Page:Stabilizing the dollar, Fisher, 1920.djvu/191

. 1, K] point necessary to restore the 50% ratio of reserve to certificates in circulation. The maintenance of this ratio by the method here described would cease to be possible only when the surplus fund should be exhausted. It could then buy up no more certificates and recourse would need to be had to taxation, as previously explained. (See "B" above.)

K. The Interest on Surplus Would Save Taxes. As long as the surplus earned any interest the expense of replenishing the reserve would be borne in part, or in whole, by this interest earned. It is roughly estimated that interest earned on this surplus would extend the 35 year period, in the imaginary example mentioned under "G," to about 50 years. If, instead of the very high rate of 2½% per annum for the accretion of the dollar's weight, we were to assume a 1½% per annum rate, which would itself be a high rate, the net result of the calculation, under the same assumptions, is that the investment of the surplus would about meet the loss indefinitely. In this case the "indefinite" system would last indefinitely and require no taxation.

L. The Future. These calculations are, of course, purely illustrative. No one can guarantee, for instance, that great gold depreciation is not in store for us from extraneous sources.

If this depreciation should be so rapid as to make the cost to the Government of stabilization a matter of real moment, — if, for instance, science should find a way to extract profitably the enormous amounts of gold now held in the southern clays, or in sea water, or in the alluvial deposits said to be at the mouth of the Sacramento River, — then the time would clearly have arrived for dispensing with the gold standard altogether, just as we would dispense with a standard based on decaying fruit and adopt something more retentive of value.

At any rate, the expense to the Government of such a future possible cataclysm is no argument against stabilization; for, as we have seen, if depreciation