Page:Stabilizing the dollar, Fisher, 1920.djvu/180

126 Suppose that, at the time of adopting the stabilization plan, the Treasury bullion behind the gold certificates contained 23.22 billion grains of pure gold. This mass of gold would, at that time, count as one billion dollars of 23.22 grains each and would be represented by one billion dollars of certificates in circulation. The reserve would then be 100% of the certificates against it. But as soon as the dollar's weight were changed, this exact equality would disappear. Suppose the dollar's weight were raised 1% (from 23.22 to 23.4522 grains). Although, at the instant after this change, there would be the self-same gold in the reserve and the self-same certificates outstanding, yet the number of dollars in the reserve would no longer be a billion but about 990 millions (or exactly, 23.22 billion grains ÷ 23.4522 grains). The gold reserve would then be approximately a 99% reserve instead of a 100% reserve.

On the other hand, a reduction of the dollar's weight by 1% would increase by about 1% the number of dollars contained in a physically unchanged reserve. In this case the gold reserve would become approximately a 101% reserve!

Thus the gold dollar certificates, while they would be certificates exactly like our present gold certificates in that (so far as heretofore provided for) they come into existence only by the deposit of gold and go out of existence only by their redemption in gold, would, at the same time, be very different from our present gold certificates in that they would no longer be true warehouse receipts. Having an indefinite reserve behind them, they would partake of the nature of Government notes.

B. Restabilizing the 100% Reserve. It would, of course, be perfectly possible, although quite unnecessary, constantly to restore the reserve to 100%. When gold was depreciating it would cost the Government thus to replace the depreciation. When, on the other hand, gold was appreciating the Government would reap a profit.

If the reserve became less than the certificates it