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Gresham's Law

            In the 1950s, it was very common to use silver coins minted 40 to 60 years earlier. What happened to all the gold and silver coins minted in the United States prior to 1964? Sir Thomas Gresham, a sixteenth-century financial adviser to Queen Elizabeth, may have had the answer. He observed that debased coins remained in circulation while relatively pure coins disappeared rapidly after debasement. This led him to state a famous economic doctrine that has stood the test of time: "Bad money drives out good." This idea is known as Gresham's Law. People will spend coins that contain far less valuable metal than their face values and hoard (save) coins that contain metal worth close to or more than the coins' face values. This explains why almost all our current dimes, quarters, half dollars, and "silver" dollars are relatively recently minted cupronickel "sandwiches."

 

 

 

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