Ill
THE RETURN TO GOLD
2I 5
Irving Fisher , advocated the former in theshape of his “compensated dollar,” which wasto be automatically adjusted by reference to anindex number of prices without any play ofjudgement or discretion. He may have beeninfluenced, however, by the advantage of pro-pounding a method which could be grafted aseasily as possible on to the pre-war system ofgold reserves and gold ratios. In any case, Idoubt the wisdom and the practicability of asystem so cut and dried. If we wait until aprice movement is actually afoot before applyingremedial measures, we may be too late. “It isnot the past rise in prices but the future rise thathas to be counteracted .” 1 It is characteristicof the impetuosity of the credit cycle that pricemovements tend to be cumulative, each move-ment promoting, up to a certain point, a furthermovement in the same direction. ProfessorFisher ’s method may be adapted to deal withlong-period trends in the value of gold but notwith the, often more injurious, short-periodoscillations of the credit cycle. Nevertheless,whilst it would not be advisable to postponeaction until it was called for by an actual move-ment of prices, it would promote confidence,and furnish an objective standard of value, if,an official index number having been compiledof such a character as to register the price of astandard composite commodity, the authoritieswere to adopt this composite commodity astheir standard of value in the sense that they