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Monday, July 17, 2017

Gresham's "law" versus Sovereign Money

One of the primary historical obstacles to complete economic stability, sovereignty and harmony historically has been the difficulty in economies of the people and their government to establish and hold control over their money supply. The concept of Modern Monetary Theory tries to delink money as a trading tool and measure of value from money as a commodity. However this is only possible in the modern era because the banking system has already done this. For years the so-called "Gresham's law" made it difficult for countries to control their money supply. If countries minted money on cheap coins, merchants would refuse to use them. If they did use them, they would hoard gold and silver and the value of the cheap coins would fall. If they rested their money supply on Gold or Silver by weight, the wealthy would export, hoard, or exploit those commodities as a tool over others. As long as local people are subject to the power of international oligarchs and monied person, disruptions in economics will continue.

For more on this read Robert Mundell's:

Uses and Abuses of Gresham's Law in the History of Money

I go into detail about this in my post:

Gresham's law as a tool of regulation>

Mundell writes:

"The great international currencies--shekels, darics, drachmas, staters, solidi, dinars, ducats, deniers, livres, pounds, dollars--have always been "good" not "bad" money."

"Good money" means that the money is redeemable, holds it's value, and is stable. Not that it is of gold or silver. Mundell also says:

"Bad coins will drive out good only if a change occurs to bring about an excess supply of money. An excess supply of money could result because of a decline in the demand for money. If this occurred in a closed economy, prices would start to rise and the value of the best coins as metal would be higher than their value as money, with the result that the best coins would be withdrawn from circulation until the excess supply of money had been eliminated. If, on the other hand, the economy were open to trade with the rest of the world, the good coins would be sent abroad until the money supply were reduced to its equilibrium level."

Read his article.

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