Page:Stabilizing the dollar, Fisher, 1920.djvu/118

64 Of course, if its victims could clearly foresee a rise or fall of the price level, they would forestall it or offset it more or less successfully. And this is actually done to a slight extent. When prices are rising the rate of interest usually rises a little to compensate partially for the depreciated principal. People then realize that bonds are a poor investment and so the price of bonds goes down, that is, the rate of interest realized rises, while the opposite happens when prices are falling. But experience shows that this compensation is seldom or never complete. Most people pay no attention to what has happened, much less attempt to forecast the future and to be guided by their forecast. Indeed, not many can escape even when they see the breakers ahead; for they are already tied up by long-time contracts.

And the few who do bother their heads over price movements are mostly professional speculators. One of the consequences of a shifting price level is speculation. The speculator, if he guesses right, makes money and lets the other fellow pocket much of the loss. And the other fellow includes the general public. The more the price level shifts and the more difficult it is to foretell it, the more active will be the speculator. So it was that, after the Civil War, with our fluctuating green-back dollar, speculation was rampant.

Already, after the World War, speculation has become rampant again and for the same reason. Unless we stabilize the gold dollar, it will continue. No one really knows now which way prices will move. The general expectation is, or has been until recently, of a fall, but