| |
Bimetallism, in economics, as its name implies, is a monetary system using two metals rather than just one as a nation\'s money. (The metals are usually gold and silver.) Historically, bimetallism was supported by those who felt that the use of just one metal would unduly restrict the supply of money and depress the general price level, at a time when it was considered that money on intrinsic value was the only ‘good’ money. (In that view it is permissible, for convenience, to print paper money only so long as it is backed 100% by precious metal.)
An official exchange rate must be established between the two metals, represented by the weight of each metal in coins of the same denomination. When the USA was on a bimetallic standard for a time in the 19th century, complications arose when the market price ratio for the two metals differed from the official price ratio per ounce as used in coins. It proved impossible to keep both metals in circulation because the market price often differed from the mint price and people would melt down the dearer coins (to get the market value of the metal). Hence Gresham\'s Law: Bad money drives out good. TF |
|
