bimetallism (redirected from bimetallist)

bimetallism (bīmĕt`əlĭz'əm), in economic history, monetary system in which two commodities, usually gold and silver, were used as a standard and coined without limit at a ratio fixed by legislation that also designated both of them as legally acceptable for all payments. The term was first used in 1869 by Enrico Cernuschi (1821–96), an Italian-French economist and a vigorous advocate of the system. In a bimetallic system, the ratio is expressed in terms of weight, e.g., 16 oz of silver equal 1 oz of gold, which is described as a ratio of 16 to 1. As the ratio is determined by law, it has no relation to the commercial value of the metals, which fluctuates constantly. Gresham's law, therefore, applies; i.e., the metal that is commercially valued at less than its face value tends to be used as money, and the metal commercially valued at more than its face value tends to be used as metal, valued by weight, and hence is withdrawn from circulation as money. Working against that is the fact that the debtor tends to pay in the commercially cheaper metal, thus creating a market demand likely to bring its commercial value up to its face value. In practice, the instability predicted by Gresham's law overpowered the cushioning effect of debtors' payments, thereby making bimetallism far too unstable a monetary system for most modern nations. Aside from England, which in acts of 1798 and 1816 made gold the standard currency, all countries practiced bimetallism during the late 18th cent. and most of the 19th cent.

Bibliography

See J. L. Laughlin, The History of Bimetallism in the United States (1897, repr. 1968).

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bimetallism

Monetary standard or system based on the use of two metals, traditionally gold and silver, rather than one (monometallism). In the 19th century, a bimetallic system defined a nation's monetary unit by law in terms of fixed quantities of gold and silver (thus automatically establishing a rate of exchange between the two metals). The system provided a free and unlimited market for the two metals, imposed no restrictions on the use and coinage of either metal, and made all other money in circulation redeemable in either gold or silver. Because each nation independently set its own rate of exchange between the two metals, the resulting rates of exchange often differed widely from country to country. When the ratio of the official prices proved different from the ratio of prices in the open market, Gresham's law operated in such a way that coins of only one metal remained in circulation. A monometallic system using the gold standard proved more responsive to changes in supply and demand and was widely adopted after 1867. See also exchange rate; silver standard.