Gresham's Law and Immaterial Commodities

story  Michael Betancourt, March 8, 2011 all rights reserved.


Here is an interesting development about the US mint (from Zero Hedge).

This sounds a lot like Gresham's Law in operation: a so-called "flight to quality."

Perhaps we should rethink this idea: maybe it is possible to expand the underlying concept of Gresham's law to include more than just physical currency. There are a number of people who have basically decided that to preserve their wealth, they need to divest themselves of paper currency, securities, and other virtual goods (such as stocks, bonds and immaterial commodities) to convert their currency into physical commodities such as gold, silver and platinum. The result is shortages of those commodities as well as enormous demand at places such as the US Mint.

What appears to be happening is a shift from immaterial, financial instruments to other, tangible commodities. For an economic structure that has shifted from physical values to immaterial ones the drain of circulating value into these physical commodities that are then withdrawn poses some interesting questions about what will happen once they stop being available: the potential for a scarcity-induced panic that creates a large scale cascade of financial failures.

The idea that this could be a prelude to a replay of the crisis in 2008/2009 seems likely. The problem is not so much the debt in the US as the lack of physical production, (since debts that cannot be repaid will not be). The shift to immaterial production only lasts so long as the system of immaterial values that support that semiotic process continue to operate.

Copyright © Michael Betancourt  March 8, 2011  all rights reserved.

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