Originally Posted by
Steven Douglas
Gresham's Law would never have been invoked in the US if Congress had never attempted to declare an actual exchange value ratio for gold and silver (and also nickel and copper, given their "small change" fiat status).
There is no exchange value mathematical constant for silver as small change for gold, or copper and nickel as small change for gold or silver. They are forever in a state of natural flux in terms of real exchange value which is not determined and cannot be controlled by any single entity.
The 'de facto standard' established by the so-called "Bimetallic" standard insanity, was tantamount to an artificial control that virtually guaranteed an on-going natural scarcity of hard specie, as only the most overvalued specie would always dominate circulation, with the undervalued specie hoarded at any given time -- and for that reason only. If there was no state declaration of value, market value determinations would prevail, and exchange values would adjust naturally, leaving no reason for anyone to hoard. Whether intended by Hamilton (or whomever advised him) or not, the net effect was centralization, or a de facto monopoly of specie in terms of TYPE.
Anytime government is involved in exchange value determinations of any kind, the market is distorted by a system that is inherently corrupt. If Congress had simply allowed all different specie to float against one another in free circulation (as the separate currencies they are anyway), with exchange values established by the free market only (as it does anyway, regardless of any state decrees), NEITHER could have driven the other out of circulation. The irony here is that this would have naturally addressed the so-called "money supply problem" (assuming no paper derivatives, or promises to pay, are declared legal tender). With gold AND silver circulating and competing--naturally and simultaneously--the overall quantity of currency in circulation is automatically greater by that amount. The more the merrier.
If gold, silver, copper, nickel, platinum or any other commodity used as a medium of exchange are allowed to circulate freely, and float freely against one another, EACH would serve as a natural check and balance against artificial controls on all other currencies in general. It would tend to stabilizing prices ON EVERYTHING, all goods and services, because you really are measuring exchange values of goods and services against a "basket of specie" that cannot be centralized, or put into anyone's control basket.
Media of exchange are the lenses that reveal market exchange values of all unlike things--goods and services. One specie, one currency, one lens, is MYOPIC, and subject to every kind of distortion. The more lenses you have, the less distortion is possible. Let someone mess with gold, or let there be a new silver boom, and the market will respond, correct and adjust very quickly, because the new quantity brought into circulation will be revealed just as quickly, and felt by everything else, in a MANY-TO-MANY relationship, and not a ONE-TO-MANY relationship that distorts all other exchange values in the process.
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