Bimetallism

Source: Wikipedia, the free encyclopedia.

Gold Croeseid, minted by King Croesus c. 561–546 BCE. (10.76 grams, Sardis mint)
Silver Croeseid, minted by King Croesus c. 560–546 BCE. (10.59 grams, Sardis mint)
The gold and silver Croeseids formed the world's first bimetallic monetary system c. 550 BCE. The exchange rate between the weights of gold and silver was 1 to 13.3 at the time.[1]

Bimetallism,

monetary unit is defined as equivalent to certain quantities of two metals, typically gold and silver, creating a fixed rate of exchange between them.[3]

For scholarly purposes, "proper" bimetallism is sometimes distinguished as permitting that both gold and silver money are legal tender in unlimited amounts and that gold and silver may be taken to be coined by the government mints in unlimited quantities.[4] This distinguishes it from "limping standard" bimetallism, where both gold and silver are legal tender but only one is freely coined (e.g. the moneys of France, Germany, and the United States after 1873), and from "trade" bimetallism, where both metals are freely coined but only one is legal tender and the other is used as "trade money" (e.g. most moneys in western Europe from the 13th to 18th centuries). Economists also distinguish legal bimetallism, where the law guarantees these conditions, and de facto bimetallism, where gold and silver coins circulate at a fixed rate.

Map of world currency systems. 1907 Countries with a gold standard are highlighted in yellow, countries with a silver standard are highlighted in blue, countries with a bimetallic standard are highlighted in green.
Map of world currency systems, 1907. Countries with a gold standard are highlighted in yellow, countries with a silver standard are highlighted in blue, countries with a bimetallic standard are highlighted in green.

During the 19th century there was a great deal of scholarly debate and political controversy regarding the use of bimetallism in place of a

floating fiat money, unconnected to the value of silver or gold. Nonetheless, academics continue to debate, inconclusively, the relative use of the metallic standards.[b]

Historical creation

From the 7th century

Asia Minor, especially in the areas of Lydia and Ionia, is known to have created a coinage based on electrum, a natural occurring material that is a variable mix of gold and silver (with about 54% gold and 44% silver). Before Croesus, his father Alyattes had already started to mint various types of non-standardized electrum coins. They were in use in Lydia and surrounding areas for about 80 years.[1] The unpredictability of its composition implied that it had a variable value which was very hard to determine, which greatly hampered its development.[1]

Croeseids

Croeseid bimetallic equivalence: 1 gold Croeseid of 8.1 grams was equivalent in value to 10 silver Croeseids of 10.8 grams.[10]

Croesus (reigned c. 560c. 546 BCE), king of Lydia, who became associated with great wealth. Croesus is credited with issuing the Croeseid, the first true gold coins with a standardised purity for general circulation,[1]

Herodotus mentioned the innovation made by the Lydians:[1]

"So far as we have any knowledge, they [the Lydians] were the first people to introduce the use of gold and silver coins, and the first who sold goods by retail"

— Herodotus, I94[1]

Achaemenid coinage

Achaemenid bimetallic equivalence: 1 gold Daric was equivalent in value to 20 silver Sigloi. Under the Achaemenids the exchange rate in weight between gold and silver was 1 to 13.[11]

Many ancient bimetallic systems would follow, starting with

Sigloi. The earliest gold coin of the Achaemenid Empire, the Daric, followed the weight standard of the Croeseid, and is therefore considered to be later and derived from the Croeseid.[12] The weight of the Daric would then be modified through a metrological reform, probably under Darius I.[12]

Sardis remained the central mint for the Persian Darics and Sigloi of Achaemenid coinage, and there is no evidence of other mints for the new Achaemenid coins during the whole time of the Achaemenid Empire.[13] Although the gold Daric became an international currency which was found throughout the Ancient world, the circulation of the Sigloi remained very much limited to Asia Minor: important hoards of Sigloi are only found in these areas, and finds of Sigloi beyond are always very limited and marginal compared to Greek coins, even in Achaemenid territories.[13]

Argentina

In 1881, a currency reform in Argentina introduced a bimetallic standard, which went into effect in July 1883.[14] Units of gold and silver pesos would be exchanged with paper peso notes at given par values, and fixed exchange rates against key international currencies would thus be established.[14] Unlike many metallic standards, the system was very decentralized: no national monetary authority existed, and all control over convertibility rested with the five banks of issue.[14] This convertibility lasted only 17 months: from December 1884 the banks of issue refused to exchange gold at par for notes.[14] The suspension of convertibility was soon accommodated[clarification needed] by the Argentine government, since, having no institutional power over the monetary system, there was little they could do to prevent it.[14]

France

Gold coin 20 francs and silver 5 francs, period of the Second French Republic. Weight 6.41 and 24.94 g. The ratio of gold to silver 1:15.5.

