Page:Stabilizing the dollar, Fisher, 1920.djvu/256

202 shall be 100, the index number for March 1, 1900, is found to be 1.35% above this par of January. This is the signal for raising the weight of the redemption bullion 1%, since the brassage will not permit the full increase of 1.35%. This 1% increase in the weight of the dollar, by assumption (3), affects the index number by 1%. Also, by assumption (4), ⅔ of this influence is felt in the following adjustment interval (ending May 1) and ⅓ in the next (ending July 1).

The May index number will then combine the effects of the ⅔ of 1% or .67% downward influence as well as of the downward tendency during this interval which is -1.33. The stabilized figure for May is, therefore, 101.35 - .67 - 1.33, or 99.35.

This figure is below par, and calls, in turn, for a decrease in the weight of the dollar. In this case, however, the brassage limitation does not come into play. The deviation is -.65, the adjustment -.65, and the influence +.65 of which two thirds, or +.43, follows in the next interval, and the remaining third, +.22, follows in the interval next but one. The July stabilized index number is found from that of May as follows: 99.35 + .43 - .33 - 1.88 = 97.57.

The stabilized and unstabilized index numbers are:

Figure 12 gives, for comparison, the curves from 1900 to 1918 for this stabilized index number and for the actual course of prices in that period.

Except for the period when the war begins (as it does at the close of 1915) to produce a great effect on the