Glossary · Economic ideas
Gresham’s law
Gresham’s law says “bad money drives out good”: when two kinds of money must be accepted at the same value, people spend the worse one and keep the better one.
Also called: Greshams law, Gresham's law, bad money drives out good
41.2 times its 25-cent face value (Oct 2026). A pre-1982 penny holds 4.3¢ of copper.
In plain words
Imagine two $1 coins in your pocket: one made of cheap metal, the other of real silver worth $20 if melted down. Every shop must take both as $1. Which do you spend? The cheap one, of course, and you keep the silver one. Everyone does the same, and soon only cheap coins are changing hands. That is Gresham’s law: bad money drives out good.
It is named after Sir Thomas Gresham, a financier to Queen Elizabeth I in the 1500s, though the idea is much older: an ancient Greek playwright and medieval scholars described it too.
It works only when the law forces both kinds of money to be taken at the same value. Where people can refuse the bad money or price it lower, the opposite can happen, and good money pushes out bad.
Example
Where did the silver quarters go?
Until 1964, US dimes, quarters and half dollars were 90% silver. As the price of silver rose, the metal in a coin crept up toward its face value.
- From 1965 the US made dimes and quarters of copper and nickel. Old and new coins were both legal money at the same face value.
- A quarter held 0.18 troy ounces of silver, so once silver passed $1.38 an ounce, its metal was worth more than 25 cents. In the World Bank’s monthly prices that first happened in Jul 1967.
- People kept the silver coins and spent the new ones. Within a few years silver coins had all but vanished from cash registers.
- At $57.00 an ounce (Oct 2026), a silver quarter holds about $10.31 of silver, and a silver dime about $4.12.
Same face value, different metal: the good money went into drawers and the bad money stayed in circulation.
One level deeper
Gresham’s law is about money whose value is fixed by law, like coins with a face value. When the metal is worth more than the face value, coins are melted or hoarded; when it is worth less, as with today’s coins, they circulate.
It applies beyond coins. In the 1800s the US valued gold and silver at a fixed ratio, and whichever metal the ratio undervalued left circulation. In countries with high inflation, people spend the local currency fast and save in dollars; and where shops may refuse the local money, the dollar can push it out entirely, the reverse effect, sometimes called Thiers’ law.
Today’s problem is often the opposite: coins that cost more to make than they are worth. The US Mint stopped making pennies for circulation in 2025, after each one had come to cost more than a cent to produce. A pre-1982 copper penny holds about 4.3¢ of copper at Oct 2026 prices; melting US pennies and nickels has been illegal since 2006.
The silver price and the 25-cent line
The price of an ounce of silver since 1960, on a log scale. Below the dashed line, the silver in an old quarter was worth less than 25 cents, and the coins circulated. Once silver crossed the line, in Jul 1967, an old quarter was worth more melted than spent.
The numbers behind the chart
| Date | Silver, $ per troy ounce |
|---|---|
| Jan 1960 | $0.91 |
| Dec 1960 | $0.91 |
| Dec 1970 | $1.64 |
| Dec 1980 | $16.46 |
| Dec 1990 | $4.08 |
| Dec 2000 | $4.64 |
| Dec 2010 | $29.32 |
| Dec 2020 | $24.97 |
| Dec 2022 | $23.33 |
| Dec 2023 | $23.88 |
| Dec 2024 | $30.76 |
| Dec 2025 | $62.34 |
| Oct 2026 | $57 |
Why it matters
It explains why coins with valuable metal disappear, and why governments switch to cheaper materials.
It shows that what people make of money depends on what it is made of and what it can buy, not only on what is printed on it.
It is a reminder of how people treat money they distrust: they spend it first and keep the money they trust.
A common mistake
Myth: Gresham’s law means good money always loses.
In fact: Only when the law forces people to accept both at the same value. Where exchange rates are free, as with dollars in a country with high inflation, the good money often wins: shops start pricing in dollars and the weak currency falls out of use.
Questions people ask
What does “bad money drives out good” mean?
If two kinds of money must be accepted at the same face value but one is worth more as metal, people spend the less valuable one and hoard the other, so only the “bad” money circulates.
Why did the US stop making silver coins?
By the early 1960s the price of silver was rising toward the point where the metal in a coin would be worth more than its face value, and coins were getting scarce. The Coinage Act of 1965 took silver out of dimes and quarters.
How much is a silver quarter worth?
As metal, about $10.31 at the silver price of Oct 2026 ($57.00 an ounce): 41.2 times its face value. Collectors may pay more for rare dates.
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About the numbers
- The numbers on this page are recalculated from the data every night; the sources are listed at the end of the page.
- Copper: World Bank Commodity Price Data (The Pink Sheet), CMO-Historical-Data-Monthly.xlsx, sheet "Monthly Prices", column "Copper"; edition updated 2026-11-03; values through 2025-12 from the January 2026 edition (https://thedocs.worldbank.org/en/doc/18675f1d1639c7a34d463f59263ba0a2-0050012025/related/CMO-Historical-Data-Monthly.xlsx).
- Silver: World Bank Commodity Price Data (The Pink Sheet), CMO-Historical-Data-Monthly.xlsx, sheet "Monthly Prices", column "Silver"; edition updated 2026-11-03; values through 2025-12 from the January 2026 edition (https://thedocs.worldbank.org/en/doc/18675f1d1639c7a34d463f59263ba0a2-0050012025/related/CMO-Historical-Data-Monthly.xlsx).
- Metal values use the World Bank’s monthly average prices, not what a coin dealer pays. A 90% silver quarter (1964 and earlier) holds 0.18084 troy ounces of silver and a dime 0.07234; a 95% copper cent (1982 and earlier) weighs 3.11 grams.
- This page explains a term. It is not investment advice.