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This is a misunderstanding of Gresham's law which only applies for multiple currencies that are nominally of the same value. Meaning, if there is a $1 silver co
by jonasvp 14y ago
This is a misunderstanding of Gresham's law which only applies for multiple currencies that are nominally of the same value. Meaning, if there is a $1 silver coin and $1 gold coin, everybody would be hoarding the gold coin and "getting rid of" the silver coin.
Also, a currency is not something you hoard, it's something you "get rid of" by giving it to someone else in return for goods and services. In your example, the "weak" currency would become the standard medium of exchange, while the "strong" currency would for all practical purposes disappear from circulation.
- brc 14y agoNo, Greshams law says nothing about things nominally of the same value. It just states that bad money drives out the good money - meaning that for anything that is falling in value, it will be discarded. For anything that is falling slower, or not falling, it will be hoarded. Currency is definitely something you hoard. It's called savings, and plenty of people still do it.
- jonasvp 14y agohttps://en.wikipedia.org/wiki/Gresham%27s_law https://en.wikipedia.org/wiki/Gresham%27s_law "When a government compulsorily overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation." Or in other words (from the same article): "Bad money drives out good if their exchange rate is set by law."