A stable price level in China could
flexible exchange rate of the Chinese obtained by arranging for dollar in terms of silver, to offset fluctuations into internat price level in China, To adopt such curren. it would be necenary. of hat lo commodity prices that 0 construct veliable index
would represent a larger part of the country than is now represented by the present very good indexes for Shanghai and North China,
of silver exchangeable for a Chinese (2) To provide that the amount Gollar note Foul be changed peiodically. If the official index of wholesale prices declined one per cent. the weight of silver exchangeable for the Chinese dollar would be di per cent, and wholesale prices would tend'to rise to the previous level. The opposite procedure would be used to offset rising wholesale prices, (8) To provide that all internal payments in settlement of debts, contracts, or other obligations could legally be made in Chinese dollar notes, regardless of their silver value' at the time the contract was made or at any other time.
This type of currency "standard is sometimes called the compensated or commodity dollar. It can also be described as a flexible—silver standard. In order for a flexible silver standard to be affective in ontroling the internal price Tave would-be necessary not to impose any restrictions on the export of aliver or on. its free exchange for currency within the country.
Weight Determination Error As long value of, the Chinese dollar is value of a, fixed prices in China will decline Burchasing power of silver fame method of stabilizing the price level is desirable, but tants import embargoes, export bounty restriction of production, and pri fixing will not be effective.
During the period of rapidly de-ea in gold standard coun-inning in 1929, many attempts were made to hold up the prices of this or that commodity by {arifts," export" bounties, priceing, restriction of production, and in other ways, These—attempts failed ultimately to give the desired relief, which could only be obtained by disengaging the Value of the carreney from the rising value of gold, by leaving the fixed gold Standard. However, most countries not leave the gold standard until declining prices had brought them close to complete economic ruin, Many were not, able to avoid serious social and political disturbances.
Text read from the printed page and cleaned; old type leaves the occasional error.