5 ms·
Gresham’s law is really about currencies where coins have a ‘true value’ and a ‘nominal value’. Like, a silver coin has value as silver, and compared to a nicke
by jameshart 3y ago
Gresham’s law is really about currencies where coins have a ‘true value’ and a ‘nominal value’. Like, a silver coin has value as silver, and compared to a nickel coin with the same face value, it’s a ‘better’ coin, so people won’t spend it.
It’s not obvious how to apply Gresham to a conversation about dollars and bitcoins. Legal tender parity would be one way to make the law apply.
- deleted 3y ago[deleted]
- JumpCrisscross 3y ago> Gresham’s law is really about currencies where coins have a ‘true value’ and a ‘nominal value’ Correct. Or, more classically, a nominal value and commodity value. Whether it’s legal tender isn’t functionally germane (though historically, it is). > not obvious how to apply Gresham to a conversation about dollars and bitcoins Bitcoins have a sloped demand curve. Liquidating ten billion U.S. dollars gives you ten billion dollars. Liquidating the same in Treasuries gives you almost ten billion dollars. Liquidating the same in Bitcoin yields an unknown amount—the commodity value of a basket of Bitcoin that size. The gap between the quoted “value” and that true value of a given aggregate creates a localised Gresham effect.
- jameshart 3y agoLegal tender law is the legal fiat that gives a coin its ‘nominal’ value distinct from its commodity value.
- JumpCrisscross 3y ago> Legal tender law is the legal fiat that gives a coin its ‘nominal’ value distinct from its commodity value No. Legal tender makes something required to be accepted at face value for extinguishing debts. Nominal value is a broader concept. Treasuries, for instance, have a nominal value without being legal tender.