<p>Edited grammar for clarity. Let's go through the hypothetical you gave.</p>

<blockquote>
  <p>Suppose the mint ratio and market ratio of <em>silver to gold</em> is 15:1</p>
</blockquote>

<p>Okay.</p>

<blockquote>
  <p>and the market ratio rises to 16:1</p>
</blockquote>

<p>And the mint ratio is still 15:1. Fine.</p>

<blockquote>
  <p>Now, scholars claim people will sell their gold in the market in exchange for silver. My question is why would people sell the gold in exchange for silver if they could get a better rate at the mint?</p>
</blockquote>

<p>If you sold your gold in the market, then you could get 16 silver for 1 gold.</p>

<p>If you sold your gold at the mint, then you would get 15 silver for 1 gold.</p>

<p>You get more silver per unit of gold for selling at the market than at the mint. I'm not sure how you came to the conclusion that the mint is offering a better rate for selling gold in this scenario, but this might be the error that is giving you confusion.</p>

<hr>

<blockquote>
  <p>The reason is that if gold suddenly became more desirable than silver, and the market price is about to rise over the mint ratio, but since we can always exchange silver for gold at the mint at 15:1, the market rate will never exceed mint ratio.</p>
</blockquote>

<p>If the demand for gold increased relative to the demand for silver, then the mint and the market will want to adjust their relative prices, so they will both shift towards the equilibrium price. What assumption would you have that would cause the mint not to adjust? It's like saying if the demand for apples rose, because one firm couldn't unilaterally raise price by itself to remain competitive, the price for all firms must remain the same. If the mint and market didn't change price, there'd be a relative surplus/shortage of either metal, depending on which metal sees the demand shock.</p>

<p>Something tells me though that there is some deeper misunderstanding about the endogeneity problem between demand and price for metals here.</p>

CC BY-SA 3.0
2015-10-29T06:17:50.403Z
2015-10-29T06:17:50.403Z
Kitsune Cavalry
<p>During the bimetallic era, there was always a dilemma where the mint ratio differs from the market ratio of their metallic value. I state this is impossible. Suppose the mint&amp;market  ratio of silver to gold is 15:1 and the market ratio rise to 16:1 because gold gets more desirable or more silver was discovered, or for whatever reason. Note in this case, the mint overvalue the silver. Now, scholars claim people will sell their gold in the market in exchange for silver. My question is why would people sell the gold in exchange for silver if they could get a better rate at the mint?  I argue that such difference would not occur in the first place. The reason is that if gold suddenly become more desirable than silver, and the market price is about to rise over the mint ratio, but since we can always exchange silver for gold at the mint at 15:1, the market rate will never exceed mint ratio. Similarly, if silver becomes more desirable, people will go to the mint to get silver once market ratio goes near 15:1.</p>

<p>Of course, if the mint was not accessible by everyone, this could surely happen if the difference between two rate was not too big.</p>

CC BY-SA 3.0
2015-10-29T03:06:24.600Z
So what is the question exactly?
HRSE
CC BY-SA 3.0
2015-10-29T03:21:15.410Z
"My question is why would people sell the gold in exchange for silver if they could get a better rate at the mint?"
Kitsune Cavalry
CC BY-SA 3.0
2015-10-29T03:24:20.320Z
Yes. Given my logic, why don't the empirical evidence not support it ?
Kun
CC BY-SA 3.0
2015-10-29T07:23:13.487Z
I think what scholars actually claim is that people would sell the silver to the mint.
https://goo.gl/kzAjpL
Giskard
<money>
The reasons I believe the bimetallic dilemma was never possible
Kun
# The reasons I believe the bimetallic dilemma was never possible

(Asked by: username_0 on 2015-10-29)

During the bimetallic era, there was always a dilemma where the mint ratio differs from the market ratio of their metallic value. I state this is impossible. Suppose the mint&market ratio of silver to gold is 15:1 and the market ratio rise to 16:1 because gold gets more desirable or more silver was discovered, or for whatever reason. Note in this case, the mint overvalue the silver. Now, scholars claim people will sell their gold in the market in exchange for silver. My question is why would people sell the gold in exchange for silver if they could get a better rate at the mint? I argue that such difference would not occur in the first place. The reason is that if gold suddenly become more desirable than silver, and the market price is about to rise over the mint ratio, but since we can always exchange silver for gold at the mint at 15:1, the market rate will never exceed mint ratio. Similarly, if silver becomes more desirable, people will go to the mint to get silver once market ratio goes near 15:1.

Of course, if the mint was not accessible by everyone, this could surely happen if the difference between two rate was not too big.

**Tags:** money

> **Comments:**
> **username_1**: So what is the question exactly?  
> **username_2**: "My question is why would people sell the gold in exchange for silver if they could get a better rate at the mint?"  
> **username_0**: Yes. Given my logic, why don't the empirical evidence not support it ?  
> **username_3**: I think what scholars actually claim is that people would sell the silver to the mint. https://goo.gl/kzAjpL  

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## 1 answers

### Answer by username_2 on 2015-10-29. Score: 2 | Accepted answer

Edited grammar for clarity. Let's go through the hypothetical you gave.

> Suppose the mint ratio and market ratio of *silver to gold* is 15:1

Okay.

> and the market ratio rises to 16:1

And the mint ratio is still 15:1. Fine.

> Now, scholars claim people will sell their gold in the market in exchange for silver. My question is why would people sell the gold in exchange for silver if they could get a better rate at the mint?

If you sold your gold in the market, then you could get 16 silver for 1 gold.

If you sold your gold at the mint, then you would get 15 silver for 1 gold.

You get more silver per unit of gold for selling at the market than at the mint. I'm not sure how you came to the conclusion that the mint is offering a better rate for selling gold in this scenario, but this might be the error that is giving you confusion.

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> The reason is that if gold suddenly became more desirable than silver, and the market price is about to rise over the mint ratio, but since we can always exchange silver for gold at the mint at 15:1, the market rate will never exceed mint ratio.

If the demand for gold increased relative to the demand for silver, then the mint and the market will want to adjust their relative prices, so they will both shift towards the equilibrium price. What assumption would you have that would cause the mint not to adjust? It's like saying if the demand for apples rose, because one firm couldn't unilaterally raise price by itself to remain competitive, the price for all firms must remain the same. If the mint and market didn't change price, there'd be a relative surplus/shortage of either metal, depending on which metal sees the demand shock.

Something tells me though that there is some deeper misunderstanding about the endogeneity problem between demand and price for metals here.


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