Bad money drives out good – a reference to Gresham’s Law: when state authority overvalues one kind of currency and undervalues another, the undervalued will be hoarded and the overvalued spent.
Inflation kicks in and the lack of circulation of sound money tends to reduce economic activity: the age old consequence of debauching the currency, a policy pursued by Tudor monarchs until the mid-16th century.
The credit goes to Tudor financier Thomas Gresham (1519-1579), although he never formulated a “law” and the phenomenon had been recognised before his time. Yet his influence was profound, and his grasp of state finances made him, “one of the most important figures in the sixteenth century and the history of England“.*