Gresham, Sir Thomas

Sir Thomas (1519-1579), a London merchant. He was the founder of the Royal Exchange and of Gresham College, London. His father was a merchant, prominent in the reign of Henry VIII both as lord mayor of London and as a financier. Gresham succeeded his father both as a merchant and a banker. In the reign of Queen Elizabeth he rendered the government signal service. He is mentioned chiefly, however, as the author of Gresham's Law. Briefly stated, it is this: "Cheap money drives good money out of circulation." One naturally pays out a mutilated coin and keeps a good one. Then, too, when gold and silver coins are in circulation, if either dollar becomes worth more than the other, the dollar of greater value is hoarded and goes out of circulation. The point is that if cheap money will buy as much and pay debts as far as more expensive money, people will pay out cheap money and keep dear money. Even if the people are not shrewd enough always to do so, the banks garner the better money with industry into their vaults. During our Civil War, when paper money was worth less than gold, the latter was seldom to be seen, except in the vault of a bank, or in private hands where it was hoarded as a curiosity. Everyone paid his obligations in paper money because it was cheaper to do so.