Gresham's law

n.
The theory holding that if two kinds of money in circulation have the same denominational value but different intrinsic values, the money with higher intrinsic value will be hoarded and eventually driven out of circulation by the money with lesser intrinsic value.

[After Sir Thomas GRESHAM.]

(GRESH-ums law)

noun
The theory that bad money drives good money out of circulation.

Etymology
Coined by economist Henry Dunning Macleod in 1858 after Sir Thomas Gresham (1519-1579), financier and founder of the Royal Exchange in London. Gresham, a financial adviser to Queen Elizabeth I, wrote to her "good and bad coin cannot circulate together."]
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Gresham's law says that when both are required to be accepted as legal tender, inferior money remains in circulation while the good money tends to be hoarded or exported.
Examples of bad money could be counterfeit notes, coins that have their edges scraped off to siphon precious metal, or two legal tenders where one is intrinsically superior (e.g. a gold coin vs. a paper note of the same face value). In general, the law applies to situations outside the financial world as well: for example, bad politicians drive out good ones.

Usage
"But the main blame for the debasement lies with the Tories, who have conclusively confirmed that there is a Gresham's law of politics: the most squalid party drags the others down towards its level." — Roy Hattersley; Exploitation Dressed Up As Compassion; The Guardian (London, UK); May 2, 2005.

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For more information on Gresham's law, visit Britannica.com.

Theory in economics that bad money drives out good money. Specifically, people faced with a choice of two currencies of the same nominal value, one of which is preferable to the other because of metal content or because it resists mutilation, will hoard the good money and spend the bad money, thereby driving the good money out of circulation. The observation is named for Sir Thomas Gresham, master of the mint in the reign of Queen Elizabeth I.

(gresh-uhmz)

An economic principle proposed by an English financier, Sir Thomas Gresham, that bad money will drive good money out of circulation. For example, if the U.S. government minted silver dollars and then, at a later date, began to mint dollar coins out of cheaper metals, the public would hoard the silver dollars (possibly for later sale at higher prices) rather than use them as a medium of exchange: silver dollars would stop circulating.