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Gresham’s law is a very interesting principle that states quite simply “bad money drives out good”. A lot of people think that money, as we know it, this paper stuff is somehow tied to something that has an intrinsic value. Gold for example. And that paper money is really just a contractual representation of the gold that exists somewhere. Absolutely not true. In fact the USA completely abandoned the “Gold Standard” as it is called back in 1971. So the inherent value of money is whatever you think it is valued at. It’s not quite that simple but there are many times throughout history when citizens lost confidence in money to the point of literally needing a wheelbarrow of cash to buy a loaf of bread. Germany hyperinflation was certainly bad at 29,500% but the top winner historically was Hungary with 41.900,000,000,000,000,000% inflation rate back in 1946.
Sir Thomas Gresham, who Gresham’s law is named after, was an English financier back in the mid 1500’s. He made the observation that good money will always drive out from bad. So humans have known of this phenomenon for hundreds of years, but we are still making these same mistakes. But we can hopefully learn from history to help us today.
So what is “good money” as referenced in this instance. Good money is money that shows little to no difference between its commodity value, which is the value of the stuff the money is actually made from, and it’s nominal value, which is what the currency suggests it is worth by it’s face value. So in the case of our paper money what is the actual value of this piece of paper? Fractions of fractions of a penny. It is only because we all agree and trust the government that this piece of paper is worth anything.
But it wasn’t always that way. Back in 1792 the US mint was established and minted coins that were made of silver. That continued with various concentrations of silver up until 1965 when all silver content was removed from nickels and dimes through passage of the coinage act.
Now an interesting phenomenon happened shortly afterwards in that there was an increasing number of people who realized the actual value of the silver in these coins (the commodity value) was worth more than it’s nominal value. So people started to hoard the coins that were known to have silver content. Pre 1965. Today you will almost never see these old coins in circulation any more. And if you do hold on to them because they are worth many times more than their actual face value. In fact many people today buy bags of the old silver coinage which is called “junk silver” as an investment. Here you can see $1000 face value in junk silver coins will cost you $11,000. If you had held on to $1,000 in dimes, you could sell those today for over $11,000 dollars. And silver prices right now are relatively low, so that price is likely to rise. So if you have any silver coins you should hang on to them just in case. People never think these things will happen but they have happened many times throughout history and they will happen again.

So the question is if our own monetary value continues to erode will we see people starting to hoard pennies for the copper value? Already happening. Canada actually stopped making pennies years ago likely for that very reason. And coin content has changed over time to keep ahead of Gresham’s law. For example pennies in the US were made of 95% copper until 1982, 1983 pennies were 97% zinc and plated with a thin copper coating. This made sense because as the value of the copper went up, anyone could simply buy the pennies and hoard them or even melt them and make a profit because Gresham’s law always drives the good money underground. The USA actually loses millions making the penny as it costs almost two cents to produce, and that number is likely to increase as inflation continues. In fact even now you can purchase a machine from Ryedale enterprises that will automatically sort your pre 1982 copper pennies from the zinc ones in bulk. So you could technically go to the bank get $100.00 worth of pennies, double your money on the copper pennies as currently the copper value is about 2 cents. Roll and return the non coppers and get another $100.00 and repeat. Obviously copper prices are too low now and the dollar is still strong enough that this would be too much work for too little money. But that situation could change. A great website to check the actual commodity value of the coins in your pocket is coinflation.com. They’ll give you the current metal value of all coins.
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https://en.wikipedia.org/wiki/Gresham%27s_law

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16 Comments

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  1. Sawmiller Smith 2 years ago

    my dad save silver coins for many years that came though his store. In 1980 he sold them all when 1000 dollars worth of coins were selling for around 35000 dollars.

  2. Bobby Fischer 2 years ago

    Audit the FED then end the FED. Central banks are a cancer on their respective governments and peoples.

  3. Mohamed Ali 2 years ago

    Thank you for the video , great information!

  4. GainTrainWompa 1 2 years ago

    Sick video !

  5. Greg Collins 2 years ago

    Thank you sir. I regard these monetary issues as one of the great concerns of our time. Sound money, that holds a stable value, is one of the foundations of a strong economy and I believe that if our leaders had abided by Article 1 Sec 10 of the Constitution to only allow gold and silver coin as money, the USA would have stayed on a path of success that was enjoyed for 150+ years when sound money was the standard. As a result of allowing the government to spend, spend, spend because the unconstitutional banking cartel called The Fed has connived a way to lend fiat money into circulation – politicians have caused all sorts of grief through unwise wars, largess that has dumbed down the populace, and weakened the economy by making basic industries uncompetitive. (Why work when you can print money for free?) The early colonies faced many of the same problems when each one had its own fiat script money that was not to be trusted. President Washington was quoted as remarking how quickly the early United States became strengthened after the Constitution went into effect and attributed this to "no state may make any thing besides gold and silver coin a tender in payment of debts. Stick around, the powers that be are doing their best to ruin the current money and world may have a chance to return to sound money yet again…..

  6. Thank you for the video sir !

  7. garyp4205 2 years ago

    Great video.

    It was a huge mistake for Nixon to take the United States off the gold standard.

    Inflation has risen quickly since.

  8. The Honest Broker 2 years ago

    Clearly, quantitative easing is different than the hyperinflation episodes you cite. You're ignoring the fact that the Fed pays interest on excess bank reserves and buys bonds with newly created money that it can sell later

    This is why QE, despite all the warnings from the know-nothing inflation hawks still didn't manage to allow the Fed to consistently hit it's 2% inflation target.

  9. The Honest Broker 2 years ago

    Also, the copper in pennies was largely replaced by zinc sometime ago.

  10. Truthfears Guilty 2 years ago

    gold and silver were the currencies of prophets, not paper. paper replaced gold and silver. plastic replaced paper and now, electronic has replaced plastic. we used to back and guarantee gold for our dollar. early 70's charles de gaulle demanded gold, it was refused. soon, gold was replaced by black gold. paper money is out the door and "you" have the right to go back in the era of lillian ghish, gloria swanson etc etc.

  11. Bill Titwell 2 years ago

    You smart talking warrior for humanity, God loves ya. Best wishes. Great channel. Ive enjoyed the topics you choose to speak on.

  12. KinGizzard 2 years ago

    Totally would enjoy seeing more videos like this from you.

  13. slugz 2 years ago

    Wait are you guys Canadian? Those bills looked like Canadian twenties

  14. Micah Hunter 2 years ago

    I really believe crypto currency will rise up during a financial crisis, due to globalization and the need to move across the globe. It would be hard to buy goods from China with a silver bar!!

  15. Anshul Meena 2 years ago

    Can you please cover hyper-inflation videos in future.

  16. Motion Joe 2 years ago

    A video that should have 500 million views.

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