Opinion
Is Tether the Coppernose of Our Time?
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By Kim Schoenholtz and Stephen Cecchetti
As seen in: Financial Times
In 1544, Henry VIII began debasing England’s silver coinage to fund his wars. The new coins were mostly copper beneath a thin silver wash. With use, the silver wore off the raised areas — most notably the king’s nose, earning him the nickname Old Coppernose.
Henry’s subjects responded as people usually do to the debasement of their means of payment. They hoarded the older silver coins and paid with the coppernoses. Bad money drove out good — a pattern economists now call Gresham’s Law.
A modified version of that pattern is now playing out among stablecoins — privately issued digital tokens that promise to maintain a fixed value, typically one US dollar.
Read the full Financial Times article.
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Kim Schoenholtz is Clinical Professor Emeritus at NYU Stern.