Hard Money Hyperinflation Roman Empire

Almost two thousand years before the hyperinflation of Weimar Germany in the early 1920s, there was the great depreciation of the currency of the Roman Empire.

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At the turn of the second century, the Roman Empire controlled all of Western Europe, parts of North Africa and the Middle East. Some estimate up to 65-100 million people lived under Roman rule, with 55-65 million as the most accepted range. – about 20% of the world’s population.

Yet 150 years later, the empire was on the verge of collapse. Many factors are at the origin of the “Third century crisis”(AD 235-284) – including factors such as political turmoil, corruption, slowdown in expansion, wars, etc. The most important factor in my opinion was the debasement of Roman currency. The depreciation of the Roman currency eventually led to over-taxation and inflation, which in turn caused a financial crisis.

The gradual debasement of the Roman coin / coin can be followed through the metallic composition of the denarius. The silver denarius was minted for common use during the first two centuries of the Roman Empire. A four gram coin was composed of 95% silver in the approximate time of AD 60. In AD 110, a 40 gram coin was only 85% silver.

In 170 AD, the denarius was 75% silver, and only 60% silver in 211 AD. In AD 270, this was finally reduced to just 5% silver. Soon after, Rome completely abandoned the use of silver in its coins, switching to bronze for minting its coins. Inflation was severe as the value of the currency declined.

In AD 290, new coins such as solidus were introduced in an attempt to stop inflation. The introduction of a “new” currency to stop inflation seems to be a staple of any hyperinflationary event. The same thing happened in Weimar in Germany in the 1920s when the government implemented the rentemark (published November 15, 1923) to stop the papermark hyperinflation. End of 1922 a loaf of bread cost around 160 marks, but at the end of 1923 that same loaf cost 200,000,000,000 marks. Using these historical markers, I find it very interesting to come across a headline that states that central banks are desperately trying to accelerate central bank digital currencies (CBDCs). Like the Rentenmark and Solidus before it, a “new” fiat currency is little more of the same problem, but with a new branding and badge.

The solidus failed to stop the rampant inflation in Rome, leading to the “Edict on maximum pricesThe edict was designed to “cap” the prices of more than 1,000 goods and services. The edict also failed. Similarly in Weimar, Germany, rent controls were put in place in an attempt to stem the upward trend of inflation.By the end of the third century, commodity prices in Rome were now 70 TIMES what they were two centuries before and most of this price increase would have taken place in during the last decade (290 AD).

What started as a regular devaluation quickly turned into a rapid destruction of currency in Rome. You see, the debasement starts slowly at first (it always does). It’s easy to degrade yourself at first. Shave some cash here, add a few more coins there, what’s the matter !? Plus, we’re creating new money (the first silver printers) for the economy and that’s great! Where is it? Problem is, currency depreciation looks a lot like heroin (I wouldn’t know that personally, but stick with me). The first time you use it, it is the most powerful. Thereafter, you constantly try to take more and more to get the same “high”: an economic stimulus by printing new money. You end up overdosing by taking too much. The same goes for currency depreciation; in the end, your currency crumbles.

Source: Pense, AW (1992)

Source: Pense, AW (1992) “The decline and fall of the Roman denarius” Characterization of materials, 29 (2), 213-222

Where this history lesson opens my eyes are the striking similarities between the graph of Roman silver content (graph intentionally inverted to show the amount of the coin that is NOT silver) and the balance sheet of n any central bank in the world these days. For this example, see U, S. Federal Reserve balance sheet below. The similarities in these graphics should be a massive fire alarm in your head shouting “WARNING!” »Although these graphs come from very different time periods and durations, it is the rate of decline (cry to Greg Foss for this term) which is the most astonishing. The rate of decline – or relative purchasing power – for the two charts follows a very similar path.

Source: Pense, AW (1992) “The Decline and Fall of the Roman Denarius” Characterization of Materials, 29 (2), 213-222 (the image was intentionally inverted to show the amount of NON-silver in a coin. Roman denarius.

Source: Pense, AW (1992) “The Decline and Fall of the Roman Denarius” Characterization of Materials, 29 (2), 213-222 (the image was intentionally inverted to show the amount of NON-silver in a coin. Roman denarius.

You see, the problem with currency depreciation is that it’s a hard habit to break down. Worse yet, most don’t even realize it’s bad. It was true in Rome, it was true in Weimar, Germany, and it is still true today. History rhymes. US politicians in power do not see the expansion of the balance sheet as a problem that must be solved. Worse, they don’t see it as a cause of inflation, or that high inflation is bad. Degrading currency is a one-way street. The rock only rolls downhill. Greg Foss Said It Best “I am 100% sure the decrees will continue to degrade…. on an accelerated basis.

They just can’t turn off printers. If they attempt to slow inflation down (usually by raising interest rates and turning off bill printers), within weeks or even days you would see immediate bankruptcies, unemployment, strikes, hunger. , violence and maybe even a revolution in an extreme case. The government and by extension the banks are cornered. This is a carbon copy of the same issues Weimar and Rome also faced. No country / government voluntarily chooses hyperinflation. Frankly, historically this has been the lesser of two evils. It doesn’t make things better (you could frankly say it’s much worse), but it happens less directly than a massive deflationary event.

In reality, the expansion of the balance sheet at an exponential rate is making the problem worse until it can ultimately no longer be ignored. They will continue to print until the effects of inflation are WORSE than the effects of not printing. Complete stop.

You need to protect yourself against inflation by purchasing durable goods. Buy bitcoin, gold, silver and / or real estate. Hard things, rare and difficult to reproduce. Agricultural farmland also historically has a strong correlation with inflation. Even if you are a gold bug or a silver bug, your bitcoin allocation should not be 0%. No one can predict the future with 100% certainty. Therefore, your bitcoin allocation should also not be zero in case you mess up. Finally, find out what is going on; there are a lot of people online who are ready to help and share information freely.

Source: Google.  Data provided by Morningstar for currency and Coinbase for cryptocurrency.

Source: Google. Data provided by Morningstar for currency and Coinbase for cryptocurrency.

This is a guest article by Drew MacMartin. The opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.

David C. Barham