This section is from the book "Money And Banking", by William A. Scott . Also available from Amazon: Money and Banking.
The word bimetallism is used to describe a monetary system in which standard coins of both gold and silver are freely manufactured without any preference whatever being shown by the government towards either metal. It, therefore, involves three things: first, that the public authorities should decide upon some ratio between the two metals; second, that they should agree to accept all the gold and silver bullion of the proper standard presented, and mint it into certain or all classes of coins at the ratio selected; and third, that they should make such coins full legal-tender for all payments public or private. This system is advocated as a substitute for monometallism, in which one of the metals only is used in the manufacture of standard coins, and in which the other occupies a subsidiary position in the sense that the coins made from it are minted only on government account and with limited legal-tender power, and are maintained at a par with the standard coins by being made redeemable directly or indirectly in them, and by being strictly limited in quantity to the public demand for them in those uses for which they are best adapted. In order to avoid confusion and misunderstanding several points should be carefully noted.
First, the controversy over bimetallism versus monometallism does not involve the question whether both gold and silver shall be used for monetary purposes. In each system coins of both metals play an important part, and no monometallist whose opinion is worth considering proposes the demonetization of either silver or gold, as has often been charged. The question simply concerns the best method of fixing the relation between the two metals in the currency, the bimetallists claiming that both should be put upon a substantially equal footing by the methods of procedure above indicated, while their opponents claim that coin made of one of the metals should be made subsidiary by the processes described in Chapter II (The Medium Of Exchange: Its Characteristics And Composition, And The Relation Between Its Constituent Elements). The difference between the two parties in reference to this matter concerns the use of both metals in the manufacture of standard coins only.
Second, bimetallism does not involve the necessity of establishing an office for money-changing in the Treasury Department at which the government would freely exchange coins of the one metal for those of the other. It means only that it shall agree to coin all the silver bullion of the proper standard which people are pleased to bring to the mint into silver coins of the denominations, weight, and fineness established by law, and all the gold bullion brought, into gold coins; that it shall receive in payments coins of either or both kinds without discrimination, and pay out whichever variety of coins it pleases; and that it shall compel everybody else to do likewise by making both gold and silver coins full legal-tender. Naturally the public treasurer is obliged to pay out the kind of money he receives, and it is entirely possible that under a bimetallic system he might be compelled to conduct practically all his monetary operations in one of the metals, and thus be entirely unable to furnish coins of the other metal on demand. Bimetallists do not like to contemplate such a state of affairs, and do not believe that it would ever be realized, but there is nothing in the nature of their system to prevent it. Everything depends upon the mode of its operation.
Third, so far as the present practice of most nations is concerned, the proposition of the bimetallists is that some one of the silver coins, usually the largest, shall be freely minted by the government just as gold coins now are, and that all limitations on its legal-tender power shall be removed. A change in the ratio sometimes is and sometimes is not advocated. In the United States, for example, the bimetallists propose that the silver dollar, which weighs sixteen times as much as would a gold dollar, if one were minted, shall be freely coined for all persons who bring silver bullion nine-tenths fine to any of our mints for that purpose. This coin already possesses the full legal-tender power, and consequently no change in this particular is needed. With us, therefore, the question of bimetallism reduces itself to that of the free coinage of silver dollars as opposed to their present limited coinage and as opposed to the proposition made by many people that they be completely assimilated to our other subsidiary coins. In France and the other countries of the Latin Union the controversy concerns the status of the five-franc piece, the coinage of which was discontinued in 1878. The bimetallists propose that this coin, the weight of which is to that of a gold coin of the same nominal value as 15 1/2 is to 1, shall be restored to the position it occupied after the monetary convention of 1865, in which France, Belgium, Switzerland, and Italy agreed to coin five-franc pieces as freely as gold. Inasmuch as no coin similar in status to our dollar and the five-franc piece of the Latin Union exists in England and Germany,* bimetallism in those countries would mean the selection of some silver coin, possibly the crown in England and the five-mark piece in Germany, for free coinage, and very likely a change in the weight or the degree of fineness, or both, of the coins so selected.
The purpose of the advocates of bimetallism is to render the standards of the nations more steady in value, and thus to prevent what they regard as unnecessarily great fluctuations in prices, and to counteract the tendency towards appreciation which, they claim, has characterized the gold standards of the world during the last thirty years. Some bimetallists, especially those who have large interests in silver mines, have special reasons of a personal character for their enthusiasm in this cause, but these are unworthy of consideration and should not be permitted to prejudice the case of those who have only the public good in view. In order adequately to explain the motives of this latter class, it is necessary to describe their charges against the monometallic system and their theory of the way in which bimetallism would remove or, at least, mitigate the evils for which it is said to be responsible.
* The thalers of the German Empire occupy a position somewhat similar to our dollars and the French five-franc pieces, but they can hardly be put in the same class on account of the peculiarity of their origin and the fact that in theory at least they are only a temporary element of the currency system.