In a way, Gresham’s law is still in operation today, and can be quite useful in investing. If I were to change it, I would make it ‘Bad money drives out good [insofar as it remains unextinguished]‘.

I love this book. Most people in the financial world use the past 30 years as their universe of comparison. This book lets you use 300 years.

Firstly, I said ‘in a way’. And secondly, sorry I don’t understand. Gresham’s law states that ‘good money drives out bad [under government compulsion]‘. Really, it should be noted that the monies in question are – themselves – decreed by governments. Eg. gold and silver were driving one another out under the policies of bimetallism for years, but remember: gold and silver were themselves enshrined to the status of ‘legal tender’. I grant that this probably originated from gold and silver emerging as natural monies, but nevertheless, the course of human history shows us that things change. A strict anti-intervention stance is to have no currencies that are ‘legal tender’, and let the market decide.

What I mean is that governments attempt to centrally plan the exchange ratios between IOU money (demand deposits, credit), and direct claims on central banks (federal reserve notes and reserve balances). They do this by manipulating the balance sheet of the Fed (and thus the composition of the dollar), and also by granting privileges to banks and ‘setting’ short term money rates. This causes some Gresham law-type effects unless there are profit-motives for money extinguishment (withdrawals, credit retirement, …).

I see the history of money as an uninterrupted stream of Government intervention, that can be compared all along its history. Sometimes I get the feeling that the conventional Austrian stance compartmentalizes too much to pre 1913, 1913-1971 and post 1971. I think there are ways to integrate them more satisfactorily. But of course, I could be naive.