Bad money drives out the good” – Gresham’s Law
Even primitive medieval economies understood the importance of guaranteeing the integrity of currency; Henry I of England imposed the penalty of castration on counterfeiters.
Gresham’s Law is the formal name economists give the common sense notion that counterfeiting is a bad thing and should not be encouraged. The upshot is that the phony money undermines your confidence in all the money in circulation, even if the bogus bucks are a relatively small portion of the total ‘dollars’ in circulation.
You need to KNOW for a fact just how much real, tangible value you can expect to receive in exchange for those ‘dollars’, and that’s entirely independent of any action on your part. At least in the short term that’s entirely dependent on how your fellow market participants perceive the value of that currency. Even if you accept some shiny beads as payment in a real estate deal, you shouldn’t really be shocked when you’re evicted for offering the same as a rental payment to your new landlord the following month.
Not exactly a super-complimicated egghead theory fresh out of some high powered thinktank. This is, and has been since time immemorial, just basic, fundamental stuff. Christ, Gresham could see it and he grew up before the invention of toilet paper.
So why can’t Paul Ryan (R-WI) and the other Republican’ts see it? Why do they seem so oblivious to the Wall Street counterfeiting operation that’s hamstringing the economy?
Continued at Dystopia Diaries