– Marcus Aurelius
What Took So Long?
Monetary, fiscal, economic, political, and military affairs are tightly interwoven into the fabric of a nation. The primary thread extending throughout is the state’s endless desire to dominate and centralize the supply of money.
Monetary policy, in this regard, always attends to the apparent wants of a country’s leaders and its ruling class. Sometimes, over an extended period, it may appear to enrich the general population. But that is merely the mirage of early stage inflation, when demand’s pulled forward and economic growth appears to be expanding.
Regardless, the primary intent of monetary policy is to support the rulers. It’s table scraps for everyone else.
Nearly 250 years ago, in 1776, Edward Gibbon’s, The History of the Decline and Fall of the Roman Empire, was first published in England. Gibbon’s six-volume work offers an account of a state that survived for twelve centuries in the West and for another thousand years in the East, at Constantinople.
In looking at the Roman Empire’s decline and fall, Gibbon noted that the wonder was not that it had fallen, but rather, that it had lasted so long. “Instead of inquiring why the Roman empire was destroyed,” said Gibbon, “we should rather be surprised that it had subsisted so long.”
Academics and amateur history buffs since Gibbon have committed a great deal of time and focus to examining that question: How was it that the Roman Empire lasted so long?
One of the more common answers is that the incremental decline, punctuated by countercyclical periods of prosperity, buffered the fall so that the general population was unaware that the state was failing. People, like frogs in slow boiling water, went about their business as if the Roman Empire was eternal.
This answer, while reasonable, is inadequate. Many factors were part of the equation. Deeper analysis reveals that one of the primary factors to both the Roman Empire’s longevity and also its ultimate decline and fall is the problem of inflation.
The Great Third Century Inflation
The period from about the end of the 2nd century AD through the end of the 3rd century AD is referred to by Roman historians as the ‘Crisis of the 3rd Century.’ During this period, the problems of Roman society were exceedingly overwhelming. So much so that the Roman Empire emerged from the 3rd century entirely different from what it had been in the 1st and 2nd centuries.
The most common coinage of the Roman Empire in the 3rd century AD was the silver denarius. This coin was introduced by Augustus at about 95 percent silver at the end of the 1st century BC.
The denarius persisted for nearly two centuries as the basic medium of exchange in the empire. Yet, over time, its value was inflated away.
By 117 AD, in the time of Trajan, the denarius was only about 85 percent silver; down from Augustus’s 95 percent silver. By the age of Marcus Aurelius, in 180, it had been reduced to about 75 percent silver. Then, in Septimius’s time, the silver content had fallen to 60 percent. Caracalla then leveled it off at 50 percent silver.
But that was nothing. The real debasement came after Caracalla, between 258 and 275, in a period of civil war and foreign invasions. The emperors basically removed silver from the money. By 268 there was only 0.5 percent silver in the denarius.
Prices in this period inflated in most parts of the empire by nearly 1,000 percent.
One of the government’s magical discoveries during the 3rd-century inflation was that when it paid its troops in debased silver coins, prices immediately rose. Then, as the value of the denarius was inflated away, the government did the absurd. It demanded payment of taxes in kind and in services, rather than in coin. The government, in effect, rejected its own issued coins.
Guns and Butter
The size of the army greatly increased during this time. In fact, it doubled from the time of Augustus to that of Diocletian. Similarly, the size of the civil service sector also increased.
These guns and butter programs, much like in America today, consumed the fiscal resources of the state. And much like in America today, the government remained in business through frequent currency debasement, oppressive taxation, and by accusing people of treason and confiscating their estates.
What were the consequences of the Roman Empire’s great inflation?
One of the less obvious consequences of the inflation is that, while it sustained the Roman state, it destroyed the freedom of the Roman people. And economic freedom was the first freedom to go.
Constantine, for example, executed radical policies that used compulsion and force to extract gold reserves from taxpayers. This placed an ever-increasing supply of gold in the hands of government officials, while impoverishing private citizens.
No doubt, the monetary policies of the late Roman Empire offer much instruction.
“War,” as Randolph Bourne remarked following World War I, “is the health of the state.” Certainly, the Roman Empire demonstrated this.
But what it also demonstrated is that war is fatal to stable and sound money. The Roman money inflation was tied to its expansive military.
The experience of the Roman Empire also demonstrated that the actions of rulers are centered on protecting their own ruling-class interests, and the military and the civil service, at the expense of private citizens and workers.
Politicians merely appeased the masses through palliative programs of ‘bread and circuses.’
So while the Roman state persisted, the liberty of the Roman people did not.
The early 5th century Christian priest Salvian of Marseille kept notes on why the Roman state was collapsing in the West. He was writing from a good vantage point, France (Gaul).
Salvian observed that the Roman state was collapsing because it deserved collapse; because it had denied the first premise of good government, which is justice to the people.
Does the American State Deserve Collapse?
In late 1777, Adam Smith, a contemporary of Gibbon, received news of General Burgoyne’s defeat at Saratoga by America’s Revolutionary Patriots. This marked an ominous turning point for the British Red Coats in the war, and the beginning of the end for Britain’s ruling desires in America.
Smith’s correspondent voiced extreme alarm that the British nation was ruined. “There is a great deal of ruin in a nation”, was how Smith responded.
Indeed, there is a great deal of ruin in a nation. And like the Roman Empire in the 3rd century, or the British Empire in the early 20th century, the United States appears to be on a quest for ruin.
Government intervention into a nation’s economy is as foolish as attempting to control the earth’s temperature by law or force. Yet that doesn’t mean governments don’t meddle each and every day with the best – and worst – of intentions. The United States government is no exception.
Over the years, layers and layers of interference by various federal, state, and local agencies have built up like grime on a kitchen window. The grease shines and smells of something fierce. The layers of government grime also drip and ooze into every crack and crevice of the economy.
Gas prices. Food supply. Reliable energy. Currency debasement. Extreme taxation. And much, Much, More. Today, Washington chases collapse with special rigor.
Perhaps it is shallow and simplistic to draw parallels from the ancients. Maybe America’s best and brightest years are in the future. Who knows?
But what we do know is that over the last several decades the U.S. government has pursued many of the policies that brought past empires to ruin.
Military misadventures. Currency debasement. Growth and protection of an elite political class. Greater and greater encroachments on economic freedom, personal privacy, and individual liberty. The celebration of freaks and self-mutilation.
On balance, if the Roman state deserved collapse, shouldn’t the American state deserve collapse too?
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for Economic Prism