Editing Gresham's law (section)

== "Good money" and "bad money" ==
Under Gresham's law, "good money" is money that shows little difference between its nominal value (the face value of the coin) and its [[commodity value]] (the value of the metal of which it is made, often [[precious metal]]s, such as [[gold]] or [[silver]]).<ref name=":0">{{Cite web |last=Wooldridge |first=Leslie Quander |title=Fiat money: Currencies that derive their value largely through trust in the governments that issue them |url=https://www.businessinsider.com/personal-finance/fiat-money |access-date=2023-10-05 |website=Business Insider |language=en-US}}</ref>

The [[price spread]] between [[face value]] and commodity value when it is minted is called [[seigniorage]]. As some coins do not circulate, remaining in the possession of [[coin collectors]], this can increase demand for coinage.

On the other hand, "bad money" is money that has a commodity value considerably lower than its face value and is in circulation along with good money, where both forms are required to be accepted at equal value as legal tender.

In Gresham's day, bad money included any [[coin]] that had been debased. [[Debasement]] was often done by the issuing body, where less than the officially specified amount of precious metal was contained in an issue of coinage, usually by [[alloy]]ing it with a [[base metal]]. The public could also debase coins, usually by [[Coin clipping|clipping]] or scraping off small portions of the precious metal, also known as "stemming" ([[Reeding#Numismatics|reeded edges]] on coins were intended to make clipping evident). Other examples of bad money include [[counterfeit]] coins made from base metal. Today virtually all circulating coins are made from base metals, often the cheapest available, durable base metal; collectively these monies are known as [[fiat money]]. While virtually all contemporary coinage is composed solely of base metals, there have been periods during the 21st century in which the market value of some base metals, like copper, have been high enough that at least one common coin (the U.S. [[Nickel (United States coin)|nickel]]) still maintained "good money" status.<ref name=":0" />

In the case of clipped, scraped, or counterfeit coins, the commodity value was reduced by fraud.  The face value remains at the previous higher level. On the other hand, with a coinage debased by a government issuer, the commodity value of the coinage was often reduced quite openly, while the face value of the debased coins was held at the higher level by legal tender laws.

The old saying, "a bad penny always turns up" is a colloquial recognition of Gresham's law.