Page:Stabilizing the dollar, Fisher, 1920.djvu/179

 APPENDIX I

TECHNICAL DETAILS

1. The Reserve against Certificates

A. Stabilizing the Dollar Would Destabilize the Present 100% Reserve. To the plan for stabilizing the dollar, as described in Chapter IV, there should be added a proviso of some kind to insure the permanent adequacy of the gold reserve.

We have a 100% Government reserve against our present gold certificates. These certificates are really warehouse receipts, issued at the rate of one dollar for every 23.22 grains of pure gold deposited, and redeemable at all times at this same rate. But, under the plan here proposed, involving, as it does, varying the weight of the gold dollar, there would cease to be an exact equality between the number of dollars of gold in the Treasury and the number of dollars of certificates outstanding. Either might exceed the other; or first one and then the other might be in excess.

Any increase of the dollar's weight decreases automatically the number of dollars in a given physical stock of bullion. A hundred ounces of pure gold contains 2067 dollars of the present weight of 23.22 grains of pure gold. But if the weight of the dollar were doubled, the 100 ounces would contain only half (1033½) that number of dollars. Or if, instead, the weight of the dollar were halved, the same 100 ounces would contain double (4134) that number of dollars. Thus the Treasury reserve (even if there were no variation in its physical amount) would count for more or less dollars according to what a dollar might happen to weigh from time to time. 125