To illustrate the compensatory theory, suppose we had had bimetallism in the United States during the past generation. The pure content of the gold dollar is 23.22 grains Troy, and of the silver dollar 371.25 grains, these weights being determined by the coinage law and representing a mint ratio (371.25/23.22 = 16-) of approximately 16:1. A Troy ounce of gold or silver weighs 480 grains Troy. Under bimetallism, therefore, at the mint an ounce of silver would be worth \$1.29 in gold (480/ 371.25 = 1.29), and an ounce of gold \$20.67 in gold (480/

23.22 = 20.67); these would be the "mint prices" and would be constant, except as Congress might legislate different weights for the coins. With free and gratuitous coinage of gold, its market and mint prices would conform, for if the market price of gold bullion should fall to, say, \$20 per ounce, the holder of bullion would carry it to the mint and get \$20.67; in other words, the mint would provide an unlimited demand for gold at \$20.67 per ounce. If the price of bullion should rise to, say, \$21 per ounce on the market, holders of coins would reduce them to bullion for sale. In other words the coined gold would constitute a potential supply, as against the industrial uses of gold, and keep the market price down to \$20.67. The mint therefore would stabilize the price of gold.

The price of gold is quoted in terms of gold, so likewise is the price of silver. The price of silver will fluctuate with the accidents of its supply and demand. Suppose it fell to, say, \$1.20 per ounce; under the conditions of bimetallism given above, the holder of bullion would prefer to sell it to the mint at \$1.29 rather than on the market at \$1.20. In fact he would use all the purchasing power he could assemble - gold coins and certificates, silver coins and certificates, bank notes, bank deposits - to buy silver bullion on the market at \$1.20 and then resell it at the mint at \$1.29; and he would use the proceeds of each sale to buy more bullion. This demand for silver would tend to raise its market price from \$1.20 to \$1.29, at which price the operation would cease to be profitable. Meanwhile the market ratio of the values of equal amounts of gold and silver bullion (20.67/1.20 = 17.22) would shift from 17.22:1 to 16:1.

Suppose, on the other hand, the market price of silver had risen to \$1.45 because of a conjunction of underproduction and larger consumption. Then it would be profitable to reduce silver dollars to bullion and to sell it at \$1.35 per ounce. The silver in a silver dollar would then be worth in the market more (371.25 /480 X \$1.35 = \$1.044) than its face value. The result of this process would be that the supply of silver bullion would increase and its price tend to fall from \$1.35 to \$1.29, and the market ratio of the values of equal amounts of gold and silver (20.67/1.35 = 15.3) would shift from 15.3:1 to 16:1.

It is therefore evident that the establishment of bimetallism tends to make the market price of gold and silver alike conform to the mint prices set by law, and to make their market ratio conform to their mint ratio. This conformity could not be effected if, in the first case above, the silver mines were so prolific that they could keep the market glutted despite an increased demand, so that it would continue to be profitable to carry bullion to the mint - for the coined silver would entirely displace the gold and silver monometallism would supplant bimetallism. Nor could the conformity be effected if, in the second case above, the demand for silver were insatiable, for then silver would disappear from circulation and gold monometallism would prevail. Theoretically, however, for ordinary variations in the relative valuations of these metals, bimetallism would be an effectual conforming force.