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Raise Money: In 1862 the U. S. Treasury needed money quickly to finance the Civil War. There were three possibilities: taxation, borrowing, and printing paper money. New tax laws could not be passed and made effective quickly enough to raise money the money that was immediately needed; the second choice, borrowing, would be too costly, because the government's credit was so weak that it would have to pay interest rates of over 10% to bond buyers.
In 1551, while conducting a merchant banking business, he was appointed by Edward VI to manage the crown's foreign debt. At this time the pound was worth 16 shillings; it had brought 32 in 1520 before Henry VIII's successive devaluations. Gresham set out to raise money the value of the pound, and at his suggestion the crown gave a monopoly over foreign trade to the Merchant Adventurers (q.v.). In exchange, the merchants were twice forced to lend the crown a sum in Flemish money to be paid back in English money at a rate set by the crown.
GRESHAM'S LAW, gresh'amz, in economics, is usually stated as "bad money drives out good." The law stems from the fact that money has a value both as money and as a commodity in the open market. The former value is set arbitrarily by law and is relatively fixed; the latter is determined by supply and demand and varies from time to time, "Good money" has a higher value as a commodity than as money and will disappear from circulation.
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