Page:Stabilizing the dollar, Fisher, 1920.djvu/228

174 until there would be no longer any profit in sending gold from the United States to England and selling exchange against it. When this happened it would be as profitable to sell gold to American mints at $20.46 per ounce as to ship it abroad; and $20.46 in America would be the exact equivalent, at the new par of exchange ($4.82), of the English mint price of £3. 17s. 10½d.

Consequently, although the new mint price of $20.46 is in figures lower than the old, yet, as it is in heavier dollars, it would still be "the same" as the English mint price of £3. 17s. 10½d.

It is clear that this sameness of mint price as between the two countries really means nothing of economic consequence, for the reason that all prices of gold are in terms of gold. At bottom the basic fact is simply that exchange is at par when an ounce of gold in America will, in the exchange market, buy the right to an ounce of gold in England.

This obvious fact is concealed, or "camouflaged," by measuring gold in America in terms of dollars, and gold in England in terms of sovereigns; but the dollar and the sovereign are merely units of weight, like the ounce, with definite ratios to the ounce and to each other. Of course the price of gold in America (in terms of itself) is "the same" as the price of gold in England (in terms of itself) when either is translated into the other by means of the par of exchange (or ratio between the two units).

This would be self-evident if the numbers were a little simpler. Thus, if the dollar were exactly a twentieth of an ounce of pure gold and the sovereign exactly a quarter of an ounce, the mint price in America would be $20.00 an ounce and in England, £4 an ounce; and the par of exchange would be $$\tfrac{20}{4}$$, or $5 per £. Naturally, then, £4 an ounce would be "the same" price as $20 an ounce when we translate £'s into dollars at $5 per £, i.e. $20=5&times;$4, or 20=$$\tfrac{20}{4}$$&times;4. Such sameness of price would evidently still exist if the