Reversal of Monetary History: Is Return to Trimetalism a Viable Alternative?

Abstract

History witnesses that despite monometalism and bimetallism dominated by gold and silver playing important role of money in the past, later adopted system of trimetalism with another less valuable metal such as copper serving as loose change replaced it as being more practical. It is surprising to see while gold or silver based monometallic and bimetallic systems are brought forward by many economists as alternative to current fiat system, there is rare tribute given to trimetalism as a real alternative. This work attempts to analyze viability of adopting trimetalism based monetary system as an alternative to fiat currency. After conducting literature review of both classical and modern writings in this subject, the current work conducts empirical analysis of trimetalism using MGARCH-DCC and Wavelet Coherence analysis along with visual and descriptive comparisons. The empirical results of the study suggest that historical combination of gold, silver and copper or its alloys under trimetalic system, most likely, was not a mere coincidence but rather a conscious choice based on strong correlation among and stability of those metals. In addition, quite contrary to conventional belief, both study of literature and empirical analyses imply the superiority of trimetalism over monometallic, bimetallic and especially fiat currency systems.