culation 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 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. 16. The "limping standard."-But though the double standard has given place to the single gold standard, silver coins are used in the circulating media of all countries. Gold is coined at the mints freely and in unlimited amounts and is the only coin endowed with complete legal tender quality, while silver is coined in limited amounts and is used chiefly in the smaller or subsidiary coins. When France and the other countries of the Latin Union abandoned bimetallism the silver five-franc pieces remained in circulation and were not deprived of their full legal tender quality. Despite the subsequent fall in the price of silver bullion these silver pieces have continued to circulate on a parity with gold. Until recently the old silver thaler of Germany was full legal tender. But in 1900, when the amount of smaller silver coins was increased from 10 to 15 marks per capita, provision was made for coining the thalers into these smaller coins, and in 1907 the thaler was deprived of its legal tender quality. The standard silver dollars of the United States, though no longer coined, are legal tender at their face value in payment of all debts, public and private, and circulate at par with gold. Countries which are theoretically on the single gold standard, but which retain silver coins with full legal tender power, are said to have a "limping standard," because the silver coins, though of less value intrinsically than the gold coins, limp along on an equality with gold by being coupled with it. They remain at a parity with gold because of their limited quantity, their full legal tender power, and their acceptance in payment of public dues. Because of its high value, gold is not adapted to coinage into the small pieces needed for hand-to-hand money. For the smaller coins, ranging from ten cents to a dollar, silver is most suitable. Nickel and copper are used for coins of still smaller denominations. Various methods have been adopted in different countries to regulate the quantity of subsidiary silver. In Germany prior to the war it was limited to 15 marks per capita and in France to 7 francs. In the United States and in Great Britain no limit is set. Generally when no limit is fixed the government buys bullion and coins silver in such amounts as experience shows to be needed from time to time. 17. The gold exchange standard.-A few countries, including Mexico, China, the Philippines and India, which are upon a silver basis, have been able to adjust their international relations with gold standard countries by adopting the "gold exchange standard," so called because the currency issued under it is exchangeable at a fixed ratio with gold. "The gold exchange standard," says Conant, "differs from the single metallic standard in the fact that it contemplates the coinage and circulation of little or none of the standard metal, but provides means (chiefly by government control of the coinage) for keeping token coins. of cheaper metal at a fixed value in standard money."1 This system is in practice similar to that of the limping standard, but the latter term is applied more properly to 1 Conant: Principles of Money and Banking, Vol. I, p. 279. the coinage system of countries which have unconsciously drifted into the large use of overvalued token money; while the term gold exchange standard is applied to the system of countries which "have adopted gold as the standard but have deliberately issued token silver coins for current use, adjusted to local requirements and to the reduced value of silver bullion." India adopted the gold exchange standard in 1899, the Philippines in 1904, and Mexico in 1905. To sustain the silver coins at their face value for purposes of money, laws have been passed limiting the quantity issued to the commercial needs of the country, and making them receivable at face value by the government for public dues. In the plans adopted for a gold exchange standard the coinage ratio between gold and silver was adjusted to the decline in the gold value of silver in recent years. Thus, the ratio adopted in the Philippines was about 32 to 1. To meet the demands of foreign exchange growing out of international trade, the governments of countries having the gold exchange standard keep gold funds in the leading financial centers and sell foreign exchange calling for gold in these centers at fixed rates in exchange for the silver money of the country. The adoption of the gold exchange standard by countries formerly upon a silver basis has steadied the par of exchange between Oriental and Western countries and has left countries where silver was best adapted to local conditions free to use it without being subject to the inconvenience of fluctuations in its gold value.1 READING REFERENCES Conant: Principles of Money and Banking, Vol. I, Bk. I, Johnson: Money and Currency, Chs. II, XI. For a full discussion of the gold exchange standard see Conant: Principles of Money and Banking, Vol. I, Bk. III, Chs. VI, VII; also Economic Journal, Vol. XIX, June, 1909, pp. 190-200; Phillips: Readings, Ch. XII; Kemmerer: Modern Currency Reforms, Pt. III, Ch. V. Laughlin: History of Bimetallism. Moulton: Principles of Money and Banking, Pt. I, pp. 5-44, Ch. IV. Scott: Money and Banking (5th ed.), Chs. I, II. Taussig: Principles of Economics, Chs. 20, 21. Report of the Monetary Commission of the Indianapolis 1 18. Adoption of a coinage system.-The coinage system of the United States was established by Act of Congress in 1792, which followed closely the recommendations of Alexander Hamilton, first Secretary of the Treasury, in his report on the establishment of a mint. The principal features of this first coinage act were the adoption of the bimetallic system, of the decimal system of reckoning, and of the dollar as the unit of value. The dollar 1 was adopted as the unit of value because in all the States people had become used to quoting prices in that unit and were already familiar with the Spanish milled dollar. The simplicity and convenience of the decimal system as compared with the awkward English system of reckoning in pounds, shillings and pence, led naturally to the adoption of the former. Bimetallism was adopted because that system was in use in European countries and it was believed that bimetallism would insure a larger supply of coin than would either silver or gold monometallism. 19. The silver period.-Under the coinage system thus adopted both gold and silver were made full legal tender and the mint was to be open to the free and unlimited coinage of both. At the market prices then existing a dollar would buy 371 grains of pure silver or 243 grains of pure 1 The word dollar is a corruption of the German Thaler, abbreviated from Joachimthaler, a silver coin issued in Bohemia in the sixteenth century. |