Show J BABSON'S r AUTHENTIC 4 STATEMENT W fib Db Special to THE EXPRESS I BABSON DISCUSSES OUR OURI I DOLLARS BABSON PARK MASS MASS- During my travels I have 1 watched for young men who 1 have original ideas and I found one in Scott City Mis- Mis Missouri Missouri His name is Edison E Shrum who wrote for me most of the following based on Gresham's Law Mr Shrum is Secretary of the Magic Circle Educational Foundation What Is Gresham's Law One of the oldest and most generally accepted accepted monetary theories is known as Gresh ams am's Law This is the prin- prin principle principle ciple that bad money tends to drive out good money This means people tend to hoard the tho good money money- that is the money they have confidence ce and in-and tend to pass on the bad money The term bad money refers to money which is less ess valuable than the called so-called good I money CUpping Clipping The Coin The remarkable validity of this law is demonstrated in inthe inthe the extremely interesting ex ample of what happened to England's money in the per per- period tod iod from 1663 to 1700 Prior to that time English coins were of the hammered var var- variety without milled edges This made it easy for the edges of these coins to be of- of often of ten ground off Thus In time most of the coins became less valuable Around 1663 new weight coIns were minted with milled or inscribed edg edg- edges es These coins began disappearing into hoards By 1690 this had reached a critical point Then a group including Sir Isaac Newton who w was s sI then warden of the mint con con- convinced I vinced the government that it should call in the defaced coins They were then melted down and at full weight with milled edges and 1 outline inscriptions Then the goad tood money came out of hIdIng I The American Experience Here in the United States i we too experienced the pain pain- painful ful workings of Gresham's Law during th the Revolution Revolution- Revolutionary ary ary War period In 1797 1818 and from 1837 to 1842 At the time of the discovery of gold goldin goldin in California the workings of Gresham's Law was also evi evi- evident dent when the increase of gold was so rapid that its value declined to the tint where silver was driven out of circulation and hoarded Then came the experience with the Civil War grec green green- greenbacks backs in March of 1862 1362 These products of the printing press were not backed by either gold or silver reserves Hence people took to hoarding gold and silver coins Other Crises In 1890 the Silver Pur- Pur Purchase Purchase chase Act caused gold to flow out of this country This precipitated n a rush to hoard money culminating in a I crisis in the New York money market in 1892 when the cashing of checks to obtain gold for export reached serf serio ous proportions Due to this reduction of gold in the feder federal al treasury the nations nation's gold reserve fell too low and we had a depression which lasted for about five years Another example was the great crash of the 33 per per- period period iod when people distrust distrusted d bank deposits and began hoarding cash and la r shift shift- shifted shifted ed to hoarding gold god This so depleted the gold reserves of our banking system that the ensuing bank crisis resulted in the moratorium when near near- nearly ly every bank in the United States closed for about two weeks Gresham's Law a Threat Again Today Gresham's Law has been neither repealed nor nullified In view of our much ed loss of gold the growing shortage of coins and the im pending replacement of the Silver Certificates the re- re remaining re- re currency bearing a full reserve of the metal there is again the real danger of bad money driving out the good money It If we do surfer suffer any adverse affects from Gresham's Law this time the trouble is likely to stem from overextension of credit This huge structure of debt which we have built is becoming harder and harder to handle Unless managed properly it could cause un- un untold untold told hardship to the economy The use of credit is an easy street but it must be tray trav- clod within the speed limits if ifa ifa a tragic crack up is to be avoided |