§ 2 (to Chapter VII, § 2) Limits for Ratios within which Bimetallism is Possible

A change of ratio is represented by a reconstruction of our reservoirs in new units, but we can, without the trouble of such a transformation, exhibit on the mechanism as it stands the limiting ratios between which bimetallism is possible. Suppose the film in Figure 7b to be forced, firstly to its extreme right limit, and secondly to its extreme left, and in each case permanent equilibrium to be attained. In the one case there is a premium on gold, in the other, a premium on silver. These premiums mark the divergences from the given ratio which are possible without destroying bimetallism. Thus suppose the legal ratio and that for which the mechanism is constructed is 32 of silver to 1 of gold and that, when the film is moved to the left limit, the level of gold will be below OO a distance 7/8 as great as the silver level, while at the right limit it will be 5/4. Then the ratio 32 to 1 can be varied between the factors 7/8 of 32 to 1 and 5/4 of 32 to 1 and bimetallism would succeed at any ratio between 32 × 7/8 to 1 and 32 × 5/4 to 1, i.e. between 28 to 1 and 40 to 1. A ratio below 28 to 1, such as the famous 16 to 1, would ultimately convert gold monometallism into silver monometallism, but would be inoperative in the opposite direction. A ratio above 40 to 1, such as 50 to 1, would ultimately convert silver monometallism into gold monometallism. A ratio between the two extremes would result in neither sort of monometallism but in bimetallism. The statistical determination of these limits is, of course, a problem which cannot with present knowledge be solved. The figures 28 and 40 are not intended as guesses, but purely as illustrations.