DEFINITION of 'Bimetallic Standard'

A bimetallic standard is a monetary system in which a government recognizes coins composed of gold or silver as legal tender. The bimetallic standard (or bimetallism) backs a unit of currency to a fixed ratio of gold and/or silver.

BREAKING DOWN 'Bimetallic Standard'

The bimetallic standard was first used in the United States in 1792 as a means of controlling the value of money. For example, during the 18th century in the United States, one ounce of gold was equal to 15 ounces of silver. Therefore, there would be 15 times more silver (by weight) in $10 worth of silver coins than $10 worth of gold coins. Adequate gold and silver was kept in reserves to back the paper currency. This bimetallic standard was used until the civil war, when the Resumption Act of 1875 stated that paper money could be converted to gold.

Proponents of the bimetallic standard argued that it steadily increased the money supply which would stabilize the economy. However, the gold rush of the late 19th century, which increased the supply of gold, put this argument to rest and essentially turned it into a historical and academic argument. 

Economist Milton Friedman believed that abolishing the bimetallic standard increased the volatility in financial markets more than it would have should the U.S. stayed on the bimetallic system. 

 

RELATED TERMS
  1. Gold/Silver Ratio

    The gold/silver ratio refers to how many ounces of silver it ...
  2. Silver Standard

    The silver standard is a monetary system which allows a country's ...
  3. Banknote

    A banknote is a negotiable promissory note, which a bank can ...
  4. Digital Gold Currency - DGC

    Digital gold currency is an electronic form of money that is ...
  5. Lawful Money

    Lawful money is any form of currency issued by the United States ...
  6. Monetary Reserve

    A monetary reserve is a central bank's holdings of a country’s ...
Related Articles
  1. Investing

    Does it Still Pay to Invest in Gold?

    Gold's appeal dates back thousands of years and investors now have several different options when it comes to investing in the royal metal. Find out whether gold can live up to the hype.
  2. Investing

    Gold: The Other Currency

    Throughout history, gold has held its value against paper currencies. Learn how it can help offset market risks.
  3. Investing

    Why Gold and Silver Prices are Diverging (GLD, SLV)

    Gold and silver prices are seeing a big performance divergence in 2016. Here's why.
  4. Investing

    What Is Wrong With Gold?

    Despite its historic and symbolic appeal, this metal is simply a commodity. Here we explore its meaning as an investment.
  5. Investing

    The Midas Touch For Gold Investors

    Find some golden opportunities by investing in gold commodities or futures contracts.
  6. Investing

    Is Silver The New Gold?

    With silver on the move, gold could quickly become yesterday's news.
  7. Investing

    Getting Into The Gold Market

    Add some sparkle to your portfolio by getting in on this classic precious metal, but know which form of gold ownership constitutes the best investment.
  8. Investing

    What Drives The Price Of Gold?

    Gold prices are based on the economy and actual uses, but there are many other factors that dictate gold's perceived value.
  9. Investing

    Why Gold Matters

    Gold is a very useful investment during periods of instability and high inflation.
  10. Investing

    How Much Disaster Can Gold Hedge?

    Gold holds up well in the face of fear, but offers little in times of true collapse.
RELATED FAQS
  1. Can I invest in gold or silver with my Roth IRA?

    Learn how you can purchase gold coins and bars with your Roth IRA, or how you can diversify part of your assets by purchasing ... Read Answer >>
  2. Has gold been a good investment over the long term?

    Examine the investment performance of gold dating back to 1933, when President Roosevelt required all gold bullion, coins ... Read Answer >>
  3. Which country has the most gold?

    Learn which countries hold the most in gold reserves, and explore the reasons holding gold may be beneficial to a country's ... Read Answer >>
Hot Definitions
  1. Quick Ratio

    The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets.
  2. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  3. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  4. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  5. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  6. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
Trading Center