Page:Stabilizing the dollar, Fisher, 1920.djvu/153

9] change in that weight will continue to be made at every adjustment period as long as the deviation in the index number continues.

The result is that the price level would oscillate only slightly. Instead of great price convulsions, such as we find throughout history, the index number would run close to par, say, 101, 100½, 101, 100, 102, 101½, 100, 98, 99, 99, 99½, 100, etc., seldom getting off the line more than one or two per cent.

The process of correcting the dollar has just been likened to steering an automobile. It might better be compared to the automatic regulation of the "governor" on a steam engine or to the method of securing a "compensated" pendulum. Every aberration brings its own correction.

And so we conform our gold dollar, approximately, to the imaginary "goods-dollar." All other dollars being interconvertible with the gold dollar would keep equal to this par. No change in our banking system would be required except that the gold reserve of banks, instead of consisting partly of gold certificates and partly of physical gold, would consist exclusively of certificates. The Government would hold the physical gold. Whoever chose to redeem the gold dollar certificates in actual gold would do so usually to secure gold for jewelry and other arts or for export. Should a bank do so, the gold it so bought would, like so much silver, be liable to fluctuations in value.

To summarize, each dollar of bank notes and other fiduciary money would, as now, be redeemable in a dollar of yellowbacks (to be called gold bullion dollar certificates) and therefore such paper money would, exactly as now, keep at parity with these yellowbacks. Each