Page:Stabilizing the dollar, Fisher, 1920.djvu/215

5] average correction to apply to outstanding contracts. Instead, special legislation "scaling" or adjusting debts might be adopted, as was sometimes done in the case of Colonial paper money. If this solution were chosen the price level for the start-off need not be changed at all from the level then existing.

Under any ordinary circumstances the price level does not vary more than 5% in a year. Probably by the time the plan could go into force the present, or recent, troubled course of prices may be sufficiently tranquilized as not to require any special legislation for scaling debts nor to afford much discrepancy between the then existing price level and the average price level for a preceding period of several months at least.

Such a debt-scaling law is, of course, not involved in the proposal to stabilize the dollar. In fact, if debt-scaling is really needed after stabilization it is far more needed without it and not once only but at many times.

But once the Gordian knot is cut and the new price level is steadily maintained, all elements still unadjusted would gradually become adjusted — wages, salaries, rents, railway rates, etc. In the long run it will be better to adjust these laggards to the price level than to adjust the price level to them. Even labor discontent would, I believe, be more successfully combated to-day by a rise of wages without a rise of the cost of living than by the reverse adjustment.

5. What Shall Be Done with Existing Gold Coins The question is sometimes asked: How are existing gold coins to be retired, as they are assumed to be in Chapter IV? The answer is: by putting a premium on the retirement of the coins or a penalty on their retention, or both. To retire the Philippine peso (and replace it by another of less weight) a slight premium was offered to holders of the old coin up to a specified date, after which the coin was not to be received by the government except at a discount.