A French law of 1803 granted anyone who brought gold or silver to its mint the right to have it coined at a nominal charge in addition to the official rates of 200 francs per kilogram of 90% silver, or 3100 francs per kilogram of 90% fine gold.

California Gold Rush increased the supply of gold, its value was reduced relative to silver. The market rate fell below 15.5 to 1, and remained below until 1866. Frenchmen responded by exporting silver to India and importing nearly two-fifths of the world's production of gold in the period from 1848 to 1870.[16] Napoleon III introduced five franc gold coins which provided a substitute for the silver five franc coins which were hoarded,[17]
but still maintained the formal bimetallism implicit in the 1803 law.

Latin Monetary Union

The national coinages introduced in Belgium (1832), Switzerland (1850), and Italy (1861) were based on France's bimetallic currency. These countries joined France in a treaty signed on 23 December 1865 which established the Latin Monetary Union (LMU).[16] Greece joined the LMU in 1868 and about twenty other countries adhered to its standards.[18] The LMU effectively adopted bimetallism by allowing unlimited free coinage of gold and silver at the 15.5 to 1 rate used in France, but also began to back away from bimetallism by allowing limited issues of low denomination silver coins struck to a lower standard for government accounts.[19] A surplus of silver led the LMU to limit free coinage of silver in 1874 and to end it in 1878, effectively abandoning bimetallism for the gold standard.[19]

United Kingdom

Medieval and early modern England used both gold and silver, at fixed rates, to provide the necessary range of coin denominations; but silver coinage began to be restricted in the 18th century, first informally, and then by an

Act of Parliament in 1774.[20] After the suspension of metal convertibility from 1797 to 1819, Peel's Bill set the country on the gold standard for the remainder of the century; however advocates of a return to bimetallism did not cease to appear. After the crash of 1825, William Huskisson argued strongly within the Government for bimetallism, as a way to increase credit (as well as to ease trade with South America).[21] Similarly, after the banking crisis of 1847, Alexander Baring headed an external bimetallist movement hoping to prevent the undue restriction of the currency.[22] It was, however, only in the last quarter of the century that the movement for bimetallism gathered real strength, drawing on Manchester cotton merchants and City financiers with Far East interests to offer a serious (if ultimately unsuccessful) challenge to the gold standard.[23]

United States

In 1792, Secretary of the Treasury

tends to disappear from circulation
by hoarding or melting down.

Political debate

In the United States, bimetallism became a center of political conflict toward the end of the 19th century. During the

would restore prosperity.

1896 Republican poster warns against free silver.

Bimetallism and "

Republican Party itself nominated William McKinley
on a platform supporting the gold standard which was favored by financial interests on the East Coast.

Bryan, the eloquent champion of the cause, gave the famous

closed the gold window
.

Economic analysis

In 1992, economist Milton Friedman concluded that abandonment of the bimetallic standard in 1873 led to greater price instability than would have occurred otherwise, and thus resulted in long-term harm to the US economy. His retrospective analysis led him to write that the act of 1873 was "a mistake that had highly adverse consequences".[31]

See also

Notes

  1. ^ Formerly also written bi-metallism.[2]
  2. Charles Kindleberger[6] and Angela Redish[7] have argued against and Milton Friedman[8] and Marc Flandreau[9]
    for the inherent stability and usefulness of bimetallic standards.

