Quote from: deisik on September 21, 2015, 07:49:05 AM

Quote from: BobK71 on September 21, 2015, 02:47:41 AM

Quote from: deisik on September 19, 2015, 12:07:41 AM

Silver is bad money while gold is good money. The bad money drives out the good money from circulation. That's why silver had been more widely used than gold through history. People spent silver but saved gold specie...

I suspect that very few people realize the true meaning of Gresham's Law, and especially as applied to gold and silver. Gresham's Law really says that, *where there is an artificially supported exchange rate between two monies*, the undervalued money will be hoarded, and only the overvalued money will be left in circulation.

Gresham's Law (or, rather, the principle behind it) would hold even in the case of a floating exchange rate (for example, Bitcoin vs USD). I have explained this here (and in greater detail further on)...

In the case of truly floating exchange rates, when A's price drops against B, you could argue that A is now undervalued, but you could also argue that A was never worth as much as its old price. This is just like any other market, and there's no clear answer. When the state is supporting an exchange rate, and the market leans one way, the state must lean the other way. There is no question which currency is undervalued, and which is overvalued. Gresham's Law concerns itself with state intervention, which is distinct from the free-market scenario.