Debasement

Debasement refers to intentionally lowering the value of a currency. In the case of metal coins like gold or silver, this is typically done by reducing the amount of precious metal in each coin. With paper or digital money, debasement happens when governments increase the money supply. The main motive is often to raise funds without directly taxing citizens.

Unlike taxes, debasement can go unnoticed by the general public, making it a common tactic throughout history. For example, in 1965 the U.S. government decreased the silver content of the half-dollar coin from 90% to 40%, yet both coins remained legally equal in value. Such changes often lead to the behaviors described by Gresham’s law, where “bad” money drives out “good.”