Page:Stabilizing the dollar, Fisher, 1920.djvu/198

144 In the second place, against these small possible gains which might present themselves from time to time, the speculator would have to reckon with large, if not prohibitive, expenses. Prominent among them would be interest. If the rise per cent in the price of gold is less than the rate of interest he will be a loser anyway. If he has to pay 5% for "carrying" his load through the year and, at the end, the price of gold has risen 5%, he has not even earned interest. For when he closes his operation and sells gold back to the Government, the brassage charge of 1% must be paid, and besides these two expenses are expenses for cartage of the gold from the Government vaults and back, storage charges in the interim, and insurance.

Another obstacle is the difficulty of assembling the yellowbacks necessary to begin such a bull operation. If they are kept ready in advance, the interest expense involved in "carrying" them would be much more than merely the interest for the period of the speculative operation.

Finally, of course, the risk of failure in such an operation has always to be reckoned with. The only case in which such speculation would be reasonably likely to succeed would be when, in any month, the 1% rise in the price of gold were inadequate completely to meet the fall of the index number, so as to create the presumption that it, the price of gold, would be raised again in the following month. If a rise of 1% were announced for February 1, which was several per cent less than the fall in the index number, there would be a high probability that a month-and-a-day bull operation would yield a gross profit of 1%, the net profit, if any, being what is left of that 1% after deduction of expenses. But this is scarcely an attractive speculative proposition.

We conclude: (1) that for short periods, like two or three months, the expenses,—e.g. the expense for the cartage of gold away from and back to the Government vaults and the expense, time, and labor of preparation