Page 170 - clra62_0019-(GIPE)

XVIII.

NOTE ON THE G~ESHAM LAW.
HERE is a good deal of misunderstanding of the
T real law as to bad money "driving out" good,
and an overrated metal in a bimetallic system" driving
out" the underrated metal, which is commonly spoken
of as the Gresham Law. It is assumed that the money
driven out must be physically driven out of the country,
i.e., exported, and this export is regarded as a funda-
mental part of the Gresham Law.
In point of {act Sir Thomas Gresham is only re-
sponsible for the suggestion that bad coins, i.e., worn
and deteriorated coins, drive good ones of the same
metal out Of circulation. Export is, no doubt, specially
referred to as the usual effect of such driving out, as it
was no doubt the usual consequence in circumstances
such as those Sir Thomas Gresham dealt with. But
the" law" was only an observation that it is difficult,
if not impossible. {or good and bad coins of the same
metal to circulate together, and the good coins are
selected for exportation when a demand for exportation
arises. The export is not a necessary part of the" law."
In point of fact, also, good and bad coins will circulate
together in a given country as if they were all good
when the circulation itself is not in excess of the de-
mand for it. We have many good and bad sovereigns
circulating together now in England.
Sir Thomas Gresham made no reference at aU to
what happens in a bimetallic system or in the analogous
case of inconvertible paper when the paper drives the
metal out of circulation. Nor are these last cases
quite on all fours with those Sir Thomas Gresham re-
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