Page:Stabilizing the dollar, Fisher, 1920.djvu/92

38 ounces, taken by a gold miner to the Mint, can be cut up and coined into 2067 dollars and handed back to him. Thus, fixing the pure gold in the dollar at 23.22 grains necessarily fixes the price of pure gold at $20.67 an ounce. Naturally, then, the miner gets $20.67 an ounce and this "price" can never vary so long as the weight of the dollar does not vary. In short we may say, omitting fractions, that gold is always worth twenty dollars an ounce simply because a dollar is a twentieth of an ounce of gold, just as a quart of milk is always worth two pints of milk because a pint is half a quart. Gold is thus stable merely in terms of itself.

But, of course, the fixity of the dollar's weight (and therefore of the price of gold in terms of gold itself) does not fix its value in exchange for other commodities. It does not exempt gold from the effects of supply and demand. The value of the dollar, in the sense of its general purchasing power, is not stable but fluctuates with supply and demand as does the value in exchange, or purchasing power, of anything else. There is only this difference: since a descending value of gold cannot lower the price of gold it must raise the prices of other things in terms of gold; and since an ascending value of gold cannot raise the price of gold, it lowers the prices of other things in terms of gold.

Thus the supply and demand of gold (and of its paper and credit substitutes which also affect its value) cannot be thwarted. Since we deny to such supply and demand the normal outlet of raising or lowering the price of gold, they take their revenge, so to speak, by lowering or raising the prices of other things.