Gresham's Law ("bad" money drives out "good" money) means that unsound money - money that is rapidly losing its value in exchange - will be traded away for more valuable goods. When money is losing value, you can't get rid of it fast enough because it will be worth less tomorrow than today. On the other hand, "good" (sound) money is hoarded because it will be worth *more* tomorrow than it is today. So Gresham's Law simply says "bad" money is "circulated" or "traded away," while the "good" money is held back for a rainy day.
Yes, you are exactly right. You used the words sound and unsound money in your comment. These words are a clear hint to the problem.
In times when gold and silver were standard, the sound of debased coins was unlike the sound of the ringing sound of gold or silver.
My purpose was to reveal what makes money bad. In ancient times, gold was debased with lead or tin. Today it is an object of economic duality, good as ornament, banned as an economic store of value.
Bad laws turned a great idea, the United States of America, into a national counterfeiter of value by the force law using the good faith, industriousness, and benevolence of a free people. Ellsworth M. Toohey would be proud.
My project, Precise Thinking, digs deeper to connect the words we use with their history. We can uncover the hidden meanings of these important ideas, and prepare the way for positive action.
I am essentially in agreement with your conclusion, although I find it a bit abstract. The way I see it, the Great Depression was the result of a change in the philosophy of government spending. Calvin Coolidge was fiscally conservative. One of the greatest agendas of his presidency was maintaining the federal surplus. Because of this perspective, he became adept at saying "No" to all manner of Congressional spending programs that threatened this agenda. He was the last of the true Classical Liberals in the Republican party to hold the highest office in the land. His successor, Herbert Hoover was a big government rhino from the Teddy Roosevelt school of republican make-work spending. Teddy's passing of the FED into existence set the stage for the disaster that was to follow. Coolidge was like the little boy with his finger in the dyke, holding the ocean back from destroying the city. When he left, there was no one left to defend the economy from the flood Teddy had invited. Meanwhile, Hoover believed that the government needs to spend money to make money, but there was no discretion behind that idea. It was as if magically, outgoing money would come back threefold, no actual revenue plan required. He passed a bunch of spending programs, disguised as infrastructure programs, which ultimately shocked the economy into the Depression. Within three years of Hoover taking office, all the work that Coolidge had done to maintain the federal surplus was destroyed, the money he had saved for us was gone, and we have been in deficit ever since. This change in philosophy is what laid the groundwork to scapegoat gold and silver for the flaws in the thinking of foolish men.
One thing that is interesting is that even though they can no longer be exchanged as currency, both gold & silver have not only maintained, but consistently increased their value as commodities. Many savvy investors maintain some sort of investment in one or both of these precious metals. And those investors tend to become wealthier over time because of it. Removing the gold standard, and before it the silver standard, were touted as mechanisms to correct for the disparity in incomes. However, the result was to concentrate the possession of these precious metals into the hands of fewer people, which effectively widened the wealth gap.
Clearly, the government Ponzi scheme known as the US economy is a failure. They print the money. They artificially assign its value. They distribute the money. They determine the policies for taxing the money. The regulate the taxation. After private citizens use the money to facilitate our productive efforts, the government step back in and they take the money back. Then they spend the money. And if they don't take enough, then they print more and give it to themselves. If private citizens colluded like the US Treasury, the FED, the Congress, and the IRS, we would be criminally prosecuted. Removing the gold standard in America was similar to taking all the guns in the Weimar Republic, in that it reduced the leverage of ordinary people to stand up to their government. It concentrated that power in the hands of the elite few, and positioned them to ride roughshod over the rights of the many. Essentially, ending the gold standard was the final nail in the coffin of Capitalism. Whatever hybrid situation we have now, is not that.
The FED. But maybe if we're lucky, the economy will turn out to be plant instead of animal, and something new will grow up where Capitalism was buried.
