Page:Stabilizing the dollar, Fisher, 1920.djvu/217

6] special difficulties no matter which way the value of gold should change.

Thus if, at any time, the gold coins were worth more than their contained bullion, they would continue to circulate as token coins, each eagle of 258 grains entitling the holder on demand to a ten-dollar certificate or ten dollars of gold bullion (of more than 25.8 grains per dollar).

On the other hand if, at any time, they were worth less as money than the contained bullion, they would be melted by the owners, disappear as coin, and be deposited with the government as bullion in return for certificates. Any gold coin in the government vaults would likewise be melted.

But the process would stop there, limited by the amount of gold coin available. There would be no "endless chain" of redemption of certificates at one rate and recoinage at another such as would (as explained in my article in the Quarterly Journal of Economics, February, 1913) have to be guarded against in the second of the three plans.

In spite of the slight practical superiority of this third method of handling existing coin, I have preferred in Chapter IV to present the first method as simpler to understand, and less confusing to the reader. With so few coins as are now in circulation it is really almost immaterial which of these two methods is adopted.

6. What Shall Be Done Concerning the "Gold Clause" in Existing Contracts One of the questions which will have to be faced when stabilization is adopted is: What should be done with the numerous bonds and other contracts containing a "gold clause" to the effect that the contract calls for payment in "gold coin of the present weight and fineness"?

This clause had its origin in the nineties when the "free coinage of silver at 16 to 1" was agitated. It