Metallic Monetary System

Bimetallism and Monometallism

Monetary System
Metallic Nonmetallic
Metallic Monetary System
Bimetallism Monometallism
Bimetallism
Two metals (gold and silver) perform the
money functions
Monetary units were made-up from both
metals
Free minting
Circulation of gold and silver coins was
simultaneous and parallel
Two prices of one good
Three versions of bimetallism
Full bimetallism
Parallel bimetallism
Partial bimetallism (lame)
Full bimetallism
Characteristics:
fixed ratio of exchange (1/15.5)
these coins had equal free power
Disadvantage:
Bad Coin remove the Good Coin from
circulation (Gresham Law)
Parallel bimetallism
Characteristics:
The state establishes through legislation the
ratio between gold and silver
Both coins participate at business service
according to the ratio which exist between
market prices of these metals
This kind of bimetallism was less spread.

Partial bimetallism (lame)
Characteristics:
The state fixes in the legislation the ratio
between both metals
these metals participate at business service
just according to the law established ratio.
This kind of bimetallism was widely spread.
The end of the 19
th
century

Bimetallism Monometallism

under the action of Copernic Gresham Law
Monometallism
just one of metals (gold or silver) provides
money functions (work as general equivalent
of goods value)
Monetary instruments are made from this
metal (gold or silver)
Monetary instruments may be free exchanged
on this metal
Silver Monometallism
Russia (1843 1852)
India (1852 1893)
the Netherlands (1847 1875)
China (until 1935)

In the 19
th
century
Silver Monometallism Gold Monometallism

Three types of gold
monometallism
Gold-coins
Gold-ingots
Gold currency (foreign exchange)

Gold-coins
Characteristics:
Monetary metal moved freely on the internal and
external market
Free minting of gold coins which ensured the
market equivalence between nominal value and
commercial value of monetary metal
Convertibility of paper money was unlimited and
free
Paper money nominal value was equivalent with
gold coins proper value
Gold-ingots
Characteristics:
Gold coins are withdrawn from the market
Gold coins are stored at paper money issuing
banks in form of ingots
Convertibility is limited
monetary unit continue to be defined through
a specific gold quantity
Gold currency (foreign
exchange)
Characteristics:
Paper money are changed on metal through foreign
exchange
GCM was introduced at the base of national monetary
systems
GCM was adopted by international monetary system
after Bretton Woods Conference
presented a deviation from gold automatism standard
because of introduction of bonds and currencies in
monetary reserve
gradually became the most important reserve
instrument
Gold currency (foreign
exchange)
Through the value structure, this system
widened the monetary circulation, but without
corresponding expansion of gold base emission.
Monometallism
The inflation appearance was impossible
worked the principle of monetary mass
volume self-regulation through treasury
formation
Development of market economic relations
brought to gradually withdraw of metallic
coins from circulation in exchange for paper
money appearance
Ratio between metal coins and
paper money
U.S.A., Great Britain, and France :
3:1 in 1815,
1:1 in 1860,
1:3 in 1885

1913 gold and silver coins constituted just the
6
th
part from world monetary mass, including
gold coins the 10
th
part
Liquidation of monometallism
First World War Time (all over the world
without U.S.A.)
After the war: European countries
reintroduced different forms of
monometallism.
European Countries main goal
Formation of the monetary unit:
gold-ingots (Great Britain, France),
gold-currency (foreign exchange) (Germany,
Austria, Norway)
Total Liquidation
Influence of worldwide economic crisis
(1929 1933)
Great Britain 1931,
U.S.A. 1933,
France 1936

In present, the gold doesnt
perform monetary functions.