Under fiat inflation good money drives out bad, reversing Gresham's law.
Thiers's observation from the assignat inflation. When the bad money is depreciating fast enough, people spend it and hoard the good, which reverses Gresham entirely.
In practice
- In a country whose currency loses a tenth of its value a month, wages are spent the day they arrive and savings are held in dollars.
- A firm paying suppliers in a rapidly devaluing currency finds suppliers demanding the stable one, and the legal tender rule is what decides which law applies.
- Subject
- Economics & Incentives
- Essay
- The regularities money obeys