In an effort to thwart these large military spendings, both Rome and America have turned to a similar route of action: devaluing the currency.
An easy place
to start is by simply taking a look at the mental outlook of the leaders of
Rome at the end of the second century A.D. Many
Roman historians speak of this era as "The Crisis of the Third
Century", for the reason that the problems in Rome at this
time were so severe that Roman society came out very different than it had
looked previously. [1]
To get an inside look at the mental outlook of the Roman emperors during this
era, we can take a look at the advice that the emperor Severus gave to his sons upon his
death bed. His last words to his heirs are said to be, "Live in
harmony with each other, enrich the troops, ignore everyone else."[2]
[1] Pat Southern, “Third Century Crisis of
the Roman Empire,” BBC, last modified
February, 17, 2011,
http://www.bbc.co.uk/history/ancient/romans/thirdcenturycrisis_article_01.shtml
[2] Patrick Hurley, “Septimius Severus,” Ancient, last modified April 11, 2011, http://www.ancient.eu.com/Septimius_Severus/.
Unfortunately, Severus' son Caracalla soon took the throne solely by murdering his brother. He is, however, said to
have stayed true to his father's request of enriching the troops, saying, "I am one of you and it is because of you alone that
I care to live, in order that I may confer upon you many favors; for all the
treasuries are yours."[3] Caracalla
proved to be as good as his word, raising
their pay by 50% while at the same time doubling the taxes payed by Roman
citizens.[4]
When this method was no longer satisfactory in serving his needs, he began to
debase the coinage. The fundamental coinage system in the Roman Empire up
to this point was the denarius launched by Augustus at approximately 95% silver.[5]
The other system of coinage was the gold-based Aureus, which equalled
twenty-five denarii at Rome's height. [6]
The denarius
continued as the fundamental means of exchange for nearly two centuries. For
many years this worked fantastically, and Rome flourished. But as the glory and
plunder of conquest faded and the price of the empire grew by the costliness of
war and overspending, it wasn't long before the purity of the coinage reached
an all-time low and inflation peaked. By Trajen's rule in 117 A.D, the denarius consisted of
approximately 85% silver. By Severus it had fallen to 60% silver and Caracalla
lessened it still to 50%. [7]
[3] Patrick Hurley, “Life of Caracalla,” Ancient, last modified on June 19, 2011,
http://www.ancient.eu.com/article/237/.
[4] Ibid.
[5] “Roman Currency of the Principate,” Tulane, accessed on November 14, 2012, http://www.tulane.edu/~august/handouts/601cprin.htm.
[6] Ibid.
[7] Marion Butler, “When Gold is King,” Gold-Eagle, last modified February 15,
2002, http://www.gold-eagle.com/editorials_02/mbutler021502.html.
Caracalla went
further by debasing the gold coinage as well.[8]
During Augustus' reign, the gold coinage circulated at a rate of approximately
45 coins to a pound of gold.[9]
Caracalla upped this standard to approximately 50 to a pound of gold, and this
only proved to heighten with each ruler after him, reaching the high of 70 to a
pound in Constantine's time. [10]
There were
also other problems. As the Empire changed to a defensive policy in the second
century, it could no longer depend on the continual income that came with newly
seized territory which it had so greatly relied on during it's glory years.[11]
This eventually showed its wear on the empire by means of the inability of
taxation to any longer pay for the Empire's enormous spending.[12]
With no new findings of precious metals to make new coinage, the Roman emperors
were in a sticky situation and needed to find a way to neatly fix the problem.[13]
The only option they had, in large part, was to debase the coinage.[14]
The real critical point in Roman history, however, occurred after Caracalla in
a period of civil war and invasion by foreigners.[15]
At this point the emperors of Rome forsook a silver coinage entirely.[16]
By 268 the only one's being paid in gold were the barbarian troops and the
denarius had been lowered to an appalling 0.5% in silver, containing one part
silver for every twenty parts copper by the late third century.[17] The
situation began to change with Diocletian,
who raised the weight of the gold coinage to 60 to a pound of gold.[18] He also made major reforms in the silver coinage by
introducing the Argentius at 96 to a pound of silver. The Argentius equalled
fifty of the former denarii and was issued along with the bronze Numis, which
approximated at 10 to a denarii.[19]
[11] Reinert, Sophus A. 2010.
