Page:Stabilizing the dollar, Fisher, 1920.djvu/185

. 1, E] circulation would be affected somewhat more slowly and only as the flow of gold deposits and withdrawals became changed.

E. Stabilization in Small and Large Nations Compared. The displacement of gold caused or averted by the operation of the "indefinite" system would react on the value of gold per unit of weight. Practically, however, this effect would be negligible unless the stabilization system, in the "indefinite" form, were in almost universal use. Any one country,—at any rate, any one small country, like Switzerland,—could employ the "indefinite" system without appreciably disturbing the gold market; for any displacement of gold which such a country could cause or avert would be too trifling (in relation to the vast reservoirs of gold outside its own circulation) to affect the value, i.e. the purchasing power, of gold in the markets of the world.

But if a large country,—or at any rate a large number of large countries,—should adopt the stabilization system in the "indefinite" form, any change caused in the movements of gold from, or into, their circulation might be so great as to glut or drain the small outside reservoirs, i.e. the gold in the arts and the gold in the circulation of any countries not employing the system.

An acceleration of the movement of gold from the country or countries having the system or a retardation of the movement of gold to them, such as would be caused by an increase in weight of their monetary units, would tend sensibly to depreciate the world's gold and so require a further increase of weight of the monetary units, while the reverse tendency would have the reverse effect.

The result would be that, in the process of compensating for the tendency of prices to change by a given percentage, the dollar's weight would be eventually changed by a larger percentage than would be the case if the definite reserve system were used.

Thus, suppose the system to have been started in