Gresham's Law

Gresham's Law
A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new coin ("bad money") is assigned the same face value as an older coin containing a higher amount of precious metal ("good money"), then the new coin will be used in circulation while the old coin will be hoarded and will disappear from circulation.

Coins were first made with gold, silver and other precious metals, which gave them their value. Over time, the amount of precious metals used to make the coin decreased because the metals were worth more on their own than when minted into the coin itself. If the value of the metal in the old coins was higher than the coin's face value, people would melt the coins down and sell the metal. Similarly, if a low quality good is passed off as a high quality good, then the market will drive down prices because consumers won't be able to determine the good's real value.


Investment dictionary. . 2012.

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  • Gresham's law — [gresh′əmz] n. [after Sir Thomas Gresham (1519 79), Eng financier, formerly thought to have formulated it] the theory that when two or more kinds of money of equal denomination but unequal intrinsic value are in circulation, the one of greater… …   English World dictionary

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  • Gresham's law — /ˈgrɛʃəmz lɔ/ (say greshuhmz law) noun the tendency of the inferior of two forms of currency to circulate more freely than, or to the exclusion of, the superior, because of the hoarding of the latter. {from Sir Thomas Gresham, 1519?–79, English… …  

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  • Gresham’s Law —  is that bad money drives out good ; attributed to ir Thomas Gresham (1519–1579), British financier …   Bryson’s dictionary for writers and editors

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