Page:Stabilizing the dollar, Fisher, 1920.djvu/269

1, D] In this section I shall consider the misunderstandings.

B. "The plan only corrects those deviations in the purchasing power of the dollar which are due to gold causes," and not those due, for instance, to causes connected with credit or commodities. On the contrary, it corrects all deviations indiscriminately. The criterion is the index number, and the plan operates against any deviation from par of the index number whether that deviation is due to gold or to any other cause whatsoever. The reason, of course, is that all dollars are interconvertible so that if the value of the gold dollar is kept constant, that of every other dollar must be constant also.

C. "It assumes 'the gold theory'—that high prices are due to the abundance of gold." No; it merely assumes that the purchasing power of gold does change relatively to commodities. It does not assume any particular cause of these changes. Gold depreciation relatively to commodities may be due, for instance, to scarcity of commodities; it may be due to the inflation of money other than gold, circulating alongside of gold, such as silver and paper money; it may be due to credit inflation; or it may be due to causes speeding up the velocities of circulation of money and credit.

D. "It assumes the quantity theory of money." The impression that the plan is dependent on acceptance of the quantity theory of money is presumably due to the fact that I have espoused that theory (in a modified form) in my Purchasing Power of Money. But there is nothing in the plan itself which could not be accepted equally well by those who reject the quantity theory altogether. On the contrary, as one opponent of the quantity theory has pointed out, the plan should seem even simpler to those who do not accept the quantity theory but believe that a direct relationship exists between the purchasing power of the dollar and the