The subject of bimetallism has been so recently the bone of contention between two hostile parties that it is difficult to obtain a clear and unbiassed view of its real meaning. As in most subjects which have formed the ground of political controversy, the issues at stake have become obscured and the main principles have been confused with various less important details.

The average man is prone to regard the subject as one of unfathomable complexity, best left to the expert. A deep study of the subject certainly does lead one into intricate byeways, but the main issues at stake are easy to understand.

The question to which each party claims to have found the answer is, how to obtain the most stable standard of value. As was explained in Chapter II., an absolutely stable standard of value has proved, and so far as we can see is likely to prove, impossible of attainment. The advocates of the single gold standard, with England at their head, do not attempt to deny the changes which have taken place in the value of gold towards commodities generally, but they do unhesitatingly claim that the single gold standard has best stood the test of experience.

The defenders of the bimetallic system on the other hand, with France at their head, claim that under certain conditions the union of gold and silver as a joint and co-ordinate standard of value would prove more stable than the gold standard has been, but that the system has not had a fair trial, because the stated conditions have never yet occurred.

It is to some extent a contest of national temperament. England, the practical and conservative, stoutly adheres to the standard which, with all its faults, has served her better than any other, and refuses to relinquish it in favour of a system which in theory may be good but which has so far failed in practice. France, the logical and experimental, ever ready to risk failure in the hope of attaining perfection, strives to convert to her views the other nations without whose active concurrence she is helpless.

The subject divides itself naturally into two periods; the first, the attempt of France, with the aid of some of the other Latin nations, to maintain a bimetallic system in defiance of the resistance of the other commercial nations; the second, following on the failure of the first, the attempt to organise an international bimetallic system by united action on the part of the chief civilised countries of Europe and America.

As I explained in the last chapter, the characteristics of a perfect bimetallic system are three in number: concurrent circulation of gold and silver at a ratio fixed by the State; the opening of the mints to the coinage of both metals on equal terms; the establishment of unlimited legal tender for both metals.

These were the principles adopted by France when she reorganised her currency after the chaotic mismanagement of her "assignats" and "mandats" at the end of the eighteenth century. The law of the 7th Germinal, 1803, embodied this system, the ratio between the two metals being fixed at 151/2 to 1. The weakness which eventually proved the ruin of the system, was the difficulty of keeping this mint ratio identical with the market ratio of the two metals as bullion. Directly the two ratios began to vary, Gresham's law came into operation and the over-rated metal tended to drive the other from circulation. In this way what was in theory a double standard, became in practice an alternating standard. At one time the preponderating bulk of the coinage was of gold, at another time of silver, but only for very short periods did they circulate together in anything like equal quantities.

This is well shown in the French monetary history of the nineteenth century. Below are given Dr. Soetbeer's (a) table of the average market ratio of gold to silver bullion during periods of ten and five years:

Observe that between 1811 and 1850 the average market ratio was always slightly above the French mint ratio of 15.5 to 1; consequently silver was over-(a) Appendix to Final Report of the Gold and Silver Commission, p. 162. rated in France and drove gold almost entirely from circulation. H. D. Macleod, the author of the "Theory and Practice of Banking," says, "I myself can testify that in 1839 there was not to be seen a gold coin in France in common use "(b).

This state of affairs lasted until the gold discoveries of the middle of the century. In 1848, the Californian gold fields were opened, followed in 1851 by similar discoveries in Australia. Most of this gold was alluvial, and therefore easily extracted. The output of the metal was enormously increased. Between 1831 and 1840 the estimated average annual production of gold was £2,830,000; between 1841 and 1850 this average rose to £7,638,000; and between 1851 and 1860, £27,815,000. Something like a panic occurred in the gold using countries, owing to the anticipated fall in the purchasing power of gold, due to this sudden increase of the quantity in circulation. History had no parallel on record except the silver discoveries in South America, following the exploitation of that country by the Spaniards in the sixteenth century, and in that case it is generally agreed that two important results ensued: First, a fall in the purchasing power of money was shown by the general rise of prices; and secondly, owing to the greater, increase in the quantity of silver compared to gold, there was a disturbance in the market ratio between the two metals, which rose from about 11 to 1 to about 15 to 1 between 1550 and 1650. Extravagant prophecies were made of wholesale ruin to gold using countries like England, but fortunately events were not so bad as was anticipated. Both of the phenomena which distinguished the silver discoveries of the sixteenth century were repeated in the nineteenth century, but only to a very small extent.

(b) H. D. Macleod, "Bimetalism," 2nd ed., p. 15.