Comment: Two Words:

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Two Words:

Gresham's Law.

Bad money chases out good. By fixing both metals, you create an artificial ratio by fiat. What you would want to have is a currency unit fixed to X amount of gold or silver, and allow the other metal to float.

In the 1800's, when the ratio was fixed, the market price of silver went way up, but the ratio remained the same. People hoarded the silver or melted it down to trade by market weight, and quickly spent all of the gold (exacerbating the problem even more via supply and demand). Furthermore, Europeans would vacation to America on ships just so they could swap all of their gold savings over to silver and return home with a 40% premium.

It also opens the door for politically connected people to get the "good" money while the "bad" money gets issued into circulation. A congressman could ask for his pay entirely in freshly minted silver, at its fixed ratio of 1:11 to gold, and then go out and make himself a pay-raise by selling it off at market prices, which were much higher.

If you attempt to fix both metals, you create a distortion. The best this, if you HAVE to have a government minting money (which you don't in reality, because it always ends up just being fully monopolized and then the physical link gets pulled), you let them mint their coins in either gold or silver, and let private mints create the alternative money with whatever they wish. This also helps to keep everything in a sort of check and balance.

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Progress is precisely that which the rules and regulations did not foresee. - Ludwig Von Mises.