Up to and well into the last century the coinage systems of progressive nations were bimetallic. That is, there were: (1) free and unlimited coinage of both gold and silver at a fixed legal ratio of weights of the gold and silver coins, and (2) the full legal tender of both at these ratios. The mint or legal ratio was fixed between 15:1 and 16:1, and conformed roughly to the market ratio prevailing at the time of legislation.
Bimetallism was based upon the assumption that it was desirable to continue the circulation of both metals as primary money; it was argued that a higher stability of values would result, since price levels could rise or fall only as the combined volume of the two metals rose or fell, and that the probability was small that the two metals " would change in value in the same direction and in the same degree at the same time." This combining of volumes would result in a sort of compensating value - if silver were the cheaper metal on the market it would flow to the mint and into coins; gold, on the other hand, would flow to the market and be melted down. The result would be that the market value of silver would rise and that of gold fall until the market ratio was again brought into conformity with the mint ratio.
The gold standard assumes that gold alone is a better and more stable measure of value than gold and silver taken together. Under bimetallism the fluctuations caused by shifts, from gold to silver and from silver to gold, which occur as the market ratio adjusts itself to the mint ratio, are disturbing to the financial and commercial world. No mint ratio which will bring permanent bimetallism can be determined upon, since the accidents of production and consumption of the two metals may bring about the complete expulsion of one of the metals, in which case monometallism of the other will prevail. Whenever the metal in a coin is valued more highly in the market than at the mint, it is either melted or exported; the overvalued metal drifts to the mint, the undervalued to the market. If the supply of the overvalued is sufficiently large, the principle of compensating values which tends to restore the ratio proves unavailing and the complete expulsion of the undervalued metal is inevitable. To keep a bimetallic system in existence therefore requires: (1) that the mint ratio be changed from time to time if the mint and market operations fail to make the two ratios conform, and (2) that the mint ratios adopted among the leading commercial nations agree. The former requirement makes possible dangerous disturbances at the caprice of legislators; the latter has proved and is likely to prove a political impossibility, on account of the jealous and independent attitude of each nation in its monetary affairs.