Speculation: is the set of commercial or financial operations that aim to obtain an economic benefit by taking advantage of price fluctuations over time by investing a capital, that is, buying low and selling high.
The Dictionary of the RAE defines speculation as “commercial operation that is practiced with merchandise, securities or public effects, with the intention of obtaining profit” and speculating as “carrying out commercial or financial operations with the hope of obtaining benefits taking advantage of variations in prices or of the changes”.
Therefore, as a general concept, speculation is to obtain an economic benefit from things that increase in value; is a concept that has certain negative connotations.
The speculator acquires goods and does not do so to use them or to produce them but for the sole purpose of waiting to be able to sell them at a higher price and thus obtain a profit.
Speculation in the economy
Speculator is the one who buys assets not to put his savings in them or to participate in the business activity, but with the sole purpose of obtaining a profit with their subsequent sale.
The speculator takes advantage of the situation and, in many cases, takes advantage of the information he has (privileged or not).
The most traditional way to speculate is to hoard some kind of economic good that we know is going to be scarce in the future, even causing that same scarcity by buying it in massive quantities, getting it to rise in price when it becomes scarce and being able to sell everything, we have stored at a higher price.
A very illustrative example would be the black market, during the first fourteen years of the Franco regime in which Spain was a closed economic autarky and there was a shortage of everything (from food to any other necessary good such as fuel or tobacco), there were people who took advantage of their possibilities (because they were protected by the regime, above all) to get rich with the Black Market on a large scale, charging abusive prices to people in need. That’s speculating.
In today’s financial markets, the most common method of speculation is arbitrage.
It consists of taking advantage of the price difference in different markets or different places, when you have the possibility.
This type of operation is usually produced taking advantage of the currently existing electronic markets and it is done in a few minutes, an asset is bought on the stock market where it is listed cheaper and, immediately, it is sold where it is more expensive, obtaining the profit at the same time.
The largest volume that moves in the financial markets are the different currencies, being in the domain of this market mainly the dollar, which defines the value of a currency (Argentine peso, pound, Canadian dollar etc., depending on the supply and demand, it is incredible to believe that the largest participants in this market are the central banks of the countries, commercial banks followed by the business sector.
Among the securities that we find in the financial markets (mainly stocks), those of each company have very different behaviors that arise, on the one hand, from how the company behaves (in its decisions and in the distribution of benefits) and, on the other hand side, in how investors see them.
There are very quiet stock values, suitable for investors who settle for normal profits.
Nevertheless, there are so-called speculative securities that are listed securities whose prices change constantly.
Investing in these types of securities is much more risky, because the variations can be positive or negative, but they could also, if things go well; give a much faster profit given their enormous volatility.
The financial bubble
The bubble is a disaster that has happened several times in the economic history of the West and consists of everyone speculating.
The Securities Market, primary and secondary, is intended for companies to obtain financing from savers and for savers to obtain an economic return on what they save from company profits.
However, this is not always the case, sometimes the meaning of the existence of these markets is lost (which is the one we have just explained) and they are used by everyone as a mere place to speculate, where to get easy money.
When this happens, a multitude of people go to the Stock Market to buy shares in companies with the sole objective of selling them shortly after at a higher price and, with many people participating in it, prices go up and up and buyers make money and more money in a short time.
To buy these shares, buyers resort to leverage, that is, to borrow money (usually from banks) and in this vicious circle, banks tend to give those loans with great ease.
The problem is that these bubbles always burst at some point: at some point someone cannot sell their securities at a higher price, or even sell them at the price they paid for them and, when this happens, everyone sees it and panics, so the situation is reversed and from being in a market where everyone wants to buy, we go to a market where everyone wants to sell, so prices fall and fall until the securities that had been bought to speculate are worth nothing.
And the worst thing is that this not only affects those who have participated in the bubble, it also affects companies that see their shares collapse and will not be able to get financed in the capital market and also affect the banks that have given credit to speculators and they will not be able to recover that money they have lent.
Therefore, the existence of a financial bubble always ends up producing an economic crisis that can become a true recession, with all its consequences of unemployment and lack of resources.
With Auricoin it will not exist, this since, being a global currency, it will not be necessary to make exchanges, because an Auricoin in the African Continent has a reference value of $ 888.88 USD, and the same value has it in the European Union, and the same in the USA.
Companies will no longer have to go to a stock exchange to look for their resources, Auricoin money grants credits with better conditions, although this market, which will benefit the entire world economic sector.