acted for the conversion of standard bullion into standard coin. If the federal government should issue a general balance sheet of the kind used in corporation accounting, the credit element in its outstanding limited coinage would properly appear as a liability, which might be greater or less than the profits that had accrued on such coinage, depending upon whether the present value of the bullion in the coins happened to be greater or less than the prices which the government had paid for it.

Bimetallism. A monetary system like the present one of the United States is a single standard system, because only one commodity is used as a monetary standard. The double standard system, under which two different commodities serve concurrently as legal monetary standards, has, however, been used in the past. by many governments, including our own, and its superiority over the single standard system has been alleged by many advocates. Practically the only commodities that civilized nations have used as monetary standards in modern times are gold and silver. The question of the double standard resolves itself, accordingly, into the question of the bimetallic standard, which means in practice the unlimited coinage of both gold and silver.

Bimetallism does not mean, in theory, as might be supposed, the establishment of two different monetary units of different names, one defined as a certain amount of silver, the other defined as a certain amount of gold, prices being stated according to convenience in terms of either unit. On the contrary, it contemplates the establishment of one nominal unit, such as the dollar, to be defined at the same time as either a definite amount of gold or a definite amount of silver. More concretely, this means the opening of the mints to the unlimited coinage of both gold and silver into dollars, or dollar multiples, the amount of silver in a silver dollar and the amount of gold in a gold dollar being established by law.

Many of the arguments that have been advanced by bimetallists have related to the alleged immediate advantages to be secured from the adoption of the double standard under particular condition time and place. One argument, however, of

more gen

is based on the probablogater stabil

ity of prices under the double standard. Silver and gold are produced under somewhat different conditions, and are used for somewhat different purposes. It has been maintained that tendencies toward fluctuations in prices stated in silver and in prices stated in gold would, therefore, be as apt to be in opposite directions as in the same direction, and that so far as they were in opposite directions they would tend to counterbalance each other.

Most opponents of bimetallism, while admitting that, if feasible, it might possess some advantages, deny its possibility. The difficulty is, they maintain, that while the ratio of the weight of gold in the monetary unit to the weight of silver in the monetary unit has to be fixed and definite, the ratio at which gold exchanges for silver is not fixed and definite, but is subject to the fluctuations of the market. If one metal is relatively underappraised and the other relatively overappraised by the legal ratio, the result will be that only the overappraised metal will be brought to the mint for coinage, for the underappraised metal will be worth no more than the overappraised one as coin, but will be worth more as bullion. The actual result will be, in such a case, not a bimetallic standard, but a single standard composed of the metal which, at the mint ratio, is the cheaper. Moreover, if, by a change in the market ratios of exchange of the two metals, this one in turn becomes underappraised by the mint ratio, the standard coins composed of that metal that are already in use will disappear from circulation, being hoarded, melted down, or exported, and the other metal will take its place as the actual standard of value.

The opponents of bimetallism claim, in short, that it encounters a formidable obstacle in the principle known as Gresham's law, which is usually summarized with rough accuracy in the statement that "bad money drives out good," or that "the cheaper money drives out the dearer." More definitely, this means that domestic payments will be made, as far as possible, in the money which can be used to less advantage for other purposes, and that no one will exchange relatively expensive bullion for coins at the mint when coins of an equal nominal

value and (for most purposes) of equal purchasing power can be obtained in exchange for relatively cheaper bullion. Sir Thomas Gresham is said to have come to this conclusion as a result of his observations of the difficulties encountered by Queen Elizabeth in her attempts to improve the condition of the debased, worn, and mutilated coinage bequeathed to her by her predecessors. But the operation of the principle had previously been noted by various writers.

All but the most extreme bimetallists would admit the impossibility of establishing and maintaining a coinage ratio between the two metals that would differ by any wide margin from the initial ratio at which they exchanged in the market, but they maintain that a mint ratio established as nearly as possible to the prevailing market ratio will have a steadying influence upon the latter that will tend to prevent any wide divergence between the two. If the market ratio should change to such an extent that it would not pay to use one of the metals as money, more of the other metal would be used for monetary purposes, thus decreasing the supply of it available for other uses and consequently enhancing its relative value. The net effect of this "compensatory action of bimetallism" would be, it is claimed, a tendency toward the equilibrium of the market ratio of exchange of the two metals at the coinage ratio.

