Gresham’s Law: From the Royal Mint to the Blockchain

In the late 17th century, Sir Isaac Newton was the Master of the Royal Mint. He was arguably the smartest man on earth, yet he spent years losing a battle against a simple economic principle: Gresham’s Law.

For a value investor, the story of Newton’s coins isn’t just a history lesson; it is a psychological map of how markets behave when the “currency” of investing becomes debased.

I. The Newton Paradox: When Logic Fails

Newton’s job was to fix England’s currency. At the time, both gold and silver circulated. Newton set an “official exchange rate” between them, but he set the price of gold too high relative to silver.

The market reacted instantly. People hoarded the silver (the “Good Money”) and spent the gold (the “Bad Money”). Despite Newton’s immense intellect, he couldn’t force people to spend their silver. It vanished from the economy into private vaults.

The BargainVest Lesson: In any market whether 1690s London or 2026s Wall Street if the “Mint” (the Market) misprices quality, that quality will go into hiding.

II. The Category Error: Bitcoin vs. Gold (Not the Dollar)

To the Graham/Buffett student, comparing Bitcoin to the Dollar is a category error. The Dollar is “Transactional Oil” it is designed to be spent, debased by inflation, and kept in motion. In Gresham’s terms, the Dollar is the “Bad Money” that must circulate to keep the global machine moving.

The real “Gresham” event is happening in the Savings category. Bitcoin isn’t competing with your checking account; it is competing with the Gold in your vault.

1. The Battle for the “Vault”

If you have capital you want to protect for 30 years, you are looking for a “Store of Value” (SoV). Both Gold and Bitcoin share the same “Good Money” DNA:

Gold: 5,000 years of “Lindy Effect” (proven survival) and a “melt value” in industry and jewelry.
Bitcoin: Digital portability, infinite divisibility, and a mathematically fixed “weight” (the 21 million supply cap).

Under Gresham’s Law, if investors perceive “Digital Gold” to be purer or more portable than physical gold, they will hoard the Bitcoin (HODL) and spend or sell the gold. They are both fighting for the same “shelf space” in the investor’s mind.

2. The Graham/Buffett Assay: The “Melt Value” Test

This is where the BargainVest philosophy adds a layer of sophistication. While the market debates which “static” asset is better, the value investor asks: “Does it produce?”

A Silver Coin has a “melt value”—it can be used in industry.
A Quality Company has a “melt value”—the annual cash flow it produces.
Bitcoin and Gold have no “melt value” in the productive sense.

Buffett famously noted that if you buy an ounce of gold today, in 100 years you will still have exactly one ounce of gold. It will not have “delivered” anything to you. It is a passive hoard.

III. The “Stock Market Mint”: How Value Vanishes

The most dangerous form of Gresham’s Law occurs within the S&P 500 itself. During a bull market, the “Market Mint” begins to debase the standards of what a “good” company looks like.

Clipped Coins: Management “clips” the earnings by using aggressive accounting or excessive stock-based compensation (SBC).
Copper Plating: Companies with no moat are given “Growth” labels to make them look like shiny silver.

When this happens, you will notice that high-quality, boring companies (the “Pure Silver”) seem to disappear. Their prices stagnate. They aren’t in the headlines. They have been “driven out” of the active conversation by high-velocity junk.

IV. The “Superior Money”: Productive Scarcity

Gresham’s Law explains why people flee the Dollar. The Bitcoin/Gold debate is a fight over which “Static Vault” is the safest hiding spot. But the Intelligent Investor seeks a third path.

We don’t just want an asset that someone won’t spend; we want an asset that reproduces while it sits in the vault.

Asset Type	Example	Gresham Role	Investor’s Outlook
Medium of Exchange	USD / Fiat	“Bad Money”	Spend it or invest it before it loses “weight.”
Store of Value	Gold / BTC	“Good Money”	Hoard it to protect against debasement.
Productive Capital	Quality Equity	“Superior Money”	Own it because it creates more value every year.

Conclusion: Trust the Silver, Own the Farm

The lesson of the Royal Mint is that “Bad Money” will always exist. You are right to want to exit the “Copper” of a debasing currency. However, don’t just settle for the “Silver” of a static token.

As a value investor, your goal is to find the Philosopher’s Stone: a business that takes the “Bad Money” of the economy and transforms it into “Superior Money” (Earnings) through the power of compounding.

“Don’t just look for a vault to hide your wealth; look for a farm that will feed you while the world is busy debating the price of the vault.”