Gresham's Law

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Gresham's Law is how cheap money tends to drive better money out of circulation in the market. Simply put, it is the economic phenomenon that "bad money drives out good."

If both silver and gold are accepted currency (as in 19th century America), then people will prefer to use silver rather than gold in buying things. This is because people will want to save and hoard the gold for themselves and get rid of the cheaper silver. The result is that the cheaper currency (silver) is used more often in market transactions, and the gold is driven out of the market.

This law is named after Sir Thomas Gresham, who was the Master of the Mint under Queen Elizabeth I in the 1500s.

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