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NOTE Inflation and the Fall of the Roman Empire

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Two centuries ago in 1776, there were two books published in England, both of which are read avidly today.

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One of them was Adam Smith's Wealth of Nations, and the other was Edward Gibbon's Decline and Fall of the Roman Empire.

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Gibbon's multi-volume work is the tale of a state that survived for 12 centuries in the West

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and for another thousand years in the East at Constantinople.

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Yet Gibbon, in looking at this phenomena, commented that the wonder was not that the Roman Empire had fallen,

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but rather that it had lasted so long.

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And scholars since Gibbon have devoted a great deal of energy

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to examining that problem.

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How was it that the Roman Empire lasted so long?

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And did it decline or was it simply transformed into something else?

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That something else being the European civilization

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of which we are the heirs.

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Now, I've been asked to speak on the theme of Roman history,

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particularly the problem of inflation and its impact.

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My analysis is based on the premise that monetary policy cannot be studied

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or understood in isolation from the overall policies of a state.

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monetary, fiscal, military, political, economic issues are all very much intertwined.

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And the reason they are all so intertwined is in part due to the fact that the state, any state,

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normally seeks to monopolize the supply of money within its own territory.

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Monetary policy, therefore, always serves, even if it serves badly, the perceived needs of the rulers of the state.

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If it also happens to enhance the prosperity and progress of the masses of the people, that is a secondary benefit.

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But its first aim is to serve the needs of the rulers, not the ruled.

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And this point is central, I believe, to an understanding of the course of monetary policy in the late Roman Empire.

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We may begin by looking at simply the mentality of the rulers of the Roman Empire, beginning at the end of the second century and looking through to the end of the third century.

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This period of the third century Roman historians refer to as the crisis of the third century, and the reason is that the problems of the Roman society in that period were so profound, so enormous that Roman society emerged from the third century very, very different in almost all ways from what it had been in the first and second

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in the Second Centuries, a period the historians speak of as the Augustan Principate.

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To look at the mentality of the Roman emperors, we can look just at the advice that the emperor

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Septimius Severus gave to his two sons, Caracalla and Geta.

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This was supposed to be his final words to his heirs.

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He said, live in harmony, enrich the troops, ignore everyone else.

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There's a monetary policy to be marveled at.

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Karakalla did not adhere to the first part of that.

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In fact, one of his first acts was to murder his brother.

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But as for enriching the troops, he took that so seriously to heart that his mother remonstrated

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with him and urged him to be more moderate and to restrain his increasing military expenditures

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and his very burdensome new taxes.

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He responded by saying, there was no longer any revenue, just or unjust, to be found,

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But Not to Worry, quote, for as long as we have this, he insisted, pointing to his sword,

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we shall not run short of money.

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His sense of priorities was made more explicit when he remarked, quote, nobody should have

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any money but I, so that I may bestow it upon the soldiers.

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And he was as good as his word.

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He raised the pay of the soldiers 50 percent, and to achieve this he doubled the inheritance

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taxes paid by Roman citizens. When this was not sufficient to meet his needs, he admitted

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almost every inhabitant of the empire to Roman citizenship. What had formerly been a privilege

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now became simply a means of expanding the tax base.

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He then went further by proceeding to debase the coinage.

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Now the basic coinage of the Roman Empire to this time, we're speaking now about 211,

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was the silver denarius introduced by Augustus at the end of the first century before Christ.

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Augustus had issued a silver coin, a denarius, that was about 95% silver, and that coin continued

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for the better part of two centuries as the basic medium of exchange in the empire.

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By the time of Trajan in 117, it was only about 85% silver, down from Augustus' 95.

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By the age of Marcus Aurelius in 180, it was down to about 75% silver.

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In Septimius' time, it had dropped to 60% and Caracalla evened it off at 50-50.

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Caracalla was assassinated in 217 and there then followed an age that historians refer

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was referred to as the age of the barrack emperors because throughout the third century all the emperors were soldiers and all of them came to their power by military coups of one sort or another there were about 26 legitimate emperors in this century and only one of them died a natural death the rest were either assassinated or died in battle which will give you some idea of the change

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This was totally unprecedented in Roman history with two exceptions, Nero, a suicide, and Caligula, assassinated earlier.

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Caracalla had also debased the gold coinage.

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Under Augustus, this circulated at 45 coins to a pound of gold.

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Karakalla made it 50 to a pound of gold.

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Within 20 years after him, it was circulating at 72 to the pound of gold,

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reduced to 60 at the end of the century by Diocletian, only to be raised again to 72 by Constantine.

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So even the gold coinage was in fact inflated, debased.

