Page:Stabilizing the dollar, Fisher, 1920.djvu/50

xlvi conditions constituting a very severe test—we find that, up to the fall of 1915, when the European war first greatly affected our price level, the stabilization machinery, working as above assumed, would have kept the index number within 2% of par two thirds of the time, within 3% of par six sevenths of the time, and within 4% of par all of the time.

10. A Tentative Draft of an Act to Stabilize the Dollar. A dollar is defined as a variable quantity of standard gold bullion of approximately constant computed purchasing power.

A Computing Bureau is to compute every second month a weighted index number of wholesale prices of about 100 important commodities.

The result of this computation is to be transmitted to the Bureau of the Mint, which thereupon increases or decreases the dollar's weight in the ratio which the index number bears to par (but not by more than 1%, the brassage fee).

The Mint is to redeem gold bullion dollar certificates ad libitum, dollar for dollar, in gold bullion and likewise issue them for gold bullion deposited, dollar for dollar, but charging in addition 1% brassage.

The Secretary of the Treasury is to maintain the gold reserve against certificates at 50%. Any surplus above this 50% reserve requires an issue of certificates and any deficiency requires a cancellation of certificates.

1. Misunderstandings are natural and numerous. They make up most of the supposed objections to the plan. (Figure 13.)