Page:Stabilizing the dollar, Fisher, 1920.djvu/47

Rh, the Government then appropriating the surplus above this legal reserve as initial profit and afterward maintaining the fixed ratio in the manner described.

As long as the reserve is left to drift, the operation of the stabilization system would consist chiefly in affecting the export or import of gold. When the additional feature of withdrawing or issuing certificates is added, the operation of the system would consist chiefly in affecting the volume of these certificates within the country.

If the country or countries employing the system were a small part of the world, the changes required in the dollar's weight would not be appreciably different whether or not the feature of special withdrawal and issue of certificates to keep the reserve ratio definite is introduced or not. But if the countries employing the system included most of the world, the first, or indefinite reserve system, would require much more change in the dollar's weight to effect stabilization than would the second, or definite, reserve system.

2. Speculation in Gold. At present the Government, unlike a merchant, buys and sells gold at one and the same price. If this practice were continued after the stabilization system was adopted, the Government might be embarrassed whenever a prospective change in the price of gold became known by speculators. They might buy gold of the Government to-day at one price and sell it back to the Government to-morrow at a higher price or sell it to-day and buy it back to-morrow at a lower price. These operations can be avoided by inserting a Government commission fee, as it were ("brassage") of say 1% between the prices at which the Government buys and sells and