Page:Stabilizing the dollar, Fisher, 1920.djvu/197

2, B] the Government prices of gold; and this is the only kind against which any safeguard is necessary.

We may, however, add here a short statement as to other kinds of speculation in gold, in order, chiefly, to show that no provision against them is needed. It is conceivable that a speculator might buy (or sell) gold to-day in order to resell to (or to rebuy of) the Government after, not the next, but some succeeding adjustment. Assume, for simplicity, that the adjustment is monthly and limited to a 1% increase or decrease. While the brassage fee of 1% would effectually prevent a speculator from buying (or selling) in January in order to resell or rebuy in February, it would not prevent him from an operation extending from January to March or later months in the hope that the first shift of gold prices,—that, say, on February 1,—might be followed by others in the same direction.

First consider bull operations. Thus, if the Government is buying gold on January 31 at $20.00 an ounce and selling it at 1% more, or $20.20, and if the speculator knows that on the following day, February 1, this pair of prices will be advanced the full limit of 1% and hopes that on March 1 it will be advanced another 1%, while it is true that he could make no profit by selling in February, he could, evidently, if his highest hope were realized, make a 1% profit by selling in March, and he may, if he chooses to take the risk involved, speculate in that hope. That is, he may buy gold of the Government in January, planning to resell it to the Government in March or later, the minimum period for the turnover being a month and a day.

But will he? Seldom, if ever, and for several reasons! In the first place, opportunities for such gain will be few and far between. The maximum gain possible will be 1% a month and that maximum will seldom continue. So far as statistics are available to tell us, gold has very seldom appreciated for a year more than 5% and never as much as 10% (except once in greenback days when gold was not the standard).