Page:Stabilizing the dollar, Fisher, 1920.djvu/188

134 50%, the percentage varying up and down owing to changes in the declared weight of the dollar as well as to the deposits of gold and the brassage receipts. Under this system of bookkeeping, the "reserve" would need to be eked out (or rather, the excess certificates would need to be retired) at the expense of the Treasury only when, if ever, the "surplus" should disappear entirely.

By this method the system would start off with a large bookkeeping profit for the Government.

I. Putting the Surplus to Work. A fourth method, and one which appeals to me as probably the best, is very similar to the third, described in "H," but makes more than a mere bookkeeping use of the "surplus." By putting the idle and otherwise useless "surplus" to work, a profit could be earned and the day of exhausting the "surplus" could be postponed still longer, if not indefinitely.

So far, we have supposed both the "reserve" and the "surplus" to be kept in physical gold. But only the "reserve" proper need be so kept. Part, or all, of the "surplus" representing the profit with which the system starts might be invested in, i.e. exchanged for, Government bonds and so virtually made to earn interest; for any bonds thus brought into the "surplus" fund would, of course, earn interest for that fund just as truly as though they were in private hands, the general fund of the Treasury paying over into that "surplus" fund the interest which would otherwise have to be paid to private holders of these bonds.

This system would recognize the needless waste involved in a 100%, or other high "reserve." In these days of economy such a "reserve" is, as one economist has said, an "expensive luxury" and one almost peculiar to the United States. In fact we are already dispensing with it, in part, by virtually converting gold certificates into Federal Reserve notes.

J. Reactions Therefrom. It should be pointed out, however, that the very operation of converting the