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But the real crisis came after Caracalla between 258 and 275. In a period of

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intense civil war and foreign invasions, the emperors simply abandoned for all

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practical purposes a silver coinage. By 268 there was only five-tenths percent

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Silver in the Denarius. And prices in this period rose in most parts of the empire by

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nearly a thousand percent. The only people who were getting paid in gold were the barbarian

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troops hired by the emperors. The barbarians were so barbarous that they would only accept

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of Gold in Payment for Their Services.

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Now, the situation did not change until the accession of Diocletian in the year 284.

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Shortly after his accession, he raised the weight of the gold coinage, the aureus, to 60 to the pound.

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This was from a low of 72. But ten years later, he finally abandoned the silver coinage, which by this time was simply a bronze coin dipped in silver rather quickly.

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And he abandoned that completely and tried to issue a new silver coin, which was struck at 96 coins to the pound of silver, called the Argentius.

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This Argentius was fixed as equal to 50 of the old denarii, the old coinage.

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It was designed to respond to the need for higher tariffed coins in the marketplace to reflect the inflation.

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He also issued a new bronze coin, tariffed at 10 denarii, called the numus.

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But less than a decade later, that silver coin had gone from being tariffed at 50 of the old, to now equaling 100 of the old, and the bronze coinage from 10 denarii to 20, in other words, 100% inflation.

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In other words, despite his efforts, Diocletian had not been able to stop the inflation.

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The next emperor who interfered with the coinage in a meaningful way was to be Constantine, the first Christian emperor of Rome.

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Constantine, in the year 312, which is also the year he issued the Edict of Toleration for Christianity,

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issued a new gold piece, which he called by a new name, the solitus, solid gold.

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This was struck at 72 to the pound, so it was in fact debased over Diocletians.

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These were very large issues, and historians have puzzled over where he got all the gold,

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but I think the puzzle is not so much of a real puzzle once you begin to look at the legislation that took place.

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First of all, he issued two new taxes.

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One was taxed on the estates of the Senators.

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And this was rather new because Senators generally were free of most taxes on their land.

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He also issued a tax on the capital of merchants.

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Not their earnings, but their capital.

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And this was to be levied every five years.

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And it was to be paid in gold.

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He also required that the rents from the imperial estates, which were rented out to tenants, were to be paid only in gold.

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He took on the bullion reserves of his former partner, Licinius, who had extracted by force bullion from the treasuries of the cities of the Eastern Empire.

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In other words, any city that had any gold bullion or silver bullion left in its treasury,

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this was simply requisitioned by Licinius, and this passed on now into the hands of Constantine,

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who had gotten rid of Licinius in a civil war.

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We're also told that he stripped the pagan temples of their treasuries.

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This he did rather late in his reign, still somewhat afraid of, apparently, in the early

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In the early days of angering the gods of Rome, as his Christianity became more fixed,

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he felt greater ease at robbing the temples.

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Now, Constantine's reform, in one sense, began the reversal of the process.

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The gold coinage was sufficiently large that it began to take hold and to become, circulate more freely.

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The silver coinage failed, and what was worse, at no time in this period did the central government try to control the token coinage.

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And the result of that was token coinage was being minted not only by the imperial mints but also by the mints of cities.

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In other words, if a city couldn't pay its costs, pay its salaries to its employees,

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It simply struck up some token coinage and issued that.

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By the late third century, we also begin to have massive appearance of what numismatists call counterfeits.

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I would say it would be called credit money today.

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People need small change and they simply go and manufacture it.

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All of which, of course, means that the amount of token coinage in circulation is uncontrolled and increasingly massive.

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Now, one of the things that had happened in the course of this third century inflation was that the government found that when it paid its troops

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In token coinage or even in these debased silver coins, prices immediately rose.

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Every time the silver value of the denarius dropped, prices naturally rose.

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And the result of this was the government, in order to try to protect its civil servants and its soldiers from the effects of inflation,

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Inflation, it began to demand payment of taxes in kind and services rather than in coin.

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They wound up in effect in repudiating their own issues, not accepting them for tax collection

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purposes.

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With Constantine's reform, this situation changed somewhat and slowly but surely, the

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government began to move away from collecting taxes in kind and from paying salaries in

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kind and began to substitute paying salaries in gold and collecting taxes in gold.

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Over the long run, this meant that the gold standard was strengthened and gold remained

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the real money of the Roman Empire.

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However, the inflation did not end

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for the masses of the people.

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In other words, gold was a hedge against inflation

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for those who had it.

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And these were principally the troops

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and the civil servants.

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The taxpayers had to buy these gold coins

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in order to pay their taxes.

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And so if they were wealthy enough,

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they could afford to buy these gold coins,

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which were increasingly expensive in terms of token money.

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If they were poorer, they simply couldn't pay the taxes,

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and this meant they lost their lands in one form or another

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or became delinquents.

