Page:Stabilizing the dollar, Fisher, 1920.djvu/271

1, F] either the quantity of money or the price level by exactly 1%. It is only necessary to assume that it works in the right direction and that, if the first adjustment proves insufficient, its insufficiency will be registered in later index numbers and, in consequence, it will be reënforced by subsequent adjustments as required.

That a change in the weight of the dollar will change the number of dollars has been made evident already. It will affect the number of gold dollar certificates (see Chapter IV, § 7, and Appendix I, § 1) and the number of dollars of circulating credit (see Appendix I, § 7).

F. "It aims to fix all prices." On the contrary, it does not aim to fix any price, except the price of gold which is already fixed—though wrongly so—in our present system. The prices of wheat and sugar and everything else would be as free as now to vary relatively to the general level and to each other. The adjustment of the dollar would control only the scale or "level" of commodity prices and not interfere with the freedom of their relative movements.

Only the general level is fixed, a rise in one commodity being balanced by a fall in others. A fixed sea level does not prevent wave motions.

As Treadwell Cleveland, editor of the Newark Evening News, well says, "the aim is by no means to freeze all ratios of exchange fast" or to compel all prices in dollars to be "petrified into everlasting immobility."

The upper curve of Figure 13 shows the actual market price of wheat in terms of gold in contrast with the middle curve which shows the price of wheat as it would have been under stabilization, i.e. its price in terms of the commodity standard. The lower curve shows the course of the general price level in terms of gold. The middle curve exhibits abundant freedom to fluctuate, the fluctuations being due to harvests and other conditions connected with the production of this specific commodity, wheat. The upper curve shows