Gresham's Law

'Bad money drives out good.'
Bad money drives out good.

Gresham's law refers to a phenomenon where, when currencies with different material values circulate as money with the same nominal value, the currency with higher material value (Good Money) disappears from circulation, and only the lower-value currency (Bad Money) circulates.

For example, when a state or government recklessly issues money seeking the seigniorage effect (minting profit), it may degrade the quality of currency in order to print more and earn greater seigniorage. In such cases, people hoard or hide the good-quality money and refrain from using it, using only the poor-quality money, so that only bad money circulates in the market.

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Topics: Money
Category: Wiki/Economy