This Mises Daily article is excerpted from chapters 4, 5, and 6 of Denationalisation of Money: the Argument Refined, by F.A. Hayek.
It tells some of the history of the world in terms of inflation:
Historians have again and again attempted to justify inflation by claiming that it made possible the great periods of rapid economic progress. They have even produced a series of inflationist theories of history,[2] which have, however, been clearly refuted by the evidence: prices in England and the United States were at the end of the period of their most rapid development almost exactly at the same level as 200 years earlier. But their recurring rediscoverers are usually ignorant of the earlier discussions.
From Marco Polo we learn that, in the 13th century, Chinese law made the rejection of imperial paper money punishable by death, and twenty years in chains or, in some cases death, was the penalty provided for the refusal to accept French assignats. Early English law punished repudiation as lese-majesty. At the time of the American revolution, non-acceptance of Continental notes was treated as an enemy act and sometimes worked a forfeiture of the debt.[3]
Only a few of the great powers preserved for a time tolerable monetary stability, and they brought it also to their colonial empires. But Eastern Europe and South America never knew a prolonged period of monetary stability.
I was struck by the clarification to Gresham’s Law given at the end. Something I’d noticed when I encountered the law in my studies:
It is a misunderstanding of what is called Gresham’s law to believe that the tendency for bad money to drive out good money makes a government monopoly necessary. . . . What Jevons, as so many others, seems to have overlooked, or regarded as irrelevant, is that Gresham’s law will apply only to different kinds of money between which a fixed rate of exchange is enforced by law. . . . Indeed, whenever inflation got really rapid, all sorts of objects of a more stable value, from potatoes to cigarettes and bottles of brandy to eggs and foreign currencies like dollar bills, have come to be increasingly used as money, so that at the end of the great German inflation it was contended that Gresham’s law was false and the opposite true.[20] It is not false, but it applies only if a fixed rate of exchange between the different forms of money is enforced.
To restate Gresham’s Law another way, bad money drives out good, IF IT FORCIBLY KEPT AT THE SAME PRICE.