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<p>[QUOTE=&quot;physics-fan3.14, post: 924973, member: 19165&quot;]Mumu, where does the old currency go when it is driven out? </p><p><br /></p><p>The whole point of Gresham&#039;s law is that people are going to keep the good money that they trust, and spend the bad money which they don&#039;t trust. The clad coinage is fiat money - the only thing that gives it value is our belief that it has value. The entire American economy is built on the belief that our money has value because the government says it does. There is nothing backing it - except the goodwill of the American and world population. </p><p><br /></p><p>When the good money is driven out, its not going to go to some foreign country or some mystical &quot;hiding place&quot;. No, people are going to keep it. </p><p><br /></p><p>Lets give a more pertinent example that will hopefully bring it home: Imagine someone hands you $19.16 in cash (the current spot price of silver), and an ounce of silver. They tell you that you have to spend one and keep the other. Now, we have just said they are worth <i>exactly</i> the same amount - that is, they will both purchase the exact same amount of goods. You have to spend one - which one are you going to spend? I am almost certain that you will spend the cash and keep the silver. That is Gresham&#039;s law. </p><p><br /></p><p>Now pretend its 1965 and someone hands you two clad quarters and one 40% silver half. They tell you they will both buy the same amount of flour, and you must spend one. Which one are you going to spend? </p><p><br /></p><p>Exactly.[/QUOTE]</p><p><br /></p>

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