Bad money drives out good

Let’s start with what ‘bad’ money and ‘good’ money are.

Coins used to derive their value from the value of the precious metal, gold or silver, that they were made from. A good coin was one that was freshly minted.

However, good money could be turned into bad money…

Unscrupulous people were in the habit of clipping small pieces from the edges of coins and selling the gold/silver obtained. A pound coin was still called a pound coin, with the value of a pound, if it was missing some of its edge. Continual clipping reduced the size of the coin until a point it was called ‘bad’ money.

Nevertheless the coin was still worth a pound. Anyone in possession of a newly minted good silver coin was tempted to steal some of the silver from the edge. After all, they would then have a pound coin and some silver.

So, the existence of ‘bad’ money caused all the ‘good’ money to disappear. Hence, ‘bad money drives out good’.

Bad money could also be made by adulterating the precious metal it was minted from.

In Tudor England, Henry VIII devised a scheme to boost the royal coffers. He decreed that the silver coinage should be made, not of pure silver as before, but of silver mixed with 40% base metal.

This soon caused the previous ‘good’ coins to disappear as they were then worth more than the value of the debased coins.

This ‘bad money driving out good’ was explained in a letter to to Henry’s daughter Elizabeth I from her courtier Sir Thomas Gresham (1519–79).

The actual phrase ‘bad money drives out good’ wasn’t used by Gresham. He explained the principle without using the proverb. The first time it was put into print was in the 1902 New English Dictionary:

Gresham’s law, the principle, involved in Sir Thomas Gresham’s letter to Q. Elizabeth in 1558, that ‘bad money drives out good’.

See also: the List of Proverbs.