"Lessons on the Rise and Fall of Great Powers: Conquest, Commerce, and Decline
in Enlightenment Italy." American Historical Review 115, no. 5: 1395-1425.
Academic Search Complete, EBSCOhost (accessed November 16, 2012)
[12] Ibid.
[13]
Ibid.
[14]
Ibid.
[15] Marion
Butler, “When Gold is King,” Gold-Eagle, last
modified February 15, 2002, http://www.gold-eagle.com/editorials_02/mbutler021502.html.
[16]
Ibid.
[17]
Ibid.
[18] Ralph W. Mathisen, “Diocletian,” Roman-Emperors, accessed November 13th,
2012, http://www.roman-emperors.org/dioclet.htm.
[19] “Diocletian Reforms the Money System and
the Coinage,” Jays Roman History, accessed
November 10th, 2012, http://jaysromanhistory.com/romeweb/laterome/art7.htm.
Regardless of
all of Diocletian's reforms, however, the inflation in Rome rose by 100%.[20] Less
than a decade later the Numis had been decreased to 20 to a denarii and the
Argentis had dropped to a staggering 100 to a denarii.[21]
Although Diocletian had worked hard to incorporate a stable monetary system,
his reforms had only begun after an Aureus was worth 833 Denarii. Inflation and
hyperinflation were soon to follow, the ratio soon being 4,350:1 twenty years
from Diocletian and approximately 275,000 silver units worth one gold unit.[22] Inevitably,
this inflation hit the poor and the middle class the hardest.[23]
The Roman financial system, at one point a superpower of great envy, had begun to
decay under the hand of a series of emperors and bureaucrats who spent
extravagantly.[24]
Is this beginning to strike a chord of familiarity with you?
[20]
Ibid.
[21] Roman Currency of the Principate, Tulane,
accessed November 12th,
2012, http://www.tulane.edu/~august/handouts/601cprin.htm.
[22]
Ibid.
[23] Bruce Barlett, “How Excessive Government
Killed Ancient Rome,” Cato, last
modified September 7th, 1994, http://www.cato.org/pubs/journal/cjv14n2-7.html.
[24] Ibid.
One of the
most interesting things about the inflation in Rome was that while the Roman
state survived, the inflation served to destroy a different aspect of Rome;
namely the economic freedom of the Roman people.[25]
Up to this point, except for in emergencies usually related in some way to war,
the Roman government had followed a policy of free trade and minimal
restriction on economic activity towards its citizens, much like America.[26]
Now, however, under this rising pressure of inflation and need to pay the
troops, the freedom of the citizens began to seriously erode. [27]
Fast-forward
to 2012, the United States of America is facing one of the largest economic
crisis' since the Great Depression of the 1930's.[28]
Inevitably, politicians have turned to spouting off intense lines about the
need for someone to resolve this issue of America's economy. They blame various
sources for this dramatic upheaval, chief among them being the free market and
various forms of greed among citizens.[29]
Nevertheless, after such a plummeting amount of evidence from ancient history,
would it not be wise for America to look in the review mirror? This country,
too, has spent well beyond its means for an increased period of time. Rather
than listening to politicians rant and rave about free markets and the issues
of trade, should we perhaps be looking instead into the review mirror of time? Or how about looking at examples such as those laid out for us by the great Roman Empire of old and the
ability of great expenditures to overwhelm the sum of the revenue coming into a
government; regardless of that government’s greatness?
[25] Ibid.
[26] Naphatali Lewis and Meyer Reinhold, Roman Civilization, vol. 1, Selected Readings: The Republic and the Augustan Age, 3rd ed. (New York: Columbia University Press, 1990), 159-160
[27] Ibid.
[28] Peter Ferarra, “The Worst Economic Recovery Since The Great Depression,” Spectator, last modified March, 14, 2012, http://spectator.org/archives/2012/03/14/the-worst-economic-recovery-si.
[29] Ibid.
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