Evening star. [volume] (Washington, D.C.) 1854-1972, 1933-11-19
The Commodity Dollar"

The theory which supports the belief
that prices can be maintained at a
certain desirable level is probably Dor
rowed from Professor Irving Fisher OF
| Yale, prepayment of the compensated
or commodity dollar There are as
many sound economists who oppose
Dr. Fishers theory as there are sound
economists who oppose Professor War
ren's theory. The Fisher theory, IN
brief, is to reduce the gold content OF
the dollar (probably by buying gold at
a higher price, as is now being done)
when prices fall, and to increase the
gold content of the dollar, by selling
gold at lower prices, when prices rise
beyond the desirable level. The me-
chanics Of raising and lowering the
gold content of the dollar has never
been explained by the authorities. But
presumably, it would in effect be the
same method now followed by the Re-
construction Finance Corporation in its
daily purchases of gold, accompanied by
the possibly permanent withdrawal from
circulation of gold coin.
A great many economists have spent
a great deal Of thought over the QueS-
ton of standard of value which would
remain stable for the payment of long
term debts. Gold, as commodity, is
subject to the same influences, though
In less marked degree. which change
the value from time to time of other
commodities. But gold has been found,
I'D to now, to be the most convenient
and the most stable standard of value,
especially when nations must trade
with each other through common
medium of exchange.
Under the commodity dollar theory
gold would still be retained as q stand
ard. but a standard that would be
heightened or shortened to prevent
variations in the price level of COM
modities.
Trying TO Keep Prices Level.
But this is another theory, yet to be
demonstrated as practical or even pos
sible II the reader will consult the
graph once more, and follow the curve
of wholesale prices, measured by an I'M
changed standard of money, the diff
Guilty Of trying to flatten out this curve
and keep it fiat by manipulating the
money standard is obvious. One may
easily understand the vast amount of
manipulating that would have been
necessary in years past. Between the
years 1916 and 1920 prices rose 81 per
cent Between 1920 and 1921 prices
dropped 80 per cent.
1t has not yet been demonstrated
that prices can be raised to desired
level by devaluing the gold content OF
the dollar. But if such an expedtent
does result in raising the price level,
the more dificult next step is to keep
the price level level.
The prices of all commodities do not
rise and fall alike. Between June, 1929,
and June. 1898, for instance, the aver
age price of all commodities fell BIT
per cent. But metals and metal prod
ucts fell only 21,6 per cent; house
furnishing goods fell 22.4 per cent:
chemicals and drugs, 21.l per cent; fuel
and lighting materials. 27.2 per cent;
building materials, ais per cent; tex
tile products, 3l.7 per cent; foods, 1873
per cent, and farm products. 49, per
cent. During the same interval other
commodities actually increased in price.
For commodities and values are affecteo
by many and complex factors which
have no apparent relationship to the
standard of value chosen to measure
prices. All of them do not rise or fall
in price at the same time nor in the
same degree.
If the Administration is able to Gre
ate a dollar that will not change its
purchasing or debt-paying value during
the succeeding generation" it will have
carved a niche in history that time will
not efface. Many of mans mundane
tribulations, as well as triumphs, have
resulted from these changes. The effort
to prevent such changes in future. by
applying a theory that today has ap-
parently more opponents than sup
porters, is undoubtedly the boldest ex-
pertinent of an administration which is
yet to be charged with lack Of courage.