Money, money circulation and credit - стр. 17
In the course of historical development first of all the system of metal circulation formed which was based on the metal coins usage.
Initially (in particular in the XVI>th-XVIII>th centuries) the system of bimetallism existed.
Bimetallism is the system where the role of the total equivalent is played by two metals – gold and silver. It means that these two metals circulated on equal basis and had a fixed correlation.
The unlimited circulation, free issue and two prices determination on one good are supposed. This system existed in the XVI>th-XVIII>th centuries and in some countries of West Europe even in the XIX>th century. However such system didn’t provide the stability of money circulation.
There are three systems of bimetallism:
Of the parallel currency where the correlation between the gold and silver coins is spontaneous.
Of the double currency where the government fixed the correlation between metals and the gold and silver coins issue and their popularity were made by this correlation.
Of the limping currency where the gold and silver coins were the legal means of payment but with unequal terms. For example if the silver coins issue was made privately thus practically they played role of the gold symbols.
In the result of silver production cheapening in the end of the XIX>th century and its devaluation the gold coins began to go out of circulation to treasures, i.e. «bad money drives out good».
In the XIX>th century the system of bimetallism was replaced by monometallism which was based on only one metal, i.e. only one metal plays role of the total equivalent. The silver monometalism existed in Russia (1843-1852), in India (1852-1893) and in China (till 1935).
The gold coin standard most closely met the requirements of capitalism of the free competition period, promoted the development of production, credit system, world trade and capital export. Sometimes the age of gold coin standard is associated with the fast industrialization and economic prosperity.
Since the First World War little by little gold was drove out of circulation by paper money and credit notes; the process of gold demonetization began which subsequently captured the international circulation.
First of all gold stopped performing the function of the instrument of circulation and payment in the domestic circulation and then in 1976 the function of the world money. For the detailed information look through the chapter «The international currency and credit rela- tions».
As can be seen from the above the system of metal money circulation became a thing of the past. Nowadays the fractional coins are minted from different alloys and aluminum.