There’s good and bad in everything. There are 2001 Fords that are good, because some little old lady kept it in her garage, drove it seldom, always had it serviced, and never dented it or in any way damaged it. There are 2001 Fords that have been New York taxis, and have a million miles on them, and are pitifully worn out. Both are 2001 Fords. They may look alike on the outside, due to cosmetic work, but are radically different. Two houses next to each other, both built at the same time, and with different owners, can be completely different. One was a rental, and suffered the typical abuse rental properties go through, and the other has been owned since new by a caring family. Guess which one will bring the most, even though both are the same design, square footage, age, color and even look alike on the exterior?
Then we come to money. Remember when the 1965 coins came out which were made of cheap metals? They looked exactly like the 1964’s which were 90% silver. Guess which ones were spent, and which ones were saved? Both were dimes, quarters, and halves. Both spent exactly the same way, bought the same merchandise, and even looked identical. Those not in the know, cared less, and spent them all equally. This was the majority by far. Smart people fished out the silver ones, and kept them. Vending machine operators by the thousands had a ball, and almost bankrupted themselves, sorting out the silver from the cheap coins. I did it in my theatres too. People thought we were nuts. “Who cares? They’re both dimes and quarters. They both spend the same.” That was what 99% of the public said. We nutballs sorted and saved. Now, they are worth over 6 times their face value, and headed higher.
The majority is always wrong. If that sounds too dogmatic, try, the majority is usually wrong. Look at history and see for yourself. The majority didn’t know what hit them when the NASDAQ crashed, and in 1929 when the whole thing went down the tubes. A very few, in both instances, sold off before, knowing it was going to happen. Just because two coins looked alike, they definitely were not the same. The bad drove the good out, or rather the good kept the bad in circulation. This is Gresham’s Law, which stated, is simply that “Bad money drives good money out of circulation.” Better stated, would be that “Bad money drives out good if they exchange for the same price.” This was the case with the 1964 and 1965 coinage. The treasury issued 40% silver halves for the next few years, but gave it up when they also disappeared from circulation as fast as they were issued, plus silver went up, and the coins were losers for the treasury who was issuing them. These are called “Clads” in the trade, and are still collectible.
These silver coins, both 90% silver and clads, are sold in “bags,” which means that a “bag” contains $1,000 face value of the coins. 10,000 silver dimes, 4,000 silver quarters, or 2,000 silver or clad halves are in a “bag.” They weigh in at 56 pounds, and even though they are the cheapest way to own silver, I don’t particularly like to heft 56 pounds. They do not stack or store nearly as well as do bars of 10 or 100 ounce size.
Originally, money was valued at its commodity value. A silver dime was worth a dime’s worth of silver, etc. In olden days, before paper money was begun, coins were debased by either the king or the peasants. It was easy to shave off a bit of silver or gold, save it and cast a new coin or put the shavings away as savings. The shaved coins eventually became so small, that those which had been shaved the least were saved, and those shaved the most, used to buy things. They both had the same value embossed on them, and both bought the same. But Gresham’s law stated that the thickest, least shaved, were saved, and the thin, shaved ones were spent.
Legal Tender Laws, are usually the last resort of a failing currency or economic system of a nation. These laws require the citizens to use the debased currency and coinage to buy and sell. As the Federal Reserve Notes say on them, “This note is legal tender for all debts public and private.” Note that the word “money” is nowhere to be found on the FRN’s. When paper money was first printed, it was backed by gold and silver. I have in my possession a dollar bill of the 1890 series, which has my ancestor’s face on it. On the right side is George Washington, and on the left is his wife Martha, from whom I am descended. That’s beside the point of course. The point is that the bill says it is a “Silver Certificate” twice, on the side with the pictures, and on the obverse it is called “One Silver Dollar.”
Underneath, it says “Pay To The Bearer On Demand.” In other words the paper dollar could be converted into silver at any time. I did so many years ago, and received from the treasury, a little packet of silver grains, which I still have.
There was gold paper money too in the U.S., backed by such, and convertible to such on demand. All U.S. paper money was backed by either gold or silver, and said so, probably until the Federal Reserve was started, which was also unconstitutional. The Constitution says that the Congress shall “Coin money,” not the Federal Reserve. (Article 1, Section 8). Since money today, is not based on its commodity value, it is all “bad money.” Money made of commodities, regardless of its source, maker, or imprimatur, is “good money,” because of what it is made. Before the Federal Reserve and bad money, gold coins were freely exchangeable between Mexico, Canada and the U.S.
“Gresham’s Law,” actually dates back to 1858 when British economist Henry Dunning Macleod coined the phrase. Sir Thomas Gresham lived from 1519-1579, but the idea of good money driving out bad, goes way back before Gresham’s time. Even Aristophanes’s “The Frogs,” written in 405B.C. compared bad politicians to good ones, and bad money to good, as follows:
“The course our city runs is the same towards men and money.
She has true and worthy sons.
She has fine new gold and ancient silver,
Coins untouched with alloys, gold and silver,
Each well minted, tested each and ringing clear.
Yet we never use them!
Others pass from hand to hand,
Sorry brass just struck last week and branded with wretched brand.
So with men we know for upright, blameless lives and noble names.
These we spurn for men of brass ”
Gresham observed the situation when he wrote that, “Good and bad coin cannot circulate together.” He noted that Henry VIII had debased the coinage as did Edward VII. Gresham observed to the Queen, that “All your ffine goold was convayd ought of this your realm.” In other words, it had left the market, and was stashed away as security by those Brits smart enough, even 800 years ago, to realize that there were good as well as bad money.
Even college degrees prove Gresham’s law. Degrees from prestigious colleges and universities will always command better salaries and positions than those from some podunk outfit which no one has heard of nor recognized for excellence. “Diploma mill” degrees have no value in the job market, any more than does any other fabricated, falsified, counterfeited, coins, degrees, or tangibles of any sort. Way back in the late 1970’s the Communist Czechs were making tens of thousands of real gold double eagles, and they were so authentic looking, that it took a jeweler’s loop to distinguish the good from the bad. Both were gold, and both looked authentic, but some were fake antiques. I am certain that all have been uncovered and removed form the market by now. Some were “good,” and some were “bad,” even though both were made of gold. Antique furniture is copied thousands of times a week, and the reproductions are, in appearance, exactly as the originals. They are worth but a fraction though, of a real antique’s value. A silver certificate dollar bill, looks exactly like a Federal Reserve Note, and will spend the same, except one is good money, and the other is bad money. We use the bad money on a daily basis, and store away the real gold and silver from which good money was made, thereby hedging ourselves against total collapse and loss of confidence in the bad paper money. It is only confidence which keeps it afloat, and confidence in a leaking boat is not security. Protect yourself.