Page:Stabilizing the dollar, Fisher, 1920.djvu/274

220 course and not artificially restrained, the changes in the supply of, and demand for, gold and its substitutes would make themselves felt in the price of gold, and not in the prices of goods, as at present they are forced to do.

H. "It is a plan to control the value of gold." The valorization of coffee in Brazil, or the valorization of silver as proposed by some "friends of silver," has nothing in common with the plan here proposed. The latter plan does not attempt to impound gold. It does not attempt anything so colossal or useless as to raise the value of gold by cornering and storing it or by any other means. It does not aim to affect at all the value of gold per ounce, but aims simply to change the quantity of it in a dollar. It is the dollar, not gold, which we are trying to stabilize. The distinction is as important as the distinction between valorizing or fixing the price of a pound of sugar by controlling the sugar market, and adjusting the number of pounds of sugar to make up a dollar's worth, whatever the market conditions may be.

I. "It works only through the flow of gold." This misunderstanding is common. It pictures the regulative machinery as though the flow of gold into and out of circulation were the main factor. It implies that the only, or chief, effect of a change in the price of gold is to divert the flow of gold from one channel to another, overlooking the factor under a definite reserve (see Appendix I, § 1),—that a change in the price of gold and in the weight of a gold dollar changes the number of dollars in a given physical mass of gold.

Laboring under the above mentioned misapprehension, one correspondent imagines that if all the world adopted the plan the result would be to alternately "dump" immense quantities of gold on to the very limited jewelry market or denude that market of all its gold, and that the system would demoralize the gold market and ultimately break down, for the jewelry market is too small to be used as a