regarding the recoinage of the
debased money of the realm as was done in 1560. He showed that when
old, worn coins were in circulation and the mint began putting out
full-weight coins, the old lighter ones remained as money, while the
new ones, being heavier, were picked out by jewelers and by those
needing to send money abroad.

Gresham's law has a paradoxical wording and is frequently
misunderstood. "Bad" money means not counterfeit money, but merely
money that has not as great a bullion value compared with its money
value as some other kind of money then in circulation. But not every
piece of such money will drive out every piece of good money. The law
applies only under certain conditions, and within certain limitations.
The "good" will be driven out only if the total amount of money in
circulation is in excess of what would be needed if all were of full
weight and of best quality. Paradoxically speaking, if there is not
too much of the bad money, it is just as good as the good money. But
even if good money is driven out, it may not leave the country. It
may be hoarded, or be picked out by banks and savings-institutions to
retain as their reserves, or be melted for use in the arts. Gresham's
"law" becomes thus a practical precept. As applied to the plan of
recoinage it is: Withdraw the worn coins as rapidly (in equal numbers)
as you put new coins into circulation.

The continued circulation of "bad" money along side of "good" money
(light-weight along side of full-weight coins), so long as the total
number of coins is not in excess of the money demand for full-weight
coins, is explained thus on just the same principle as is the
circulation at parity of a light-weight fractional coinage, in the
preceding section.

Sec. 6. #A general seigniorage charge on standard money.# The fiduciary
coinage problem presents itself under a some-what different guise in
case a seigniorage charge is made on all coinage, even of that metal
used as the standard unit. In this case coinage is free but not
gratuitous. In this case no bullion is brought to the mint unless the
coined pieces the owners receive have a value equal to the bullion
value plus the seigniorage charge. The power to impose a seigniorage
charge is a monopoly power. Artificial limitation is present.
Evidently, the number of coins that can be issued without depreciation
is limited to that number which would circulate if they were made
full weight without a seigniorage