Gresham’s Law comes alive in Sri Lanka amid high inflation

Aug 11, 2008 (LBO) – Sri Lanka is melting its coinage and minting less valuable coins amidst booming commodity prices and rising inflation at home, continuing a tradition of monetary debasement that dates back to ancient monarchies.

By collecting the Nickel/brass and Cupro/Nickel coins in circulation and shipping them to the minter for melting and re-striking, Sri Lanka could now debase the coins with less valuable plated steel coins.

Base metal and precious metals and most commodities have been booming amidst unprecedented money printing in the United States, though the bubble is now running out of steam after the underlying credit bubble collapsed in August 2007.

Debasing coins has been a traditional tactic of monarchs to steal from the population secretly, before the advent of paper money central banking gave rulers an even better weapon to create inflation and impoverish the population.

The process has been formalized in monetary economics famously as Gresham’s Law, named after Thomas Gresham who advised Queen Elizabeth I in 1558 about the bad effects of debasing coins.

Gresham’s Law which says “bad money drives out good” underscores the tendency of people to hoard good coins, and give to others in