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And we hear constant references

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to people abandoning their land, disappearing.

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As a matter of fact, in the third century, this was a constant problem in Rome that all

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sorts of people were trying to escape the increased taxes that the military had needed.

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The army itself, from the time of Augustus, when they had about a quarter of a million

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troops, by the time of Diocletian, they had somewhat over 600,000.

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So the army itself had doubled in size in the course of this inflationary spiral and

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obviously that contributed greatly to the inflation.

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In addition, the administration of the state had grown enormously.

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Under Augustus, essentially, you had the imperial administration at Rome and the governors of

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different provinces, the secondary level of administration, and then the primary governmental

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The units in the Roman Empire in this time were the cities, the municipalities.

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By the time of Diocletian, this pattern had been broken apart.

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You had not one emperor, but you had, under Diocletian, four emperors, which meant four

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imperial courts, four praetorian guards, four palaces, four staffs, etc., etc.

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Under them were four praetorian prefectures, regional administrative units with their

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staffs and their budgets.

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Under these four prefectures, they were divided into 12 dioceses, each diocese having its

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administrative staff and so on.

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Under the diocesan rulers, the vicars of the diocese, we have the provinces.

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In Augustus's time, there were approximately 20 provinces.

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300 years later, with no substantial increase in territory,

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there were over 100 provinces.

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They had simply began to divide and subdivide provinces

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for purposes of maintaining internal military control

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of these regions.

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In other words, the cost of policing the Roman state

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became increasingly enormous.

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All these costs then are some of the reasons why the inflation took place, I'll get to others in a moment.

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To give you some idea of the situation after Constantine's reform of the gold,

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let me just briefly give you the figures for what it cost in terms of the silver coinage or token coinage now,

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Now, the denarius, for a pound of gold. In Diocletian's time, in the year 301, he fixed

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the price at 50,000 denarii for one pound of gold. Ten years later, it had risen to

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120,000. In 324, in other words, 23 years after it was 50, it was now 300,000. And in

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In 337, the year of Constantine's death, a pound of gold brought 20 million denarii.

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And by the way, just as we're all familiar with the German currency of the 20s with the

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figures stamped on it, the Roman coinage also has stamps and over stamps on the metal indicating

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multiples of value.

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At one point, one of the Roman emperors had a marvelous idea.

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Instead of issuing a single coin, he devised a method to handle the inflation.

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He took brass slugs and put them in a leather pouch and called it a phallus and people began

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passing these pouches back and forth as value.

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I guess it was the Roman equivalent to those baskets of paper we see in the pictures of

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Germany in the 20s.

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Interestingly enough, within 10 years or so after that began, the word phallus, which

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had meant this bag of coins, had now drifted to mean one of those plugs, one of those slugs

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was now the phallus.

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So they couldn't even keep the bags stable, they too were inflated.

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One interesting thing with all this inflation, I think it should be a great comfort to us.

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In terms of prices in the Roman Empire have come to the conclusion that despite all of this inflation or perhaps we should say because of all this inflation the price of gold in terms of its purchasing power remained stable from the 1st through the 4th century in other words gold remained in terms of its purchasing power

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value, whereas all this coinage just became increasingly worthless. Now what

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were the causes of this inflation? First of all, war. The soldiers' pay rose from

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225 denarii during the time of Augustus to 300 denarii in the time of

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Domission, about a hundred years later. A century after Domission, in the time of Septimius, it had gone from 300 to 500 denarii, and in the time of Caracalla, about ten years later, it had gone to 750 denarii.

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In other words, the cost of the army was also rising in terms of the coinage, so as the coinage became more worthless, the cost of the army had to be increased.

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The advance in the soldiers' pay in the rest of the third century and into the fourth century is not known.

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We don't have figures. And one reason is that the soldiers were increasingly paid in terms of requisitions of supplies and goods in kind.

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They were literally given food, clothing, shelter and other commodities in lieu of pay.

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And this applied also to the civil service.

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When one Roman emperor refused to pay a donative on his accession – this was a bonus given to the soldiers on the accession of the emperor – he was simply murdered by his troops.

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The Romans had had this kind of problem even in the days of the Republic. If the soldiers don't get paid, they rather resent it.

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What we find is that the donatives had been given on the accession of a new emperor from the time of Augustus on.

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Then they began to be given in the third century every five years.

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By the time of Diocletian, donatives were given every year, so that the soldiers' donatives had in fact become part of their basic salary.

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The size of the army, I think I indicated already, had increased, doubled from the time of Augustus to Diocletian, and the size of the civil service I indicated also.

