Page:Stabilizing the dollar, Fisher, 1920.djvu/226

172 Professor Knut Wicksell of Sweden has, for many years, advocated a more extensive use of this regulative function of the rate of bank discount as a means of preventing cycles of credit and prices. Mr. Paul Warburg, formerly of the Federal Reserve Board, has suggested that the index number of prices should be one of the data scrutinized by the Federal Reserve Board to help guide it in fixing the rate of discount. Senator Shafroth proposed that the Federal Reserve Board should fix discount rates in such a manner as to regulate credit with the object of stabilizing the level of prices.

This adjustment would not of itself, however, be sufficient to keep the price level stable; for while it controls the credit superstructure, it does so only relatively to the metallic base and if this base is uncontrolled relatively to the needs of business, the credit superstructure being proportional to the base, that credit superstructure is equally uncontrolled relatively to the needs of business.

But, given both a stabilization of the base and any sound banking system, that is, any system which makes credit expand or contract with an expansion or contraction of reserves, we can secure complete stabilization.

8. International Aspects of the Plan

A. The Mint Price. It goes without saying that the plan would have a wider usefulness if adopted by all nations than if adopted by only one, or a few. But, if at first its general adoption were not found feasible, the question remains: Would the plan work and work well if adopted, say, by the United States alone?

Many persons have imagined that a single nation could not make the plan work, that the money problem, being essentially an international one, requires concerted action, that it is therefore imperative that there should be "the same mint price of gold"