Thinking about bad money expelling good money

Recently, I have been reading Zhang Wuchang's blog and books . I see his theory that bad money drives out good money is a fallacy . I remember when I saw this theory , The first reaction was that the world was wonderful , There is such a phenomenon . But when I look back, I think something is wrong , But I didn't think deeply , With a belief in authority , Just believe it . Actually, I forgot , Because I never thought of using this theory to think about problems in life . But I have thought about it these two days , Get some ideas . Make a note here , Of course there is something wrong , But I still want to write .

There is a theory that bad money drives out good money , Of course, such a fact happened in those years . In the days when gold and silver were still used for coinage . Because there is not enough gold or silver , But I have to make coins , What do I do ？ Of course the publisher has to add some other metal . But contrast   Gold and silver coins cast before , The gold and silver content of the new coin is less , Of course, its value as a precious metal has also decreased . So people see old coins , Just hide , See is new money to spend . Last , Old money is no longer in circulation , The new currency is very popular . Another version is , There was no pattern on the edge of the gold coin before , So some people use bad ideas , Take a little gold powder off the edge of the gold coin . Of course, these gold coins are relatively small . So people use small ones for circulation , And the complete ones are collected . It seems that bad money expels good money , But in fact, there are many results under constraints , In the era of paper money , This situation is difficult to replicate . I try to analyze the conditions ：

1、 Pay bad money , The point is that the recipient must be willing to admit it before it can be established . It is impossible for a person to become a fool when he receives money , Good or bad . Why do the people who receive the money admit it ？ That's because the government is willing to admit . A gold coin or banknote , As long as it meets the requirements of the government or the issuer （ Damage degree and so on ）, Can be recognized as its nominal value , Of course, the person who collects the money is willing to .

2、 When good and bad coexist , There should be different prices for good and bad products immediately . Normally , Good money can buy more things . But let Liang coin fully reflect its purchasing power , Get a reasonable price , Different times have different computing costs （ Bargain , A lot of market knowledge , Weigh , The social resources to be spent on a series of behaviors such as judging sex ）. If the cost is too high , Both buyers and sellers tend to be reluctant to trade with good money , They prefer to use inferior money to save trouble . In this way, good money will be transferred to a place where it is easier to convert into reasonable purchasing power .（ I believe that the so-called collection should only be the behavior of a small number of people , Most people still try to make it cost less .）

3、 The bad currency and the good currency mentioned here are the currencies of the same country or region , Not that one of them is foreign exchange . Further said that , That's what we're talking about “ Two kinds of ” Coins are just different states of the same currency . That is to say, whether old or new, good or bad , Its purchasing power in the market as a currency itself is the same . such as 100 A gold, silver, or paper currency of a piece , If even the sender thinks it's not worth it 100 block , Then how can it expel good money ？ It can only be devalued , Or recast .（ Just ask a half sheet 100 Block RMB , You should think of it as 100 Will you take it ？ There are few such fools ？） If the denominations of the two currencies are different , Because purchasing power is different , So it is very likely that there will be two prices when buying and selling , In this way, both kinds of coins will circulate normally . As long as the buyer thinks the price is reasonable , It can reflect the real purchasing power of good money , Who can collect good coins ？（ If there is an expectation of appreciation and the collection , That's because buyers don't think the current price can reflect their future purchasing power .）

With the above conditions , Bad money drives out good money , But when these conditions are met , This theory has no practical significance . as , Everyone wants to spend the old RMB as soon as possible , And the new one wants to stay . Coins are also given priority as inferior coins . But what is the actual economic impact of this ？

There is another counterexample , It may not be appropriate . In recent years, one dollar notes have become popular , But the coins are less and less . That's because there are too many counterfeit coins . In this way , Of course, coins are inferior , It was driven out by the good money of paper money . This is because the first condition I mentioned is not met . In fact, the counterexample is really handy , And the supporting examples come and go . My own knowledge is limited , I dare not say this is a fallacy , But it's really hard to achieve this effect , It feels like the earth produces life , Time, place and people are the same .