9. How the Adjustment Rule Would Work
And now we approach the last of the three questions formulated in §6: Will the above rule for varying the dollar's weight really stabilize the dollar? How can we know that if the index number is one per cent above par, a one per cent increase in the weight of the gold dollar will be just sufficient to drive the index number back to par? The answer is we do not know, any more than we know, when the steering wheel of an automobile is turned, that it will prove to have been turned just enough and not too much. Many things may interfere in the period elapsing between adjustments. But if the correction is not enough or if it is too much, the index number, when next computed, will tell the story. Absolutely perfect correction is impossible but any imperfection will continue to reappear and cannot escape ultimate correction.
Suppose, for instance, that next month, or adjustment period, the index number is found to remain unchanged at 101%, that is, that the basketful of goods still costs $1.01. Then the dollar is at once loaded an additional one per cent. And if, next month, the index number is, let us say, l00½, i.e ½ of one per cent above par, that ½ of one per cent will call for a third addition to the dollar's weight—this time ½ of one per cent. And so, as long as the index number persists in staying even a little above par, the dollar will continue to be loaded at each adjustment period, until, if necessary, it weighs an ounce—or a ton, for that matter.
But, of course, long before it can grow very heavy, the additional weight will become sufficient, so that the index number will be pushed back to par; that is,
