|'Bad money drives out good'|
Before paper money became universally accepted as a means for settling debts precious metals were the most common forms of money. Gold and silver coins were struck bearing a face value equivalevt to the value of their metal content. Debasement of the coinage occurred when the face value as kept above the value of the metal content of the coinage. The holders of the correctly valued coinage became unwilling to exchange for the debased coinage because they would obtain less metal in exchange than if they bought direct. The result was that the 'good', undebased coinage did not circulate. The process is referred to as Gresham's law.
|Reference: The Penguin Business Dictionary, 3rd edt.|