The Case for Supported Bimetallism in the Late 19th Century

Supported bimetallism was a financial system proposed in the late 19th century to stabilize currency values and promote economic growth.

The idea was to peg the value of silver to gold, allowing both metals to be used as currency, with the government guaranteeing the value of each.

This system was seen as a way to alleviate the economic hardships caused by the gold standard, which had caused a significant increase in the value of gold and a subsequent decrease in the value of silver.

By linking the value of silver to gold, the government hoped to create a more stable currency that would benefit both farmers and industrialists.

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Bimetallism is a monetary standard that uses two metals, traditionally gold and silver, rather than one. This system was based on the use of fixed quantities of both metals to define a nation's monetary unit.

The 19th-century bimetallic system provided a free and unlimited market for the two metals, with no restrictions on their use and coinage. This allowed people to easily exchange gold and silver for money.

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A major problem with international bimetallism was the varying rates of exchange between countries. Each nation set its own rate, resulting in differing rates from country to country.

The Latin Monetary Union, formed in 1865, attempted to establish a unified bimetallic system among France, Belgium, Italy, and Switzerland. The union established a mint ratio between gold and silver, and provided for the use of the same standard units and issuance of coins.

Supporters of bimetallism argue that it can provide greater monetary reserves, greater price stability, and easier determination of exchange rates.

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The debate over bimetallism was a contentious issue in the UK, with strong opinions on both sides. The government's decision to set the country on the gold standard in 1819 was met with opposition from advocates of bimetallism, who argued that it would limit credit and hinder trade.

William Huskisson, a prominent figure in the government, was a strong advocate for bimetallism, seeing it as a way to increase credit and ease trade with South America. He argued for its adoption after the crash of 1825.

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In the United Kingdom, the debate over gold versus silver coinage was a contentious issue in the 18th century. The use of both metals at fixed rates provided the necessary range of coin denominations.

Silver coinage began to be restricted in the 18th century, first informally, and then by an Act of Parliament in 1774. This marked a significant shift towards gold as the primary currency standard.

The suspension of metal convertibility from 1797 to 1819 led to the adoption of the gold standard, as set by Peel's Bill. This move was met with resistance from advocates of bimetallism, who argued that it would limit credit and hinder trade.

William Huskisson, a strong advocate of bimetallism, argued that it would increase credit and ease trade with South America, particularly following the crash of 1825. His efforts, however, were unsuccessful in the short term.

The banking crisis of 1847 saw Alexander Baring lead an external bimetallist movement to prevent the undue restriction of the currency. This movement, though ultimately unsuccessful, marked a significant turning point in the debate over bimetallism in the UK.

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In the late 19th century, the merits of bimetallism were debated in the United States and the United Kingdom. The Coinage Act of 1853 effectively turned silver coinage into a fiduciary currency in the US, while in the UK, silver coinage began to be restricted in the 18th century.

The debate over bimetallism was complex, with some arguing that it would increase credit and ease trade. In the UK, William Huskisson advocated for bimetallism after the crash of 1825, hoping to increase credit and ease trade with South America.

Bimetallism was not without its challenges, as the market forces of supply and demand for either metal could cause its bullion value to exceed its nominal currency value, leading to hoarding or melting down. This was a major concern for those who advocated for bimetallism.

In the US, the Coinage Act of 1873 effectively abandoned bimetallism, but it wasn't formally outlawed as legal currency until the early 20th century. The merits of the system continued to be debated, with some arguing that it would provide a more stable currency.

The people living in rural areas were more likely to support "free silver" in 1896 than urban dwellers, likely due to the fact that silver was a more valuable commodity in rural areas, where it was used for everyday transactions.

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As we explore the topic of supported bimetallism, it's essential to examine the primary sources that provide valuable insights into this economic concept.

One of the earliest and most influential works on bimetallism is Francis Amasa Walker's 1878 book, Money. Walker's work laid the groundwork for future discussions on the topic.

Elisha Benjamin Andrews' 1894 book, An honest Dollar, also contributed to the bimetallism debate, offering a critical perspective on the gold standard.

Frank William Taussig's 1893 article, The Silver Situation in the United States, highlighted the importance of silver in the US economy and its potential role in bimetallism.

Roger Q. Mills' 1890 article, What shall we do with silver?, posed a crucial question that would continue to resonate in the bimetallism debate.

The following list highlights some of the key works on bimetallism that provide valuable insights into the topic: