24.5 Metallic Money

Economists divide the types of metallic currencies in to two main types: the single metallic standard and the dual metallic standard. The first is where the main currencies are restricted to one single metallic coinage. As for the latter i.e. the dual standard, both the gold and silver coins represent the main currency. The dual metallic standard requires the existence of three qualities:

1. Gold coins must have an unrestricted legal tender (no fixed purchasing power).

2. There should be no restrictions on minting from the bullion of both metals.

3. An official rate between the values of the gold and silver coins must be established.

The dual metallic standard is characterised by the huge amount of money it puts into circulation, due to the simultaneous use of the metallic coins as main currencies. Therefore, prices remain high and this would lead to an increase in production. This would also make the value of money more stable and prices would be less likely to undergo major fluctuations which usually leads to economic unrest. It is therefore clear that operating a dual metallic standard is better than the single metallic standard.

Superior Economic Model : Islamic System

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