt phrase of the older Morgan—‘undigested securities.’ The pains of digestion involved, of course, are many and severe. In order for this digestive process to be effective, time must elapse for investors to pay off debts, accumulate earnings, and regain courage. Prices, moreover, must fall low enough to attract the larger and more conservative financial interests to the extent where they are willing to utilize their resources both in capital and in borrowing power to acquire such securities. And finally, the recovery from speculative excesses in securities, in its last phase, is usually retarded by a despair that comes because of the very delay in recovery. The final segment of the oversupply of units of security speculation is the most difficult to absorb. The delayed recovery convinces many that a disastrous phase of the economic moon shines down upon man and his world. Just as the duration of a boom convinces everyone that logic is wrong and that the boom will never end, so the protracted duration of a panic convinces everyone that logic is wrong and that the panic will never work itself out.
The significance of this central fact, that booms are brought to an end by the unrestrained multiplication of units of speculation, lies not merely in the warning flag which such a multiplication constitutes. Though a danger signal that all may read is hoisted, danger signals are difficult to believe until after the danger is no longer escapable. The length of time before the final collapse depends largely upon the rapidity and extent of this multiplication of the units of speculation, calculated in the light of the eagerness to buy created by high-pressure sales propaganda. And thus it is difficult for the outsider to determine the time factor as to when the collapse will come; and many a speculator is confident that he can linger and yet escape in time.
The significance of this multiplication of the units of speculation, rather, lies in the truth that the sins committed are basically the sins of the most powerful and influential segment of our business leaders. They sponsor and sell and advertise these vastly increased units of speculation. Their motives in so doing are not evil or dishonest; they themselves usually suffer greatly in the following collapse. Their crime, unfortunately, is the most reprehensible of all crimes—a blunder. If there be an inherent weakness in the human mind or in the human heart involved in speculation, this weakness primarily is not mob greed and mob stupidity, but rather it is the failure of our business leaders—primarily our investment bankers—to refrain from making dazzling, though largely fugitive, paper profits by exploiting unto the edge of disaster the possibilities of a mad market. For the outstanding characteristic of a lamb is his willingness to be led.
Real-estate booms probably will constantly recur, because the real-estate men involved—drifters from other industries—naturally will cooperate with local interests to sell through high-pressure sales methods as many lots as the public can possibly be induced to buy. The only hope here is increased caution, born of experience, on the part of the public, and the influence of the established and more experienced local real-estate firms in checking boom tendencies. So far as commodity booms are concerned, we have reason to hope that our industrial leaders are sufficiently devoted to the principle of balancing production and consumption to refrain from further excesses. The oil industry, for example, is slowly, though painfully, enforcing at least an approach to a state of equilibrium. Even during the wild days of 1929, inventories of most commodities were held in line. At least we can console ourselves with the hope that our industrial leaders have acquired sufficient experience and resolute foresight to fight shy of the dangers of encouraging the multiplication of the units of commodity speculation.
But the rulers of our country to-day—if any one class can be said to rule America—are our larger investment bankers. Wall Street’s investment bankers steadily are advancing toward the domination of our larger New York commercial banks. The controlling shares in these genuinely gigantic organizations (which in turn pretty well control the call-money market and the financial pace of America) are held neither by the officers of these banks nor by the depositors, but rather by investment trusts, integrated family fortunes, or investment-banking affiliates, for all of whom investment bankers are becoming more and more the spokesmen. So, too, in the case our larger industrial corporations: the investment banker, in his own right, or as agent of the public to whom he has sold part of the stock, is the master. A compact minority of the stock of any bank or industrial corporation, of course, usually is sufficient to control. The officers of our larger corporations and of our banks are selected and advanced by investment bankers; with one or two notable exceptions, their future depends upon the approbation of investment-banking masters. For the controlling and supreme aspect of our capitalistic industrial society is the investment of earnings in industry by the public, and, since our investment bankers control this process, they are our supreme financial masters.
