Greshams Law

Gresham's Law: Cheap Money Drives Dear Money From Circulation

Sir Thomas Gresham (1519-1579)

Thomas Gresham, born in London, educated at Cambridge, was a merchant, banker and agent to the crown. Gresham negotiated loans for the crown and executed royal business abroad, in the process providing detailed reports to Queen Elizabeth I that revealed an acute understanding of international exchange. Gresham's observation that people will hoard the best money available and deal in the least dependable currencies was not new. Nevertheless, the "bad money drives out the good," statement of Gresham's Law has found a niche in economic terminology.

Gresham, impressed with the Bourse in Antwerp, offered to build a like facility for London businessmen at his own expense if the City of London would provide the land. The Royal Exchange opened in 1571.

CategoryEconomics