English financier Sir Thomas Gresham, way back in the 15th century, noticed the relationship of intrinsic values of circulating coinage to the hoarding (or saving ) phenomenon of coins. King Edward VI appointed him as a factor agent and charged him with the management of the royal debt abroad. He eliminated the entire debt by shrewd financial manipulations on the bourse (stock exchange) of Antwerp using his formulated law (Gresham's Law) "Bad money drives out good". He proved his contention to Queen Elizabeth I in 1559 that when the intrinsic value of a coin is debased those coins in circulation with the higher intrinsic value soon disappear because people save them, investors hoard them, by being smuggled to other countries or melted down in order to realize their higher value in foreign exchange or just as coin bullion. Take an example from our own coinage: In 1965 the dime was debased from being 90 per cent silver to a copper-nickel clad copper coin. In 1964, if you went into a bank and asked for a roll of dimes you would have received 50 silver dimes. By the end of '66 there might have been ten silver dimes in a 50 coin roll. By the end of '67 there might have been one or two. Now remember during '64 Philadelphia struck 933,310,762 silver dimes and San Francisco struck 1,357,517,180 silver dimes, yet, these days, you would be hard-pressed to find one silver dime within 10 rolls. Just about every working person, toward the end of '64 and all during '65 salted away a few to a hundred, or more, silver dimes in piggy banks, cigar boxes or canning jars. Many were sold as bullion in coin form or melted for foreign exchange. Coin speculaters, investors and dealers salted them away by the bag and roll in both circulated and uncirculated condition. And look at the Phillipines. In 2004 they debased the content of their coins to an all-steel composition. Earlier this very year a ship bound for Japan was stopped and a cargo of 4,000,000 smuggled pre-2004 copper 1-peso coins were recovered. Their fate was to be melted and restruck as gambling tokens. Note: Gresham became one of the wealthiest people in Great Britain during his lifetime. Clinker
Bad money driving out good is something that governments have known since practically the dawn of time. But Gresham was the first one to actually write it all down as an economic theory - thus he gets the credit.
jody526: At my age, it's selfish. I get a kick out of being able to find something interesting about our hobby/investment to share and I get a lot out of reading the comments afterwards. You moderators and those responsible for this sight that allows numismatists like me to share with other numismatists are the unselfish ones who count in this world. Clinker
Hi GDJMSP Your're right, and it became his "law" because he shared it with the Queen and others he encountered. Clinker
