Page:Stabilizing the dollar, Fisher, 1920.djvu/239

9, A] during the ensuing or first interval, the index number will be subject only to the assumed tendency to rise 1%, so that, at the beginning of the next adjustment interval, it will be 101, just as though no system of stabilization existed.

At this adjustment date, therefore, there is a deviation from par of the index number of +1%. This leads (by assumption 2) to an adjustment of the dollar's weight of 1%.

The influence of this adjustment will (by assumption 4) be felt during the ensuing interval and be registered at its close. That influence is (by assumption 3) 1%. If there were no other force, therefore, than this par-ward influence, the index number would then return to 100, or par.

But there is another force; namely, the tendency of the index number to rise 1% during this (second) interval. This force restrains the index number from returning to par and keeps it at 101. In short, the downward and upward forces neutralize each other so that the index number remains unchanged at 101.

Summarizing thus far, we may schedule the events as follows:

At beginning of 1st interval: index number 100; no adjustment of dollar's weight.

During 1st interval: no influence from adjustment, but only unhindered tendency of index number to rise, +1%.

At beginning of 2d interval: index number, 101; adjustment of dollar's weight, +1%.

During 2d interval: influence of aforesaid adjustment on index number, —1%, neutralizing tendency of index number to rise, +1%, leaving, ——

At beginning of 3d interval: index number unchanged at 101.

But the deviation from par being still +1%, the adjustment in weight at the adjustment date now reached (the beginning of the 3d interval) is again +1%, which will again strive to bring down to par the index number