References

Citations

  1. ^ from the original on 7 August 2022. Retrieved 16 November 2018.
  2. ^ Wilson, Alexander Johnstone (1880), Reciprocity, Bi-metallism, and Land-Tenure Reform, London: Macmillan & Co., archived from the original on 1 January 2017, retrieved 1 January 2017
  3. ^ "bimetallism, n.", Oxford English Dictionary, archived from the original on 11 January 2008, retrieved 1 January 2017.
  4. ^ Velde; et al., A Model of Bimetallism, Minneapolis: Federal Reserve Bank of Minneapolis Research Department.
  5. ^ "Bimetallism", Encyclopædia Britannica.[clarification needed]
  6. ^ Kindleberger, Charles (1984), A Financial History of Western Europe, London: Allen & Unwin
  7. ^ Redish, Angela (1995), "The Persistence of Bimetallism in Nineteenth Century France", Economic History Review, pp. 717–736
  8. ^ Friedman, Milton (1990), "Bimetallism Revisited", Journal of Economic Perspectives, vol. 4, American Economic Association, pp. 85–104
  9. ^ Flandreau, Marc (1996), "The French Crime of 1873: An Essay on the Emergence of the International Gold Standard, 1870–1880", The Journal of Economic History, vol. 56, pp. 862–897
  10. from the original on 15 January 2023. Retrieved 17 November 2018.
  11. ^ DARIC – Encyclopaedia Iranica. Archived from the original on 29 April 2011. Retrieved 20 November 2018.
  12. ^ from the original on 15 January 2023. Retrieved 20 November 2018.
  13. ^ from the original on 15 January 2023. Retrieved 20 November 2018.
  14. ^ a b c d e della Paolera, Gerardo; Taylor, Alan M. (2001). "The Argentine Currency Board and the Search for Macroeconomic Stability, 1880–1935" (PDF). University of Chicago Press. pp. 46–48. Archived from the original (PDF) on 16 January 2014.
  15. ^ a b Dickson Leavens, Silver Money, Chapter IV Bimetallism in France and the Latin Monetary Union, page 25
  16. ^ a b Dickson Leavens, op. cit. page 26
  17. ^ John Porteous, Coins in History, page 238
  18. ^ Robert Friedberg, Gold Coins of the World, fourth edition, page 11
  19. ^ a b John Porteous, op. cit. page 241
  20. ^ A. Redish, Bimetallism (2006) p. 67 and p. 205
  21. ^ B. Hilton, A Mad, Bad & Dangerous People? (Oxford, 2008) p. 303
  22. ^ É. Halévy, Victorian Years (London: Ernest Benn, 1961) p. 201
  23. ^ P. J. Cain, British Imperialism (2016) pp. 155–6 and p. 695
  24. ^ 2 Annals of Cong. 2115 (1789–1791), cited in Arthur Nussbaum, The Law of the Dollar Archived 15 November 2020 at the Wayback Machine, Columbia Law Review, Vol. 37, No. 7 (Nov., 1937), pp. 1057–1091
  25. ^ R. B. Nye, the Growth of the United States (Penguin 1955) p. 599-603
  26. ^ H. G, Nicholas, The American Union (Penguin 1950) p. 220
  27. ^ Quoted in R. B. Nye, the Growth of the United States (Penguin 1955) p. 603
  28. ^ R. B. Nye, the Growth of the United States (Penguin 1955) p. 603
  29. ^ R. B. Nye, the Growth of the United States (Penguin 1955) p. 604
  30. ^ H. G, Nicholas, The American Union (Penguin 1950) p. 222
  31. ^ Milton Friedman, Money Mischief (New York: Harcourt Brace Jovanovich, 1992) 78.

Bibliography

Primary sources

  • Campaign Text-book of the National Democratic Party (1896) by Democratic Party (U.S.) National Committee: this is the Gold Democrats handbook; it strongly opposed Bryan.
  • Walker, International Bimetallism (New York, 1896)
  • Robert Giffen, Case against Bimetallism (London, 1896)
  • Joseph Shield Nicholson, Money and Monetary Problems (London, 1897)
  • Samuel Dana Horton, The Silver Pound (London, 1887)
  • Walker, Money (New York, 1878)
  • Francis Amasa Walker, Money, Trade and Industry (New York, 1879)
  • Elisha Benjamin Andrews
    , An honest Dollar (Hartford, 1894)
  • Helm, The Joint Standard (London, 1894)
  • Frank William Taussig
    , The Silver Situation in the United States (New York, 1893)
  • Horace White (writer), Money and Banking (Boston, 1896)
  • James Laurence Laughlin, History of Bimetallism in the United States (New York, 1897)
  • Langford Lovell Price, Money and its Relations to Prices (London and New York, 1896)
  • Utley, Bimetallism (Los Angeles, 1899)
  • Roger Q. Mills, What shall we do with silver? (The North American Review, Volume 150, Issue 402, May 1890.)

Secondary sources

External links