The displacement of one metal by the other, resulting in the establishment of equilibrium between market and mint prices, operates more exactly if both metals are full legal tenders at the mint ratio. It is the seller who decides the form of payment he will accept; if asked to take the coined metal overvalued at the mint, he can refuse outright, or can accept it at a discount, or -what amounts to the same thing - ask a higher price for his goods. In paying debts previously contracted, however, legal tender laws apply, and the payer can tender any lawful money, and he will normally pay the metal which is overvalued at the mint. That is, if the silver dollar is a legal tender and silver is selling on the market at $1.20 per ounce, a debt of $1 can be paid with $.928 worth of silver, by first having the silver coined. The metal overvalued at the mint tends to displace the undervalued and to be the circulating medium. This is Gresham's Law. The legal-tender quality therefore helps to drive the undervalued metal from circulation, the only prevention for which is to specify in the contract of debt the tender that will be acceptable. Prices tend to be quoted in the overvalued medium and therefore its purchasing power tends to equal its debt - paying power.
Owing to the higher price level, the country becomes a good one in which to sell and a poor one in which to buy, the balance of trade becomes adverse, and balances must be settled. In international trade, where no international legal-tender laws exist, the seller of goods determines the money medium that is acceptable, and international balances are normally settled in gold; if the seller lives in a silver or bimetallic country, silver may be acceptable. The supply and demand of the metals is therefore international in scope, and if the mint prices of the various countries differ each metal will tend to move to the mint that pays most for it. To be successful, accordingly, bimetallism requires international concert at fixing mint prices.