Yale University
(Editor's Note: Professor Fisher is internationally known for his work in direct
ing public attention to' the intimate relation between a fluctuating currency—"the dance
of the dollar”—and industrial booms and depressions. In a discussion of this impor
tant subject at the Nineteenth Annual Meeting of the American Association for Labor
Legislation, his conclusion that by stabilizing the dollar we could for the most part
solve the problem of unemployment drew from Dr. Royal Meeker, former United
States Commissioner of Labor Statistics, the comment: "I do agree with Professor
Fisher that it is far and away the most important influence in the stabilization of
industry, in the assurance of prosperity and therefore of employment.”)
T7EW economic problems have seemed more baffling than the Un-
employment problem although none is of greater human in
terest or has received more attention.
That unemployment should bear any relation to banking and
money, inflation and deflation, may seem strange and far fetched.
Yet it is in such a relationship that the explanation of those mysteri
ous changes in unemployment is to be very largely found.
Doubtless many distinct factors play a part in causing unem
ployment; but there is one which, though often dimly recognized,
has not hitherto been sufficiently appreciated. A careful study
demonstrates that its fluctuations correspond closely to the fluctua
tions of unemployment.
That factor is the instability of the dollar, or to be more specific
the instability of the price level as measured by the rates of change
in the index number of wholesale prices of the United States Bureau
of Labor Statistics. When prices fall unemployment increases.
When prices rise unemployment decreases—for a time. When prices
neither rise nor fall, employment remains steady.
The present study of unemployment and the price level is part
of a study of the price level and the so-called “business cycle” which
I have been making for several years.
A rising price level temporarily stimulates trade and a falling'
price level depresses trade. Otherwise expressed, monetary de-
