3 ms·
In other words: Gresham's law doesn't make the "good" disappear altogether. It makes the "good" hoarded and kept instead of passed around, which prevents the "g
by phoe-krk 7y ago
In other words: Gresham's law doesn't make the "good" disappear altogether. It makes the "good" hoarded and kept instead of passed around, which prevents the "good" from being exchanged between people - or, in other words, removes it from circulation.
- RobertoG 7y ago>> "[..] in other words, removes it from circulation." And that makes it useless as money and show that, the added value, was not necessary for a practical currency in the first place.
- TeMPOraL 7y agoThis situation is just a special case, in which it's possible for the "good" thing to survive without being actively circulated. It may work for "gold as a store of value", because gold's value is based on scarcity and tradition. It doesn't work for other things. Gresham's law does boil to natural selection: if you iterate a system that selectively prefers one thing over the other, the preferred thing will survive. The preferred thing is usually one that's cheaper in some sense - monetary, energetically, or ethically. (WRT. bitcoin, I don't think it's a case of "bad" fiat "driving out good" bitcoin, but more of bad bitcoin failing to compete with better fiat.)