The business of investment bankers is primarily that of underwriting and then selling common stocks and bonds to the public at a profit. Investment bankers usually insist that, like that of the wise merchant, their duty is to sell the public what it wants, not what they think the public should want. Unquestionably our investment bankers often are controlled by the public’s momentary desires in the type of security sold. But a successful merchant must select and endorse the goods he sells, and an investment banker, if he desires to continue selling, cannot forget his securities as soon as he gets them out of the door. Not only must the investment banker be eager to sell securities in such a manner that they will ‘stat sold’ and not ‘come back on him,’ but he must also be concerned with, even though he will not support, the market price of the securities he sells.
Because of the innumerable dangers and pitfalls involved in the marketing of securities, and consequently the high degree of sound judgment required, the business of investment banking is probably the most difficult as well as the most important aspect of our industrial life. And the profits involved are as great as the difficulties. The future of American industry, and of American prosperity, therefore, depends partly upon the sound judgment, the courage, and the capacity for organized group restraint, as well as farseeing action, displayed by our investment bankers. The rise of England to dominating prosperity during the nineteenth century as the world’s banker, and as the world’s great investor and creditor, was largely the achievement of her international investment-banking class. England’s great asset to-day is the established tradition of judgment, courage, and foresight on the part of her international bankers. And the critical question for us to-day is the breadth of capacity for action and for restraint possessed by our Wall Street investment-banking personalities.
For unquestionably in the last few years our ruling oligarchy of investment bankers, to whom every investor in America yesterday was eager to pledge loyalty and obedience, have blundered grievously and publicly. They have openly sinned in the market place. They madly multiplied and sold endless units of speculation when prudence and foresight required them firmly to impose restraint. They showed as little foresight and as little restraint as did the wild real-estate promoters of Florida. Since Wall Street insists, and perhaps wisely, on the government’s staying out of business, Wall Street has no right to expect restraint or guidance from Washington or from the Federal Reserve Board.
The prevalent excuse offered—that vast, excessive quantities of unseasoned stocks were sold to the public solely because the public was possessed of an insatiable, fool’s appetite—ignores the basic truths. The appetite of the public was stimulated, if not created, by the most subtle and most powerful form of advertising and high-pressure sales skill—the constant and stupendous increase in the price of stocks on various exchanges under the deft touch of pool manipulation. Manipulation of stocks by hidden pools probably is an essential part of the marketing of stocks on a wide scale or through marketing operations on an exchange. To abolish pool operations is neither advisable nor possible. But pool manipulation is a most potent poison, and responsible investment bankers cannot evade the responsibility for the abuse of their most potent drug. Where independent, reckless pools are steadily allowed ample credit and full freedom to excite the public by constantly running up the price of stocks, someone must assume the responsibility. Those who hold the sceptre must rule.
The greater part of this recent wild multiplication and sale of excessive units of speculation, to the fanfares of fantastic economic theories and frenzied pool manipulation, was the work of the lunatic fringe of Wall Street, to be sure. That this lunatic fringe was stupid and ill advised, rather than dishonest, is shown by the far-reaching manner in which these firms themselves have been punished by the following collapse. With one or two notable exceptions, our more powerful investment-banking firms stepped aside during the final wild episode of 1929. Yet their sins in the early stages of the boom were many; and they must bear the responsibility of not having put forth their hand and of not having stopped the excessive multiplication of units of speculation. Perhaps they could not have publicly used their influence to check the orgy of stock issues. Speeches and public counsel alone would have been jeered at as the bearish wailing of sold-out bulls. But our powerful inner group on Wall Street could have effectively put an end to undue pool manipulation and the undue issuance of new securities through their control of our larger commercial banks and of the New York Stock Exchange. Private warnings, which would have been heeded in many quarters, followed up by a steady, carefully planned enforcement of credit restriction over a period of many months as to new stock underwritings, backed by a sharp discouragement of pool manipulation and by the writing down of offending pool stocks to absurdly low figures for loaning purposes, all to the accompaniment of a few exemplary blows, would have effectively quieted down even a runaway bull market.
All this could have been done only if the leading investment bankers had themselves set the example by refraining from new stock offerings, by refusing to allow the prices of those stocks in which they were interested to be run up, and by having the Stock Exchange officials discourage the bidding up of stocks by bull pools. If bear raiders can be restrained, so too can wild, reckless bull pools. Restraint of this kind would have called for much fortitude and a noteworthy willingness to forgo illusory profits of great size; but such a courageous stand would have allowed the investment market to absorb and digest the securities already issued in an orderly manner. Thus, the inevitable business recession would have been but a severe recession, and not converted into the worst panic we have known in over half a century. Such restraint, perhaps, would have called for so high a degree of leadership and foresight as to seem fanciful; but by leadership a great nation falls or endures, and those who hold great power and great wealth cannot expect merely to enjoy the sweets of mastery.
