Jake Dietrich, age 16, of Chattanooga, Tenn., for his question:
WHAT IS BIMETALLISM?
Bimetallism is a monetary policy based on the use of two metals, usually gold and silver, as legal tender, coined without limit (free coinage) and equalized by laws in a fixed ratio. The ratio is expressed in terms of weight, usually with a fixed number of ounces of silver being made equal to one ounce of gold.
Determined by law, the ratio between the two metals does not necessarily reflect the relative abundance of either metal and therefore may be changed by law, as it was in the United States in 1834, when the former ratio of 15 to one was changed to 15.988 to one, or, as commonly expressed, 16 to one.
Weight ratio has no relation to the commercial ratio (value) of the metals, which may fluctuate.
Bimetallism was abandoned in the United States in 1873. The Bland Allison Act of 1878, however, allowed a limited number of silver dollars to be coined, thus creating the system termed limping bimetallism, a monetary system partially dependent on the use of silver but primarily dependent on gold.
Bimetallism was a major political issue in France and other European nations. It became a crucial issue in the U.S. during the last quarter of the 19th century, a period characterized by steadily falling prices and a commercial depression. The policy of limping bimetallism was ended by the Gold Standard Act of 1900 and with the gradual improvement in economic conditions, the issue was forgotten.
It was revived, however, in the 1930s, following the depression of 1929, and although true bimetallism was not established, silver was added to gold as the U. S. monetary base.
In 1967 the U.S. removed all connections to bimetallism. The 25 percent gold backing for the currency was eliminated as base of payments difficulties reduced U.S. gold stock.
Rising silver prices led to the virtual elimination of silver contents in U.S. coins and to a discontinuation of redemption of any silver certificates presented after 1968. In 1970 the federal government sold the rest of its silver supply.
Practical difficulties, in the maintenance of concurrent circulation of the two metals, have led one nation after another to adopt a system of monometallism, with gold as its basis.
In England the single gold standard, actually in operation since 1699, was finally legalized by successive steps in 1717, 1774, 1778 and 1816.
The U.S. adopted the double standard, as urged by Secretary of the Treasury Alexander Hamilton, in 1792. France, in 1801, instituted a plan to make a five franc silver piece standard money, but after the discovery of gold in Australia and California and the fall in the price of gold relative to silver, the French law favored the coinage of gold.
Thereafter the most important European nations abandoned the double standard for the single gold standard.