“Bad money drives out good.” if we return to a gold standard without enough gold to back up most of that currency, it will get “exchanged” out of existence fast.
““Bad money drives out good.””
That’s Gresham’s Law, but it has nothing to do with the gold standard. It describes what happens when a government compels two coinage issues of differing quality to be treated as if they are equal. The undervalued coins will be hoarded and the overvalued coins will continue to circulate.
“if we return to a gold standard without enough gold to back up most of that currency, it will get “exchanged” out of existence fast.”
And what do you think “enough gold” amounts to? When Alexander Hamilton made the dollar exchangeable for gold there was very little gold in the Treasury to back up the outstanding currency issue. Instead of the Treasury’s gold stock being “exchanged out of existence” the Continental Dollar was quickly bid up to par with gold. The gold standard doesn’t require every dollar to be backed by a deposit of gold, it does require the ability to exchange dollars for gold at a fixed price upon demand.