d63edbdf_brary_of_Economics_and_Liberty__ast_Highlights_HIDE_HIGHLIGHTS
[Time] 1:08:27
Gresham's Law: bad money drives out good. Why didn't that happen during that episode? Named for Thomas Gresham, Elizabethan financier. All refer to situations where there was no private coinage, no free choice in coinage, but a government monopoly that decided to dilute the quality of its coins, usually by making coins with less precious metal in them. Punished people if they tried to discriminate between new coins--bad money--and old coins--good money. As a seller, you price goods as if you are going to be paid in the bad coin, because otherwise you take an unnecessary loss. As the buyer, you only pay in bad coins. So good coins tend to disappear. In free banking there is no tendency for that to happen at all. If no legal tender law, seller can choose. No Gresham's Law tendency. Under competition, good money drives bad money out. France; U.S. Revolution. France: paper assignats not treated the same. Legal for a merchant to ask in what medium he would be paid before quoting a price and making a deal.
Selgin on Free Banking | EconTalk | Library of Economics and Liberty