Editors ChoiceNote (opinion)

The destruction of the world economy with government money: Ancient Roman hyperinflation and its resemblance to today


Drew McMartin, a macroeconomic researcher, in String Tweet Has studied the state of the world economy with reference to history. In his post, he compares ancient Roman hyperinflation with the inflation of the German Reich (before Nazi and Hitler) and the current state of inflation in the world, and concludes that the world economy is heading for crisis with government currencies. You can read the translation of this researcher’s tweet below.

Thousands of years before the Reich, the world witnessed a sharp devaluation of the currency of the Roman Empire. The beginning of the second century AD coincided with the Roman Empire’s domination of all of Western Europe, parts of North Africa and the Middle East. Some estimates suggest that between 65 and 100 million people lived under Roman rule; About 20% of the world’s population at that time.

From hard money to Fiat currencies: Ancient Roman hyperinflation and its resemblance to today
The territory of the Roman Empire

For all its glory, 150 years later, Rome was falling apart. Many factors can be attributed to the crisis of the third century AD.

Political turmoil, corruption, slow development, wars, etc., were all among these factors. In the meantime, I think the biggest factor was the devaluation of the Roman currency.

The sharp devaluation of the currency in ancient Rome eventually led to over-taxation and rising inflation, resulting in an economic crisis.

Rome on the verge of collapse
Rome on the verge of collapse

Rejection of the devaluation of the Roman currency or, better described, the Roman coin can be traced to the amount of metal used in Denarius.

Denarius was a silver coin minted for ordinary public use in the first two centuries of the Roman Empire.

Roman coins
Denarius

A 4 gram coin in 60 AD consisted of 95% silver. This rate reached 85% in 110 AD. In 170 AD, each 4 gram coin contained 75%, in 211 AD it contained 60% silver, and in 207 AD this amount was only 5%.

It did not take long for silver coins to be replaced by bronze coins.

Inflation skyrocketed as the Roman currency depreciated.

Graph of the decrease in the amount of silver used in coins
Graph of the decrease in the amount of silver used in coins

As early as 290 AD, new coins such as the Solidos were introduced, which can be considered something similar to today’s national digital currencies.

The supply of these coins also failed to curb inflation and eventually led to the issuance of the Edict on Maximum Prices, which almost means setting an orderly price for goods; This is not unlike the control of rents during the Reich (pre-Nazi Germany).

The order was issued in Rome, with the aim of limiting the price of more than 1,000 goods and services.

The issuance of this order also could not stop inflation, and shortly after, prices reached 70 times the price of two centuries ago; Much of this price increase was in the last decade.

What was initially just a slow devaluation of the currency soon led to the destruction of the Roman currency.

As you can see in the image below, currency devaluation starts slowly at first and always does. In the early stages, this devaluation is done easily; You can slightly reduce the amount of silver and add a few more coins to the cycle.

Decrease in the amount of silver in Roman coins
Decrease in the amount of silver in Roman coins

After all, we are generating new money in the economy (this is what the early days of money printing say). But is this really a good thing?

Printing more money is very similar to heroin. The first time you use heroin, it gets so-called. Of course, I have never used heroin!

Irregular printing of money
printing money!

After that, you want more heroin all the time to get you into space again! This is similar to stimulus policies and printing more money and injecting it into the economy. Just like the heroin you use at the end of the overdose, printing more money will cause the currency system to collapse.

From hard money to fiat currencies: Ancient Roman hyperinflation and its resemblance to today
Balance sheet (printed dollars) of the Federal Reserve

In my opinion, history makes your eyes glaze over when you compare data. By comparing silver charts in Roman times with the balance sheets of central banks or, more specifically, the Federal Reserve, we see many similarities. Of course, you should know that the silver chart in Roman times was reversed to show the decrease in the amount of silver used in coins. Seeing the similarities of the two diagrams, it is as if someone inside your mind is shouting to pay attention.

Diagram of the reverse of the amount of silver used in Roman coins
Inverse chart of the amount of silver used in Roman coins

It is very difficult to break the habit of devaluing the currency. What’s worse is the words that I can spell I often mistype. This was true of both the Roman and German Reichs, and is still true today; It is as if history repeats itself!

American politicians do not look at the expansion of their balance sheets as a problem that needs to be solved. Worse! They do not see this expansion as the cause of inflation, and they do not even see inflation as bad.

The devaluation of the currency is a one-way street. It is a giant boulder that only moves down the slope.

Greg Foss says:

I am 100% sure that Fiat currencies will continue to depreciate and accelerate their decline every day.

Image
Decreased purchasing power of the dollar

Now you also have to buy hard assets to protect yourself against inflation. Buy Bitcoin! Buy gold! Buy silver! Buy property and land! All of these are hard and scarce assets that are difficult to reproduce. For me, Bitcoin with distance is better than other examples. You choose the best option for yourself from among them.

Dollar price to bitcoin
Graph of the dollar against bitcoin

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