Classification of Monetary Systems

According to the elements which compose it, there are 2 kinds of monetary system identified through the
evolution:
Metallic system
Nonmetallic system
Historically, for the Metallic Monetary System were specific two forms:
Bimetallism
Monometallism
The bimetallism is a monetary system where two metals (gold or silver) perform the money functions.
Monetary units were made-up from both metals, minting was free, circulation of gold and silver coins was
simultaneous and parallel, but on the market existed two prices of one good.
The bimetallism has known three versions:
1) Full bimetallism, supported a fixed ratio (1/15.5) of exchange through both metals, however these
coins had equal free power. The disadvantage of this thing was that when the value ratio between
those coins changed, the coins made from more expensive metal were withdrawn from circulation
(Gresham Law) Bad Coin remove the Good Coin from circulation.
The establishment of the ratio through both metals contradicts with the unplanned change of
market prices of these metals. As result, one of these metals has a lower market price, and the
other metal a higher price. When developing, this contradiction leads to elimination from
monetary circulation of lower market price metal (Copernic Gresham Law). This objective
economic law was discovered by the Polish scientist Copernic in 1526 and was definitely
formulated by the English financier Gresham in 1560. According to this law, so called bad
money remove from monetary circulation the good money in conditions when it is established
by legislation the ratio between the monetary metals.
2) Parallel bimetallism, provided that the state establish through legislation the ratio between gold
and silver, and coins made-up from these metals participate at business service according to the
ratio which exist between market prices of these metals. This kind of bimetallism was less
spread.
3) Partial bimetallism (lame), provide that the state fixes in the legislation the ratio between both
metals and these metals participate at business service just according to the law established ratio.
This kind of bimetallism was widely spread.
The bimetallism was widely spread in the 16-18 centuries, and in some countries (France, Belgium,
Switzerland, and Italy) existed in the 19th century. At the end of the 19th century in all countries, the
bimetallism was replaced with the monometalism (under the action of Copernic Gresham Law).
The monometallism is a type o monetary system where just one of metals (gold or silver) function as
general equivalent of all goods value (provide money functions). Monetary instruments are made from
this metal or may be free changed on this metal. The silver monometallism existed in Russia (1843

1852), India (1852 1893), the Netherlands (1847 1875), China (until 1935). In the 19th century in the
majority of countries, the silver monometallism was replaced with gold monometallism.
The history shows that existed three types of gold monometallism:
1) Gold-coins monetary metal moved freely on the internal and external market; free minting of
gold coins ensured the market equivalence between monetary metal nominal value and
commercial value. Convertibility of paper money was unlimited and free, their nominal value was
equivalent with gold coins proper value.
2) Gold-ingots gold coins are withdrawn from the market and stored at paper money issuing bank
in form of ingots. Convertibility is limited, monetary unit continued to be defined through a
specific gold quantity.
3) Gold currency (foreign exchange) paper money are changed on metal through foreign
exchange (that country currency which ensures free exchange of paper based money on valued
metal). This type of monometallism was introduced at the base of national monetary systems
starting with 1922, adopted by international monetary system after Bretton Woods Conference
from 1944, and presented a deviation from gold automatism standard thanks to introduction of
bonds and currencies in monetary reserve, which gradually became the most important reserve
instrument. Through the value structure, this system widened the monetary circulation, but
without corresponding expansion of gold base emission.
In monometallistic conditions the inflation appearance was impossible because worked the principle
of monetary mass volume self-regulation through treasury formation. At the same time with market
economic relations development, coins made-up from valuable metal started to withdraw gradually
from circulation in exchange for paper money appearance. The ratio between metal coins and paper
money was in permanent change in the direction of paper money quotes growing. In U.S.A., Great
Britain, and France this ratio was 3:1 in 1815, 1:1 in 1860, 1:3 in 1885. In 1913 gold and silver coins
constituted just the 6th part from monetary mass of all countries (from the world), including cold coins
the 10th part. In the First World War time, the monometallism was liquidated in the majority of
world countries (without U.S.A.). After the war, many European countries reintroduced different
forms of monometallism, having as a goal the monetary unit: gold-ingots (Great Britain, France),
gold-currency (foreign exchange) (Germany, Austria, Norway). In the worldwide economic crisis
time (1929 1933), and under its influence, was liquidated all forms of the monometallism in
countries from all over the world (Great Britain 1931, U.S.A. 1933, France 1936).
In present, the gold doesnt perform monetary functions.