Gresham's Law

The theory that given two types of money with the same nominal value but different real values, the "bad" money will be spent while the "good" money will be hoarded. Strictly, the law only applies if the exchange rate between the two monies is decreed by the state, but it is sometimes invoked more broadly. While it does not always hold true, one example was the hoarding of U.S. coins in the 20th century as they gradually came to be minted with less valuable metals.

Gresham's law

the economic hypothesis that ‘bad’ MONEY forces ‘good’ money out of circulation. The principle applies only to economies the domestic money system of which is based upon metal coinage that embodies a proportion of intrinsically valuable metals such as silver and gold. Where governments issue new coins embodying a lower proportion of valuable metals, people are tempted to hoard the older coins for the commodity value of their metal content so that the ‘good’ money ceases to circulate as currency.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005

References in periodicals archive

Owing to their legal tender status, the operation of Gresham's Law swiftly ensured that greenbacks would displace gold in payments.

The dollar quiz: a hands-on approach to monetary debasement and inflation

We might posit Sancho's corollary to Gresham's law: "When a society's bad money forces its good money abroad, it relinquishes moral control over the industries financed by that money."

Sancho Panza's "por negros que sean, los he de volver blancos o amarillos" (DQ 1.29) and Juan de Mariana's De moneta of 1605

As this Article has demonstrated, green differentiation is happening in the Kyoto compliance markets--a phenomenon we have characterized as Gresham's Law in reverse.

The curious case of greening in carbon markets

Such a system would be immune to Gresham's law and would not involve the "high cost of exchange" that Selgin imagines, if "shopkeepers in the u.S.

Short changing 100 percent reserves

Gresham's law has to do with the nature of currency, and the common formula for it is that "bad money drives out good." That is to say, it is always the worst form of currency in circulation that fixes the value of all the others and causes them presently to disappear.

The dangers of literacy: millions of readers create a market for mediocrity

Thus, the famous British upper-class snobbery combined with Gresham's Law to help produce an acute shortage of small coins in an economy desperate for them.

A chronicle of Coinage

The observation that bad money drives out good money, usually called Gresham's law, has become one of the more famous maxims in economics and has been used to account for many episodes of monetary disorder.

The tale of Gresham's law

The hazards can be illustrated by applying Gresham's Law. In economics, this law teaches that bad money drives out good.

Getting the facts straight: a growing number of people have been led to believe that an airliner did not hit the Pentagon on 9/11. However, in this case the "official version" of events is irrefutable

It's Sir Thomas Gresham's law at work: The bad drives out the good.

A story for all seasons: summertime crime stories are no longer confined to hot-weather months

So much so that my colleague, Ron Baker, created Baker's Law: Bad customers drive out good customers, as a corollary to Gresham's Law: Bad money drives out good money.

Terminating toxic customers: enhancing firm profits through customer cultivation

Szasz: 'Having been unwilling to be taught a lesson, Szasz, who has a large readership, deserves to be pilloried.' Kraus is not the only author to whom one might apply Zohn's saddened question, 'Is there a Gresham's Law of translation by which bad translations drive out the good ones?' (p.

Kark Kraus and the Critics