by Dave Kranzler, Investment Research Dynamics:
“Bad money drives out good money.” Gresham’s law is an economic principle that states: “When a government overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation.” – Murray Rothbard
Gresham’s Law is also known as Copernicus’ Law, as Nicolaus Copernicus first formulated the theory in 1519. The idea is that when a system has different forms of currency circulating and one of the currencies is perceived to be overvalued relative to the alternative currency, the undervalued currency will be hoarded and the overvalued currency will be used for transactions.
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