Difference between revisions of "Gresham's Law"
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(he Bible contains a warning against a similar tendency in life for unimportant time-wasters to drive out more important contemplation: Luke 10:38-42.) |
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| − | '''Gresham's Law''' is how cheap [[money]] tends to drive better money out of circulation in the market. Simply put, it is the [[economic]] phenomenon that "bad money drives out good." | + | '''Gresham's Law''' is how cheap [[money]] tends to drive better money out of circulation in the market. Simply put, it is the [[economic]] phenomenon that "bad money drives out good." The [[Bible]] contains a warning against a similar tendency in life for unimportant time-wasters to drive out more important contemplation: [[Luke, Chapter 10|Luke 10:38-42]]. |
If both [[silver]] and [[gold]] are accepted currency (as in 19th century America), then people will prefer to use silver rather than gold in buying things. This is because people will want to save and hoard the gold for themselves and get rid of the cheaper silver. The result is that the cheaper currency (silver) is used more often in market transactions, and the gold is driven out of the market. | If both [[silver]] and [[gold]] are accepted currency (as in 19th century America), then people will prefer to use silver rather than gold in buying things. This is because people will want to save and hoard the gold for themselves and get rid of the cheaper silver. The result is that the cheaper currency (silver) is used more often in market transactions, and the gold is driven out of the market. | ||
Latest revision as of 17:29, July 16, 2025
Gresham's Law is how cheap money tends to drive better money out of circulation in the market. Simply put, it is the economic phenomenon that "bad money drives out good." The Bible contains a warning against a similar tendency in life for unimportant time-wasters to drive out more important contemplation: Luke 10:38-42.
If both silver and gold are accepted currency (as in 19th century America), then people will prefer to use silver rather than gold in buying things. This is because people will want to save and hoard the gold for themselves and get rid of the cheaper silver. The result is that the cheaper currency (silver) is used more often in market transactions, and the gold is driven out of the market.
This law is named after Sir Thomas Gresham, who was the Master of the Mint under Queen Elizabeth I in the 1500s.
External links
- Gresham's Law: Definition, Effects, and Example
- Gresham’s Law, George Selgin, University of Georgia