[gralx]

Holy crap I had no idea this was Galbraith's insight. I've heard William K. Black talk about Gresham's dynamics a few times, but always wondered why his use of the term didn't comport with Wikipedia's article on it. It's because he's using it in Galbraith's sense. I'll be checking out the book for sure. Thank you.

[dredmorbius]

Do read the book, it's excellent. I'd finally done so myself only after the 2007-8 meltdown and found it hugely useful.

The passage I reference is toward the end of Chapter VI:

Never was there a time when more people wanted more money more urgently than in those days. The word that a man had "got caught" by the market was the signal for his creditors to descend on him like locusts. Many who were having trouble meeting their margin calls wanted to sell some stocks so they could hold the rest and thus salvage something from their misfortunes. But such people now found that their investment trust securities could not be sold for any appreciable sum and perhaps not at all. They were forced, as a result, to realize on their good securityies. Standard stocks like Steel, General Motors, Tel and Tel, were thus dumped on the market in abnormal volume, with the effect on prices that had already been fully revealed. The great investment trust boom had ended in a unique manifestation of Gresham's Law in which the bad stock were driving out the good.

-- John Kenneth Galbraith, The Great Crash: 1929, chapter VI

NB: In re-typing the above passage, I managed to render "hold" as "hodl". I've fixed that, but note the fact here...