What is perhaps more to the point, our investment bankers have repeatedly criticized the leaders in various industries for the failure of the more powerful elements to organize and control the lunatic fringe of such industries, so that sound business practices and restrictions in production could be carried out. They have even urged the more powerful elements in such industries to act by vigorous, strong-arm means. In the oil industry, for example, the rebellious, independent producers have been partially brought within the plans for prorating oil production as proposed by the larger units. So, too, in the motion-picture and the public-utility industries. A similar restraint could probably have been imposed upon the lunatic fringe in investment banking. Considerable difficulty would have been encountered, unquestionably, in organizing a group solidarity on Wall Street to carry out this end; but if Wall Street desires to rule American industry, free of blundering political control, it must organize its own vast house.
Our commercial bankers, moreover, followed the leadership or misunderstood the silence of the more powerful investment bankers. During the first two or three years of the Coolidge bull market, our commercial bankers undertook an amazing enlargement of their field of activity. Well over a decade ago our larger New York commercial banks undertook the sale of investment bonds through subsidiaries The control and ownership of these investment banking affiliates, by a neat legal device, were inextricably tied up with the ownership of the stock of the parent bank. And the reputation of the great parent commercial banks for prudent, cautious, and almost superhuman financial judgment lent these, new selling organizations great prestige.
So long as these subsidiaries sold only conservative bonds, no great harm arose. But with the temporary drying up of the public demand for bonds these banking subsidiaries, in order to find grist for their mills, suddenly invaded the remaining and more precarious segment of the investment-banking field. They began underwriting and distributing common stocks. Smaller commercial banks throughout America followed their example pell-mell. Instead of trying to restrain the tendency to multiply and sell units of speculation, our commercial banks, unable to resist the glittering, though illusive, profits involved, set out to gather their share of the gold. They stepped beyond the established, cautious confines of commercial banking wherein they solicited deposits and made loans and wherein they had gained the public’s confidence as cautious guardians of the public’s funds and as conservative financial counselors; they also became, almost overnight, investment bankers. They accepted the common-stock theory completely. And even good American common stocks, ridden without stint and caution, can become jaded nags.
Under the eagerness of our commercial bankers, bank stocks were wildly exploited and sold. Vice presidents of large banks became ill-advised, ‘ballyhoo’ agents for various pools, and blindly, though conscientiously, aided in the hasty and ill-advised distribution of new units of speculation. The public expects and needs leadership and guidance in investment matters—even in a new economic era. It was as though our doctors, as a class, had suddenly abandoned the principles of science based on cautious experience and had preached a new medical era of escape from disease through auto-suggestion. The public had learned to distrust the optimism of brokers, but the public succumbed to the optimistic encouragement of commercial bankers. The six and a half billions of still un-liquidated loans on securities held by commercial banks is a suggestion of the extent of the incautious counsel of our commercial bankers. For a sizable part of that stock was bought because commercial bankers so advised or sanctioned. And surely bankers cannot fairly blame our debacle upon the public madness when all the public sought was guidance from those who held themselves out as financial and investment experts.
To escape succeeding decades of similar distress we must look, in a democratic state, to the greater wisdom and more foreseeing courage of our financial leaders. Little help will come from expecting aid from governmental agencies, or from hoping for a miraculous forbearance on the part of the public in the face of exploitation. For it is scarcely a display of hard-headed common sense to expect a sudden acquisition by the public of wisdom greater than that possessed by their financial masters. Our financial miracle men, of whose wisdom and foresight we were so proud and trustful yesterday, must prove themselves in the future more than incautious, wordy medicine men. And unless our investment and commercial banking leaders prudently and courageously maintain our investment-banking machinery in balance as it distributes new securities, and unless they restrain it at critical times from ungoverned frenzies of self-destroying speed, our newly won world economic and banking mastery will bring neither America nor the world happiness or profit.