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A History of Money, Part 2

By Edited Sep 15, 2015 0 0

During the invasion of Britain, Julius Caesar noted that the Britons were still using metal sword blades as a form of money, although many Celtic tribes had begun to mint coins. The Romans themselves had actually been somewhat late to adopt coinage, considering the length of time coins had been circulating in surrounding territories, but by around 250 BC the Romans were minting coins regularly. The problem of inflation became apparent during the second Punic War between Rome and Carthage, when the war created a huge demand for more money to pay troops, and Roman leadership decided to debase the currency.

The problems caused by government's meddling with the currencies eventually led to the reformation of the currency during the reign of Augustus Caesar, who had new coins with higher precious metal content minted. But during the reign of the Emperor Nero, the currency was debased once again. Although the debasement was slight, the process begun a process of prolonged inflation that would continue under subsequent Emperors. By 250 AD the silver content in Roman coins had dropped to 40%, increasing the rate of inflation, and by 270 AD the Roman coins contained only 4% real silver.

Aurelian used gold from his eastern military campaigns to mint new coins with higher metal content. However, he also gave an edict that more than doubled the nominal value of the coins, an act which drastically increased inflation. A rebellion by mint workers broke out, and was only suppressed after the rebels slew 7,000 of Aurelian's soldiers. Diocletian later attempted to bring inflation under control in various ways, including reforming the currency. However, Gresham's law once again went into effect and the citizenry hoarded the coins with higher metal content, leaving the low-value coins in circulation. 

The process of Roman hyperinflation would have looked very familiar to many modern observers: First the government began spending excessively to finance military activity and public projects, and raised taxes to cover the excessive spending. The higher taxes penalized and reduced economic activity, which reduced the tax base, prompting the government to debase the currency in order to create more money. The government increased the number of coins in circulation so drastically that at one point the silver content of Roman coins dropped to 0.002% of its original level. This caused a corresponding increase in prices.  

Although the Empire was responsible for the increasing prices and debased currency, they attempted to subdue the unrestful public by blaming inflation on the greed of business owners and merchants. Diocletian issued an "Edict of Prices" in an attempt to mandate prices and wages, declaring that anyone selling above the government control price would be put to death. Merchants stopped selling goods and kept them in reserve, prompting the government to outlaw hoarding as well. Then, when merchants attempted to go out of business, Diocletian declared that any man leaving the occupation of his father would be put to death. After the eventual failure of all these draconian edicts, Diocletian voluntarily abdicated in 305 AD. 

Constantine began his reign in 306 AD, declaring Christianity the official faith of Rome, and confiscated huge quantities of bullion from pagan temples throughout the Empire. However, he didn't use the bullion to issue a sound currency, but instead continued producing debased silver and copper coins, afflicting the poor with higher inflation. The Roman currency, the denarius, became so debauched that it eventually resulted in hyperinflation. The denarius collapsed completely in Egypt, where a pound of gold was worth more than 2,000,000,000 denarii by the time of collapse.

Constantine eventually reissued a coin called the Solidus, the gold content of which remained unchanged for seven hundred years. The Solidus was such an enduring currency that it had a lasting impact on the language of many of the areas in which it circulated. The Italian soldi was derived from the Latin solidus and is equivalent to the English "money," and in both France and Romania the words for an account or invoice are directly derived from solidus.

This history of money will continue in Part III beginning with the collapse of the Roman Empire, and then following the gradual redevelopment of the use of coinage in England up until the reign of William the Conqueror.



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