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be taken to regulate the proportion between [the metals], with an eye to their average commercial value" ([1791] 1969, p. 168). Very shortly, however, the market ratio rose, conforming with the legal ratio in France of 15.5 to 1. Congress did not heed Hamilton's counsel, but left the legal ratio at 15 to 1 until 1834. As a result, silver became the de facto standard until 1834, when Congress altered the legal ratio to 16 to 1, and gold became the de facto standard from then to the Civil War. In 1862, redemption of currency in specie was suspended, and a pure fiat currency, popularly known as greenbacks, was issued to help finance the war. The 1873 coinage act ended the free coinage of silver and limited its legal-tender status, so that when resumption (the convertibility of legal tender into specie) was achieved in 1879, it was on the basis of gold. That in turn unleashed the free-silver movement of the 1880s and 1890s, which culminated in William Jennings Bryan's 1896 presidential campaign under the flag of 16 to 1.

The U.S. experience doubtless helped form the conventional view, as stated for example by Ludwig von Mises (1953, p. 75), that the bimetallic "standard was ... turned, not into a double standard, as the legislators had intended, but into an alternative standard."

While such an alternative standard is possible and has often been the case, as it was in the United States before the Civil War and in Britain for several centuries before the Napoleonic wars, it is not at all inevitable. As Irving Fisher (1911, p. 132) points out: "The history of France and the Latin Union during the period from 1785, and especially from 1803, to 1873 is instructive. It affords a practical illustration of the theory that when conditions are favorable, gold and silver can be kept tied together for a considerable period by means of bimetallism. During this period the public was ordinarily unconscious of any disparity of value, and only observed the changes from the relative predominance of gold to the relative predominance of silver in the currency and vice versa."

France's success in maintaining full-bodied gold and silver coins in circulation simultaneously over such a long period reflected several factors. The first was France's economic importance in the world, which was far greater than it is now. A second was the exceptionally high propensity of the French people to use specie as money, both directly as coins and indirectly as reserves for paper currency and deposits.* These two factors made France a major participant in the market for silver and gold, an important enough participant to be able to peg the price ratio despite major changes in the relative production of silver and gold.† In Fisher's words (1911, [>]):

From 1803 until about 1850 the tendency was for silver to displace gold.... By 1850,... [bimetallism would have broken down and resulted in silver monometallism..., except for the fact that, as though to save the day, gold had just been discovered in California. The consequence of the new and increased gold production was a reverse movement, an inflow of gold into the French currency and an outflow of silver....It seemed probable that France would be entirely drained of her silver currency and come to a gold basis.... But the new gold mines were gradually exhausted, while silver production increased, with the consequence that there was again a reversal of the movement.

France absorbed into its money stock more than half of the world's total output of gold from 1850 to 1870, while holding the amount of silver almost constant.* As a result, the market price ratio, which was 15.7 in 1850, never fell below 15.2 (in 1859) and was back up to 15.6 by 1870 (Warren and Pearson 1933, p. 144).

The conventional view implicitly assumes that the legal gold-silver price ratio is a knife-edge, so that the least departure of the market ratio from the legal ratio would rapidly send all the coins minted from the now more valuable metal to the melting pot for sale on the market. That turned out not to be the case in France. The situation