Gresham's Law

[billwald]

How does the fact that 90% of all "money" is nothing but electronic entries effect the workings of Gresham's Law? Isn't the relative value of $ vs eu nothing but a conversion factor?

For example, no one got upset when American liquor distributers changed from fifths to liters because the conversion factor is fixed. When the world was on a metallic money standard it mattered.

Say on the evening of this Friday the eu was traded at $1.30 and the US govt declared that we would henceforth use the eu as our denomination and ordered all electronic accounts to be divided by 1.30 an renamed eu.

Internally, $cash money would disappear? Dope dealers would have a problem depositing their suitcases of cash?

What would happen to international trading?

 

[Něco hrubého oprýskaného 1]

You mean au?

 

[billwald]

Meant euro.

 

[Něco hrubého oprýskaného 1]

Oh. I tried to participate. Economics. Out of my league.

 

[ThePhoenix]

Well we would be unable to regulate our own economy using various market mechanisms like bond buybacks and selling, and altering the federal reserve rate. By doing this we would create conflict whenever European economic cues interfered with our own. There would also be various problems with supply based on the exchange rate that are very strange.