Page:Stabilizing the dollar, Fisher, 1920.djvu/150

96 To be specific, every two months (or whatever the adjustment period chosen might be) the Bureau would calculate from current market prices how much our composite basketful of goods costs. This figure (the index number of prices) it would publish; and this figure would then afford the needed official sanction to the Director of the Mint to change the weight of the gold dollar—that is, to change the amount of gold which the Government would give or take for a gold certificate, and thus increase or diminish the purchasing power of that certificate.

The certificate would always be equal in value to the gold dollar ; and the gold dollar would be kept equal in value to the goods-dollar which is the ultimate standard.

If, for instance, the index number representing the current price of our composite basketful of goods is found to be $1.01, i.e. one per cent above the ideal par (i.e. above the one dollar price), this fact would indicate that the purchasing power of the dollar was too low, for it requires one cent more than a dollar to buy the ideal basket. This fact would be the signal and authorization for an increase of one per cent in the weight of the gold dollar.

If, on the other hand, the index number when computed is found to be one per cent below par, the purchasing power of the dollar is too high and a one per cent reduction of the dollar's weight is called for.

In short, then, our rule or criterion of adjustment is simply this: for every one per cent of deviation of the index number above or below par found at any adjustment date, we then increase or decrease the dollar's weight by one per cent.