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Gresham's Conjecture

Posted by $ MikeMarotta 12 years, 3 months ago to Economics
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We learn it as "Gresham's Law" the claim that "bad money drives good money from the market." But the general rule has many exceptions.

From 1878-1904, the US Mint struck over 24 million ounces of silver dollars per year, far in excess of anyone's demand, to meet the political agenda of Western mining interests. The Comstock Lode and other strikes flooded the markets with cheap silver and the price of it fell relative to gold. Nonetheless, silver dollars sat in bags; and even today fully one-third are in uncirculated condition. According to Gresham's Suggestion, silver dollars should have driven gold dollars from the market. They did not.

3-cent silvers circulated alongside 3-cent nickels, both them along with 3-cent "fractional currency" notes from the Treasury.

More here:
http://necessaryfacts.blogspot.com/2012/...

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  • Posted by $ MikeMarotta 12 years, 3 months ago in reply to this comment.
    Still on the run... but just to say, for any financier or for a larger business, especially an importer, it makes a difference. On the street, not so much. I trust the numismatic evidence and it is clear that if you wanted a beer, you could pay with a nickel 5-cent coin, a silver half-dime, or a fractional currency note. Your choice might depend more on the depth of your pockets or the shape of your wallet than on your fear of Gresham's Suggestions.

    We know, for example that during the Civil War, the fear that the North would lose drove metallic money into hoards. It was not the legal tender notes, but the fact that the South had better officers, and needed only to win a defensive war. Fortunes for the North remained grim until 1864. Postage stamps circulated as small change. To make them convenient, one JOHN GAULT patented a holder of brass and mica. These things are RARE today. So, they did not actually fill the need for small change on the street, or only partially so.
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