Europe (especially Germany and the United Kingdom) was gradually
switching at the time to the gold standard. But the members of the
Latin Monetary Union paid no attention to its emergence. They printed
ever increasing quantities of gold and silver coins, which constituted
legal tender across the Union. Smaller denomination (token) silver
coins, minted in limited quantity, were legal tender only in the
issuing country (because they had a lower silver content than the Union
coins).
The LMU had no single currency (akin to the euro). The national
currencies of its member countries were at parity with each other. The
cost of conversion was limited to an exchange commission of 1.25%.
Government offices and municipalities were obliged to accept up to 100
Francs of non-convertible and low intrinsic value tokens per
transaction. People lined to convert low metal content silver coins
(100 Francs per transaction each time) to buy higher metal content ones.
With the exception of the above-mentioned per capita coinage
restriction, the LMU had no uniform money supply policies or
management. The amount of money in circulation was determined by the
markets. The central banks of the member countries pledged to freely
convert gold and silver to coins and, thus, were forced to maintain a
fixed exchange rate between the two metals (15 to 1) ignoring
fluctuating market prices.
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