An excerpt from the book, What Has Government Done to Our Money?, by the great Austrian Economist Murray Rothbard (1926-1995).
“Government imposes price controls largely in order to divert public attention from governmental inflation to the alleged evils of the free market. As we have seen, ‘Gresham’s Law’–that an artificially overvalued money tends to drive an artificially undervalued money out of circulation–is an example of the general consequences of price control. Government places, in effect, a maximum price on one type of money in terms of the other.”
Me: Think of how, when the our government began debasing silver quarters in the 1960s, all the true silver quarters disappeared almost instantly.
“. . . With the name of the country’s currency now prominent in accounting instead its actual weight, contracts began to pledge payment in certain amounts of ‘money.’ Legal tender laws dictated what that ‘money’ could be. When only the original gold or silver was designated ‘legal tender,’ people considered it harmless, but they should have realized that a dangerous precedent had been set for government control of money. If the government sticks to the original money, its legal tender law is superfluous and unnecessary. On the other hand, the government may declare as legal tender a lower-quality currency side-by-side with the original. Thus, the government may decree worn coins as good as new ones in paying off debt, of silver and gold equivalent to each other in the fixed ratio.The legal tender laws then bring Gresham’s Law into being. . . .
Governmental control of money could only become absolute, and its counterfeiting unchallenged, as money-substitutes came into prominence in recent centuries. The advent of paper money and bank deposits, an economic boon when backed fully by gold or silver, provided the open sesame for government’s road to power over money, and thereby over the entire economic system.” (Read more from Mises.org)