Page:Stabilizing the dollar, Fisher, 1920.djvu/257

9, H] price level, stabilization works almost perfectly, keeping the index number within 2% of the original par during two thirds of the time, within 3% of par six sevenths of the time, and within 4% all of the time. During this same period, on the other hand, the unstabilized index number wandered from the starting point 30%.

Beginning with the fall of 1915, however, the upward tendency becomes too strong and, in spite of the stabilization mechanism, the stabilized price level rises in the diagram 86% above par. This, of course, is a small rise as compared with the rise which actually occurred, as the index number rose 200% above the original starting point.

The deviation from par of the stabilized index number would be slightly less if the brassage were 2% and less still if it were 3%, etc. Yet I doubt whether the brassage should be increased much, if any, above 1%, (1) because presumably we do not now need to provide against a contingency so remote as a repetition of such a situation as that caused by the Great War, and (2) because, if another such situation should develop, a partial stabilization is the most we could expect. The fiscal necessity of the Government is then so paramount a necessity that inflation is probably unavoidable. If the Government itself succeeds in avoiding direct inflation, the people, in subscribing to bonds by borrowed money, will bring about an indirect inflation.