Gresham's law

In economics, there's actually a concept here.

with regard to money, it's called Gresham's Law.

And it's basically that bad money, sort of in the age of coins and gold, bad money chases out the good.

And so counterfeiters will end up destroying the currency.

If NFTs and crypto existed in the 12th century, England would be their number one seller.

Essentially, England had been sliding into a sort of social and legal version of Gresham's Law.

And honestly, given the currency situation, they were also thoroughly into the official version of Gresham's Law as well.

Boiled down, what Gresham's Law states is that if debased currency is allowed to exist in the same market as the official currency, then eventually the bad money will drive out the good.

That makes sense, right? Like, if you can clip a little silver off the edge of your coin, or even worse, if you can mix silver with tin and then stamp out new coins, and if you know you won't get punished for it, then you have a clear incentive to do exactly that.

And if the government allows that to continue, the market will soon be flooded with debased currency.

At the same time, and this is where the rubber really meets the road for Gresham's Law, if the public knows that there's bad currency circulating, then they'll start hoarding the good money and just spend the currency that seems shady.

So eventually, most of the currency being passed around will be at least debased and no one will trust the system.

who

want to nationalize everything now show up so much? that it's kind of like Gresham's Law about bad money chasing out good, right? This is a problem.

I'll give you an example.

Comment sections are notorious.

Agent Provenu tried to beat the cheaters with pure math, realized it couldn't out-compute a one-line syntax bypass, and pivoted entirely to cheating.

It's basically Gresham's Law applied to AI.

Yes.

Bad money drives out good.

expect.

Gresham's Law arrives.

Here's what people did.

If you were paid in new garbage coins, you spent them as fast as humanly possible because they'd be worth less next month.

If you got hold of the older coin with real silver in it or the gold aureus, you took it home and buried it.

You hoarded the metal and you spent the garbage.

This is Gresham's Law, which basically means that bad money drives out good money.

Two forms of money circulate at the same official value.

I think it's really clear that there's going to be a big demand for non-reserve digital currency.

And the answer, of course, is Gresham's Law.

No one's going to ever want to spend their Bitcoin.

In fact, one of the things I think is the funniest thing in the world is when people constantly say, oh, Bitcoin's not real because nobody spends it.

You don't see anybody spending gold coins to pay for haircuts either, do you? Why? Because you spend the currency.

You save the reserve.

That's Gresham's law.

Everyone knows this or everyone should.

And the US would have faced the same market pressures that forced all of Europe and France to abandon silver.

It's an example of what is known as Gresham's Law, that bad money drives out good money.

Absolutely.

It's also an example of that infamous image of a flap of a butterfly's wing can cause a hurricane on the other side of the world in our sort of globally interconnected markets.