What is bimetallism?

Question

Please I'm in 8th grade so don't give me something all technical. I've searched on wikipedia and I don't understand a word it says, just tell me what it is, like say it's a type of metal or something. I can't understand this stuff. This book I'm meant to be studying says that France changed from bimetallism standard to gold standard. So what on earth is bimetallism standard, and pleaseput it in SIMPLE words, that's why I'm asking here, don't just copy and paste from wikipedia or something, it's the same as not asking, i need a simple answer. Please. Thank you.

Answer 1

This is something to do with history of currency. What I'm saying here are purely based on my memory when I was studying treasury years ago. If I never remember wrongly, bimetallism is the pegging of currency against two metals, and when we say two metals it is obvious that we are talking about silver and gold. In the past, value of the currencies used to be peg against metals (which is how you get sterling pounds, since value of silvers are measured by how the weigh of the metal). Transition of France monetary system from bimetallism to gold standard means, one of the metal is abandon, and the value of the currency is converted to peg against gold only. Hope that answers your question :)

Answer 2

The use of a monetary standard consisting of two metals, especially gold and silver, in a fixed ratio of value.

The doctrine advocating bimetallism

Answer 3

WOW...I see what you mean...I looked several places and I'm still not sure what it means... maybe someone will have the answer for us..

Answer 4

I hope you find this interesting.

Bimetallism has to do with money, and since you probably haven't taken a lot of economics classes, I'll go into maybe a little more detail than you need just to make sure you understand this important concept clearly.

You probably have heard of a "gold standard" where the money that a nation prints for the use of its citizens and businesses is backed up by gold. In theory, you should be able to take a gold-backed dollar and exchange it with the Federal Reserve for an equivalent amount of gold.  Bimetallism is the same idea, except that two different metals (usually gold and silver) back up the currency. The US had a bimetallic standard for a few years after the Civil War.

Now, the US dollar has not been backed by any metal for more than thirty years. This is called "fiat" currency, from a Latin word meaning "to make so". Most developed nations have fiat currencies. Where metal-backed money gets its value from the asset (the metal) lying underneath, fiat currency gets its value simply because it is useful.

You know, for example, that you can take $3.85 and go to McDonald's and buy a meal deal, or go to a gas station and buy a gallon of gas, or go to a grocery store and buy bread and a half-gallon of milk. We conduct business in dollars, not in metals, in this country. Not all countries are this way, and the US has not always been this way.

For instance, when the US was very young in the early 1800s, European nations didn't know if our nation would survive (especially given that the British Empire had it in for us). To conduct trade, we needed to convince them that our money was worth something, so a gold-backed currency made sense. If a trader was worried that the US dollar would be worthless by the time he made it back to Europe, he could stop at the First Bank of the United States (then the government's bank) and exchange the dollars for gold, which would be honored in Europe.

One of the reasons for going on a bimetallic standard is that gold is rare and prone to price fluctuations. Having two metals may make it easier to expand the money supply (something necessary as more people are born), and to weather the price changes in gold.

Moreover, say a competitor of ours opens a new gold mine and can suddenly outproduce us, their currency would increase drastically in value for no reason other than they now have more gold. This means that imports from that nation would be much more expensive - and if we're at war with them, they can now outspend us. This is what happened in the 1960s when the USSR found a new gold mine - and is considered one of the major reasons why we abandoned the gold standard.

Bimetallism is supposed to avoid this - say we happened to also find a new silver mine, we could compete with that trading competitor who opened a new gold mine.

Of course, a metallic standard is difficult to hold. If we find more of the metal, but don't increase the money supply, then the nation enters a period of deflation. It is the opposite of inflation - when prices go up, something that business copes with by raising prices. Deflation is when prices go down - and businesses have no idea how to cope with it effectively. They drop prices, but if you paid $1.50 to produce an item that you can only sell for $1.20, you'll go out of business.

Another problem is that a metal standard means you can only have as much money in the economy as metal in your nation's vaults. Consider that the value of something is what you get out of it. Why should the value of everything in the economy be limited to how much gold and silver your nation has on-hand? In fact, given that we don't mine very much gold (I read an estimate of 2,500 tones having been mined in all of human history), the total value of world production probably exceeds all the gold available on earth. The true measure of value, then, isn't some rock, but is what the economy can produce.

I hope this answers your question.

Answer 5

OK..in order to figure out what value we can put on money i.e. how much is say a dollar really worth, we base it usually on whats called the gold standard. The value of a certain amount of gold. Bimetallism is the average value of two metals(BI-metals) in this case gold and silver. A formula is figured and a currencies value can then be figured. I hope this helps.