The advocates of bimetallism claim for it various advantages, of which the most important, perhaps, is the greater stability of value of a double standard. They claim that since gold and silver are produced under different conditions and are used for different purposes, fluctuations in their respective values are as apt to be in opposite directions as in the same direction; that gold may be cheapening while silver is enhancing in value, and that these movements in opposite directions tend to keep the two metals from varying greatly from the legal ratio. It is undoubtedly true that the relative values of gold and silver under a double standard tend toward the established ratio. If gold is overvalued it is attracted to the mint and less of it is offered on the market, with the result that its value tends to rise. On the other hand, if it is undervalued it will be melted down to be sold as bullion on the market, and the increase there would tend to lower its value. Thus, says the bimetallism any tendency of gold either to rise or fall in value would be automatically checked. As pointed out by Dr. Scott, "The weakness of this argument is the assumption involved of the unlimited interchangeability of gold and silver coins for monetary purposes."1 Gold is best suited for coins of high denominations and silver for small denominations, and neither can well take the place of the other. Without this interchangeability of the coins the "compensatory action" of bimetallism would fail to work. As a result there would be a frequent change of the standard of value from one metal to the other, debtors choosing the cheaper one as the basis for payments, and prices would be quoted in that metal. "Instead of ridding us of the evils of a fluctuating standard, therefore, bimetallism would substitute one kind of fluctuation for another, namely, that involved in changing from a dearer to a cheaper standard for that involved in changes in the value of gold." Finally, it should be noted that even if the values of gold and silver could be maintained at a. fixed ratio to each other, it would not solve the problem of a stable standard of deferred payment. Though thus tied together they would not always maintain the same exchange relations and the same level of prices with all other commodities, the cost of which is constantly changing.
Despite some more or less successful experiences with bimetallism, notably the experience of France in the last century, it is now generally conceded that no nation could independently maintain the double standard under existing conditions of a large and fluctuating production of gold and silver and of an enormous international trade. From time to time conferences have been held to discuss the establishment of international bimetallism, that is, the adoption by the leading nations of the double standard at a ratio determined by international agreement. The possibility of maintaining an actual bimetallic system, even if it could be agreed upon by the leading nations, has always been open to doubt. The extraordinary increase in the production of gold in recent years has set at rest, for the present at least, the double standard controversy.
England was one of the first countries to reach the conclusion that gold and silver cannot be kept in current circulation at any fixed ratio. That country had through the eighteenth century a nominal double standard, though the circulating medium was composed largely of gold. In 1816 she formally adopted the single gold standard. The other countries of Europe, in most of which silver was the main metallic money, continued the struggle to maintain the double standard for a few decades longer. Germany adopted the gold standard in 1871. In 1865 France, Belgium, Switzerland and Italy united to form the Latin Union, the main object of which was the adoption of a uniform decimal coinage system based on the French franc. The Union adopted the double standard with free coinage of both metals at a ratio of 15 1/2 to 1. In 1873 France, fearing the loss of her supply of gold, stopped the free coinage of silver, and in the next year the Union limited the amount of five-franc pieces to be coined. Finally, in 1878, the coinage of these silver pieces was discontinued and it has never been resumed. Thus, bimetallism came to an end. In practically every important nation in the world gold is now the standard of value.
1 Scott: Money, p. 85.