Gresham's Law ("bad" money drives out "good" money) means that unsound money - money that is rapidly losing its value in exchange - will be traded away for more valuable goods. When money is losing value, you can't get rid of it fast enough because it will be worth less tomorrow than today. On the other hand, "good" (sound) money is hoarded because it will be worth *more* tomorrow than it is today. So Gresham's Law simply says "bad" money is "circulated" or "traded away," while the "good" money is held back for a rainy day.
Yes, you are exactly right. You used the words sound and unsound money in your comment. These words are a clear hint to the problem.
In times when gold and silver were standard, the sound of debased coins was unlike the sound of the ringing sound of gold or silver.
My purpose was to reveal what makes money bad. In ancient times, gold was debased with lead or tin. Today it is an object of economic duality, good as ornament, banned as an economic store of value.
Bad laws turned a great idea, the United States of America, into a national counterfeiter of value by the force law using the good faith, industriousness, and benevolence of a free people. Ellsworth M. Toohey would be proud.
My project, Precise Thinking, digs deeper to connect the words we use with their history. We can uncover the hidden meanings of these important ideas, and prepare the way for positive action.
Thank you! I love the takeaway: “Bad laws drive out good money.” I’m going to call it Ilene’s Law!
If I were an economist, I would write a treatise and people would call it Skeen’s law. Since I’m not, I won’t.
“Bad laws drive out good money” is just an example what you can realize with Precise Thinking.
I am essentially in agreement with your conclusion, although I find it a bit abstract. The way I see it, the Great Depression was the result of a change in the philosophy of government spending. Calvin Coolidge was fiscally conservative. One of the greatest agendas of his presidency was maintaining the federal surplus. Because of this perspective, he became adept at saying "No" to all manner of Congressional spending programs that threatened this agenda. He was the last of the true Classical Liberals in the Republican party to hold the highest office in the land. His successor, Herbert Hoover was a big government rhino from the Teddy Roosevelt school of republican make-work spending. Teddy's passing of the FED into existence set the stage for the disaster that was to follow. Coolidge was like the little boy with his finger in the dyke, holding the ocean back from destroying the city. When he left, there was no one left to defend the economy from the flood Teddy had invited. Meanwhile, Hoover believed that the government needs to spend money to make money, but there was no discretion behind that idea. It was as if magically, outgoing money would come back threefold, no actual revenue plan required. He passed a bunch of spending programs, disguised as infrastructure programs, which ultimately shocked the economy into the Depression. Within three years of Hoover taking office, all the work that Coolidge had done to maintain the federal surplus was destroyed, the money he had saved for us was gone, and we have been in deficit ever since. This change in philosophy is what laid the groundwork to scapegoat gold and silver for the flaws in the thinking of foolish men.
One thing that is interesting is that even though they can no longer be exchanged as currency, both gold & silver have not only maintained, but consistently increased their value as commodities. Many savvy investors maintain some sort of investment in one or both of these precious metals. And those investors tend to become wealthier over time because of it. Removing the gold standard, and before it the silver standard, were touted as mechanisms to correct for the disparity in incomes. However, the result was to concentrate the possession of these precious metals into the hands of fewer people, which effectively widened the wealth gap.
Clearly, the government Ponzi scheme known as the US economy is a failure. They print the money. They artificially assign its value. They distribute the money. They determine the policies for taxing the money. The regulate the taxation. After private citizens use the money to facilitate our productive efforts, the government step back in and they take the money back. Then they spend the money. And if they don't take enough, then they print more and give it to themselves. If private citizens colluded like the US Treasury, the FED, the Congress, and the IRS, we would be criminally prosecuted. Removing the gold standard in America was similar to taking all the guns in the Weimar Republic, in that it reduced the leverage of ordinary people to stand up to their government. It concentrated that power in the hands of the elite few, and positioned them to ride roughshod over the rights of the many. Essentially, ending the gold standard was the final nail in the coffin of Capitalism. Whatever hybrid situation we have now, is not that.
Thanks for the detailed analysis. Here’s a question for you: if ending the gold standard was the final mail, what would you name as the first nail?
The FED. But maybe if we're lucky, the economy will turn out to be plant instead of animal, and something new will grow up where Capitalism was buried.