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Debasement


Debasement is the deliberate reduction in the value of a money. For commodity money such as gold or silver coins, debasement is usually achieved via a reduction in the gold or silver content of a coin. For digital or paper money, debasement can be achieved simply by creating more money. Debasement is usually enacted by governments to fund their endeavors at the cost of their citizens.

Debasement is an alternative to direct taxation and is less obvious to most citizens. For these reasons, governments from the Roman Empire to the United States have debased their currency. In 1965, the United States government reduced the silver content of the silver half-dollar from 90% to 40% while legislating that both coins were worth the same amount. In this case and many others, debasement triggered the effects of Gresham’s law.