Tuesday, May 24, 2005

Gresham's law

Gresham's Law, featured recently on A.Word.A.Day, is the theory that "bad money drives good money out of circulation." This perhaps goes someway in explaining why dollar coins in the U.S. are rarely seen in circulation. I would hesitate the call the Sacagewea dollar better than the good 'ol Sawbuck, but one can imagine it thought of as more valuable from a collector's standpoint. I experienced firsthand a more "classic" instance of Gresham's law in Argentina after the currency collapse in 2001. Even though traditionally both the dollar and the peso were acceptable for payment at that point only the peso was in circulation.


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