The appeal to history has been used both by bimetallists and their opponents. The claim of the monometallists that legal bimetallism is apt to mean actual monometallism, with the relatively cheaper metal as the standard, has been substantiated many times in the monetary experience of different nations. The automatic change from one single standard to the other, following a change in market rates of exchange, is also a phenomenon that has been illustrated by a large number of concrete cases. On the other hand, the bimetallists are able to point to some fairly successful bimetallic systems, such as that of France in the first half of the nineteenth century. But it is a significant fact that no real bimetallic system has been able to endure for any considerable time except when the annual production of gold and silver was relatively small and relatively stable,

and where international trade was a relatively unimportant item. There is no scientific student of monetary problems who believes that it would be possible for any nation independently to maintain the double standard under the present conditions of a large and fluctuating annual production of the precious metals, coupled with an international commerce of vast proportions.

International bimetallism, that is, the adoption by most of the leading nations of a bimetallic standard, at a ratio fixed by international agreement, has had many supporters, even among those who do not believe in the practicability of national bimetallism, and representatives of different nations have assembled in several international monetary conferences for the discussion of this subject. International bimetallism would remove one difficulty experienced in the attempts made by different nations to maintain independent bimetallic systems at even slightly differing ratios, and that is the tendency for each metal to flow from the countries in which it is relatively underappraised in the mint ratio to the countries in which it is relatively overappraised. Other difficulties, however, would still remain, and the possibility of maintaining an actual bimetallic standard even under international agreement, supposing that were possible, is open to very serious doubt.

The waning of public interest in the question of bimetallism in recent years is of great significance, because it indicates that the real moving forces behind the bimetallist propaganda have not been any real or assumed points of superiority of general significance that may be imputed to a double standard, but rather that certain specific results that would flow from the adoption of bimetallism at a particular time and place have been desired. More specifically, bimetallism has been supported by those who have desired "cheaper money," and these have been particularly active when the money in actual use has been increasing in its purchasing power, that is, when prices in general have been decreasing. The recent great increase in the world's production of gold has, temporarily at least, taken bimetallism out of the list of economic problems of general public interest.

Bimetallism in the United States. - The national monetary

system was established by act of Congress in 1792. The mint was opened to the free and unlimited coinage of both gold and silver, the silver coins containing 371 grains of fine metal per dollar, and the gold coins 243 grains per dollar, the ratio of 15 to I being thus established. It was soon found, however, that gold was worth in the market slightly more than fifteen times as much silver, and as a consequence but little gold was brought to the mint for coinage, while such gold as was coined illustrated Gresham's law by speedily disappearing from circulation.

Silver dollars, too, disappeared from circulation, but for another reason. They were somewhat lighter than the Spanish dollars which were in general circulation at the time, and would, under the operations of Gresham's law, have driven the latter out of circulation, had it not been that the Spanish dollar commanded a slight premium over the American dollar in ordinary purchases. But the American dollars, on account of their new and attractive appearance, could be used as advantageously as the Spanish dollars in trade with the Spanish possessions in America. They were consequently taken from the country for that purpose, while Spanish dollars were brought back and were sometimes recoined into a larger number of American dollars. This wasteful coinage of silver dollars was stopped in 1806 by order of President Jefferson, leaving the mint open to the coinage only of gold, smaller silver coins, and minor coins. As a matter of fact American coins made up only an insignificant part of our circulating medium before 1834.

Realizing the impossibility of maintaining a gold coinage under such conditions, Congress, in 1834, changed the legal ratio to 16 to 1 by reducing the weight of the gold dollar. By this step, however, it went too far in the other direction, for gold was not worth in the market quite sixteen times as much as silver, and while the number of gold coins increased, but little silver was brought to the mint, and silver coins quickly disappeared from circulation. In order to secure a supply of small change, Congress was forced, in 1853, to abandon the principle of the un

1 The act of 1792 followed in detail the recommendations of a Report on the Establishment of a Mint, by Alexander Hamilton, then Secretary of the Treasury. Hamilton incorporated some of the recommendations contained in earlier reports by Robert Morris and Thomas Jefferson. Hamilton's Report has been frequently reprinted, but it, together with the reports of Morris and Jefferson and other pertinent documents, may be conveniently found in the Report of the International Monetary Conference of 1878.