Page:Stabilizing the dollar, Fisher, 1920.djvu/309

1, D] warrants, redeem those warrants in commodities, and sell these commodities in the open market for, say, $110,000 of certificates, thus making a profit of $10,000 (less expenses) on the series of transactions. As long as the index number were enough above par to make such operations pay, redemption would go on. The certificates so redeemed would be canceled, thus contracting the currency and reducing the index number toward par.

In short, if such redemption of money into commodities existed some people would refuse to patronize the markets at very high prices and, instead, patronize the Government which guaranteed to redeem certificates in goods.

D. Unrestricted Deposit of Goods-Dollars. So far we have considered only one of the two great regulators of the value of money; namely, unrestricted redemption of certificates in goods, constituting the outflow of money from circulation. The other is the "free coinage" or unrestricted deposit of goods, or some equivalent system of issuing certificates for goods, constituting the inflow of money into circulation. While, as already said, it would be impracticable to have literal composite goods-dollars brought to the mint to be exchanged for certificates exactly in the manner that gold is now exchanged, yet essentially the same result could be secured by the intermediation of warrants. The warrants would, in this case, pass from merchants to the Government instead of from the Government to merchants as in the operation of redemption.

To fix our ideas, we may suppose a licensed warrant-broker executing the following operations: First, with money (certificates) he buys up from miscellaneous sources, wherever he can get the lowest prices, the bill of miscellaneous goods constituting, say, $100,000 in goods-dollars. Some or all of these may be left in the custody of the respective dealers from whom he buys; but their ownership passes to him.