Bimetallism

Bimetallic standards refer to monetary regimes where the principal media of exchange in the economy are gold and silver coins. Bimetallic standards were introduced by monetary authorities that wanted to have a medium of exchange with a wide range of denominations to facilitate trade at the international, wholesale, and retail level. Producing coins of two metals, one valued 10–16 times more than the other, enabled a wider range of coins than a monometallic standard, but in solving one problem it created another. This chapter describes a prototypical bimetallic standard and then shows how changing relative values of gold and silver, the financial needs of monetary authorities, and the challenges common to all commodity monies created difficulties for the system. Bimetallic standards were common at the beginning of the nineteenth century, but by the end of the century, the large economies had transitioned to the gold standard. The transition reflected geopolitics of the late nineteenth century, but also required that monetary authorities had the capacity to issue tokens (both in high denominations such as bank notes and low denominations such as fractional coins) to address the need for multi-denominational money. That capacity evolved over time, requiring both technology that would preclude (or at least minimize) counterfeiting, and monetary authorities with credibility. The history of bimetallism highlights the fact that money is a social institution whose instantiation has varied over time, in response to changes in technology and changes in social institutions.