Some aspects of the monetary use of silver



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The recent dramatic decline in the price of silver to its lowest point in history has again focussed attention on the monetary use of the precious metals. The relative merits of silver and gold as standards of value is a question upon which there has been intermittent discussion from the earliest time to the present day. Xenophon expressed the opinion that silver is more stable in value than gold; in the Middle Ages, Oresme and Gresham formulated a law to explain why both gold and silver could not be kept in circulation at the same time; and today the monetary use of the precious metals is still the subject for considerable discussion. It would seem that in view of these many centuries of discussion, all questions relating to the precious metals should have been settled; unfortunately, such is not the case. Indeed, since 1870 difference of opinion regarding the silver question seem to have increased rather than diminished. The silver question caused much discussion in this country during the major depressions of the past sixty years. In the seventies and nineties, the silver question was the subject of great debate, and during the present depression the controversy over bimetallism has again been revived. The recurrence of proposals for bimetallism in periods of prolonged depression is an interesting phenomenon. Of course, bimetallism is proposed during periods of depression because it is a means of inflation. But the proponents of bimetallism do not content themselves with saying that bimetallism is desirable because it would raise prices; they also claim many other advantages for the double standard. In fact, the real reason for bimetallism, that it will raise prices, is often disguised by a number of theoretical arguments attempting to show that bimetallism is better than gold monometallism as a standard of value. The validity of these arguments still remains unsettled after many years of discussion. It will be the purpose of this study to analyze and determine the validity of the arguments made for bimetallism and for other methods of increasing the monetary use of silver. One reason why the questions pertaining to the monetary use of the precious metals have remained in an unsettled state is that the use of statistical evidence to support or criticize the various arguments for bimetallism has been the exception rather than the rule. In the following pages a different approach to the subject is attempted. It will be my purpose to consider the theoretical arguments advanced for bimetallism by means of statistical analysis. In so far as possible, the statistical method is used both in tracing the history of the monetary use of silver and gold and in analyzing the theoretical arguments for the greater monetary use of silver