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Today we revert back to our Visibilium Omnium, et Invisibilium theme. Just as a quick recap, the underlying assumption behind this theme is as follows:
God’s creation is comprised of the visibilium omnium, et invisibilium, i.e. all that is seen and unseen. Going one step forward, in the “unseen” bit are all the laws that govern the “seen” bit.
The below post will deal with one area, or to be more precise, one part of the et Invisibilium which pertains to the manner in which God organized the economic affairs of His creation.
And before I go on, I would just like to say that God was definitely a CAPITALIST. Need any more proof? But more on that in a future post. And excuse the digression…
Within this field of study that is commonly referred to as the dismal science, is the subdivision if you will, or specialization that is known as “monetary policy”. Monetary policy is nothing more than the study of how money behaves within the wider set of economic activities that God’s creation engages in while they are working out their salvation in fear and trembling in this vale of tears.
Economics as a science is dated back to the year 1776 and the publication of Adam Smith’s Wealth of Nations. However, just because God’s creation formally recognized “economics” as a major area of study of the human condition in 1776, does not mean that it did not exist earlier. Actually, it existed from God’s creation itself, and Our Lord spent quite a bit of time explaining it to His followers in the gospels. But I digress again…
The specialty area within the study of economics which is referred to as monetary policy was not only known to Our Lord, but more importantly it was known to the Romans as well. Actually, it was something that the Romans couldn’t quite manage and it ended up being a major reason behind why the Romans are not around today.
I will leave off here with one observation and that is this: Western Civilization presently is also having a hard time managing its monetary policy. Below is a post via the Zero Hedge blog. Please read it at your leisure and keep in mind the big picture and how the individual pieces all fit together. (see here)
FOR THE RECORD:
Currency And The Collapse Of The Roman Empire
At its peak, the Roman Empire held up to 130 million people over a span of 1.5 million square miles.
Rome had conquered much of the known world. The Empire built 50,000 miles of roads, as well as many aqueducts, amphitheatres, and other works that are still in use today.
Our alphabet, calendar, languages, literature, and architecture borrow much from the Romans. Even concepts of Roman justice still stand tall, such as being “innocent until proven guilty”.
So, as Visual Capitalist’s Jeff Desjardins’ asks, how could such a powerful empire collapse?
The Roman Economy
Trade was vital to Rome. It was trade that allowed a wide variety of goods to be imported into its borders: beef, grains, glassware, iron, lead, leather, marble, olive oil, perfumes, purple dye, silk, silver, spices, timber, tin and wine.
Trade generated vast wealth for the citizens of Rome. However, the city of Rome itself had only 1 million people, and costs kept rising as the empire became larger.
Administrative, logistical, and military costs kept adding up, and the Empire found creative new ways to pay for things.
Along with other factors, this led to hyperinflation, a fractured economy, localization of trade, heavy taxes, and a financial crisis that crippled Rome.
The major silver coin used during the first 220 years of the empire was the denarius.
This coin, between the size of a modern nickel and dime, was worth approximately a day’s wages for a skilled laborer or craftsman. During the first days of the Empire, these coins were of high purity, holding about 4.5 grams of pure silver.
However, with a finite supply of silver and gold entering the empire, Roman spending was limited by the amount of denarii that could be minted.
This made financing the pet-projects of emperors challenging. How was the newest war, thermae, palace, or circus to be paid for?
Roman officials found a way to work around this. By decreasing the purity of their coinage, they were able to make more “silver” coins with the same face value. With more coins in circulation, the government could spend more. And so, the content of silver dropped over the years.
By the time of Marcus Aurelius, the denarius was only about 75% silver. Caracalla tried a different method of debasement. He introduced the “double denarius”, which was worth 2x the denarius in face value. However, it had only the weight of 1.5 denarii. By the time of Gallienus, the coins had barely 5% silver. Each coin was a bronze core with a thin coating of silver. The shine quickly wore off to reveal the poor quality underneath.
The real effects of debasement took time to materialize.
Adding more coins of poorer quality into circulation did not help increase prosperity – it just transferred wealth away from the people, and it meant that more coins were needed to pay for goods and services.
At times, there was runaway inflation in the empire. For example, soldiers demanded far higher wages as the quality of coins diminished.
“Nobody should have any money but I, so that I may bestow it upon the soldiers.” – Caracalla, who raised soldiers pay by 50% near 210 AD.
By 265 AD, when there was only 0.5% silver left in a denarius, prices skyrocketed 1,000% across the Roman Empire.
Only barbarian mercenaries were to be paid in gold.
With soaring logistical and admin costs and no precious metals left to plunder from enemies, the Romans levied more and more taxes against the people to sustain the Empire.
Hyperinflation, soaring taxes, and worthless money created a trifecta that dissolved much of Rome’s trade.
The economy was paralyzed.
By the end of the 3rd century, any trade that was left was mostly local, using inefficient barter methods instead of any meaningful medium of exchange.
During the crisis of the 3rd century (235-284 A.D), there may have been more than 50 emperors. Most of these were murdered, assassinated, or killed in battle.
The empire was in a free-for-all, and it split into three separate states.
Constant civil wars meant the Empire’s borders were vulnerable. Trade networks were disintegrated and such activities became too dangerous.
Barbarian invasions came in from every direction. Plague was rampant.
And so the Western Roman Empire would cease to exist by 476 A.D.