Page:Stabilizing the dollar, Fisher, 1920.djvu/201

3] if the limiting, or official, prices were $18.00 and $18.18, the market price might be $18.10. There would, so long as this intermediate price ruled in the market, be no actual redeeming or depositing. For no one would sell bullion to the Government for $18.00 an ounce when he could get $18.10 in the open market, nor would any one buy bullion of the Government for $18.18 an ounce when he only needs to pay $18.10 for it in the open market.

Evidently, therefore, the deposit of gold would only take place when the deposit-price, i.e. the lower limit, ruled the market; and its redemption would only take place when the redemption-price, i.e. the upper limit, ruled the market. The buying and selling of gold within the two official price limits would thus not directly concern the Government.

D. Conclusion. Our main conclusion is that speculation in gold, whether or not the Government be involved as a buyer or seller, would, if the brassage safe-guard be used, not embarrass the Government finances nor affect the smooth working of the plan for stabilizing the dollar. Moreover, such speculation would be negligible, probably more so than speculation in silver to-day.

3. Selection of the Index Number

The method of stabilizing the dollar set forth in this book consists in periodically readjusting the weight of the gold dollar so as to make its purchasing power correspond to an ideal composite dollar of commodities. The criterion for this adjustment is an index number of prices. Consequently the selection of the right type of index number is one of the essential details of the plan.

Many different methods of averaging and of weighting and many different selections of commodities, sources, and periods of price quotations have been used or suggested, making many sorts of index numbers.