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Now all these events strained the fiscal resources of the state beyond its ability to sustain itself, and the debasement and the taxation were both used to keep the ship of state going,

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frequently by debasing, then by taxation, and then often simply by accusing people of treason and confiscating their estates.

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One of the Christian fathers, St. Gregory Nazianzus, commented that war is the mother of taxes.

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And I think that's a wonderful thing to keep in mind. War is the mother of taxes and it's also, of course, the mother of inflation.

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Now, what were the consequences of inflation?

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One of the odd things about inflation is, in the Roman Empire, that while the Roman state survived,

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The Roman state was not destroyed by inflation.

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What was destroyed by inflation was the freedom of the Roman people.

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And particularly, the first victim was their economic freedom.

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Rome had basically a laissez-faire concept of state-economy relations.

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Except in emergencies, which were usually related to war,

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the Roman government generally followed a policy of free trade

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and minimal restriction on the economic activities of its population.

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But now, under the pressure of this need to pay the troops

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and under the pressure of inflation,

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the liberty of the people began to be seriously eroded and very rapidly.

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We could start with the class known as the Decuriones, the Decurions.

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This was your prosperous, small and middle-land-owning class

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who were the dominant elements of the cities of the Roman Empire.

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They were the class from which were chosen the municipal councils, the municipal magistrates and officials.

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And traditionally, they had viewed service in the governments of their towns as an honor.

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And they had responded to this by donating, not merely their time, but their wealth to the betterment of the urban environment,

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building stadiums and bathhouses and repairing the streets and providing for pure water.

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These were considered benefactions. It was a kind of philanthropic element.

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And their reward was, of course, public recognition and esteem.

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This class, in the mid-third century, was assigned a task of collecting the taxes in the municipality that were being assessed by the central government.

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The central government could no longer collect its taxes effectively, so they made the Decurian class collectively responsible for getting revenues and passing them on to the imperial government.

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The Decurians, of course, had as much difficulty as anyone else in doing this,

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and the returns were, again, frequently inadequate,

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so the government solved that problem by simply passing a law

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that any taxes the Decurians could not collect from others,

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they would have to pay out of their own pocket.

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That's known as the incentive method for the tax collector.

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As you can well imagine, as the crisis became greater and the economy was disrupted by civil

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conflicts and invasions and the effects of inflation, the Decurians, strangely enough,

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no longer wanted to be Decurians.

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And they began to abandon their lands, abandon their cities, and escape to wherever they

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They could find refuge in other larger cities or other provinces.

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But they were not to be allowed to do that with impunity, and the law was then passed

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that any decurian discovered somewhere else was to be arrested, bound like a slave and

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carted back to his hometown where he was restored to his dignity as a decurian.

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This third century is also the period of the persecution of the Church.

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And we find that at least some of the emperors must have had a sense of humor because when

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they passed a regulation that if a Christian was arrested and found guilty of capital punishment,

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namely believing in Christ, he was to not be executed but offered the option of becoming

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Being a Decurion.

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Now the merchants and the artisans were traditionally organized into guilds and chambers of commerce

250
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and that sort of thing.

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They now too came under government pressure because the government could not obtain enough

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material for the war machine through regular channels.

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People, after all, don't want all that token coinage.

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And so they were now compelled to make deliveries of goods, so that if you had a factory making

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garments, you now had to deliver so many garments to the government requisitions.

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If you had ships, you had to carry government goods in your ships.

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In other words, what we have here is a kind of nationalization of private enterprises,

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And this nationalization means that the people who risk their money and their talent are

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compelled to now serve the state whether they like it or not.

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When people tried to get out of this, they were then, by law, compelled to remain in

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the occupation that they were in.

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In other words, you couldn't change your job or your business.

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This was not sufficient because, after all, death is always a relief from taxes.

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And so the occupations were now made hereditary.

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When you died, your son had to take up your business, your trade, your profession.

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If your father was a shoemaker, you had to be a shoemaker.

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These started by being restricted to the defense-oriented industries.

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But of course gradually it was realized that everything is defense oriented and the system just developed.

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The peasantry, known as the Colony, these were leaseholders on both imperial and private estates.

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They too, formerly a free class, were now under the same kinds of pressures that all

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All small holders were in this situation, and they began to drift away trying to find

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better opportunities, better leases, better occupations.

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And so, under Diocletian, the Colony were now bound to the soil.

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Anyone who had a lease on a particular piece of land could not give that lease up.

275
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More than that, they had to stay on the land and work it.

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In effect, this is the beginning of what in the Middle Ages is called serfdom, but it

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actually has its origins here in the late Roman society.

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We know, for example, from studies of Palestine, particularly in the rabbinical writings, that

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in the course of the third and early fourth century, the structure of landholding in Palestine

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changed very dramatically.

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in the second century was largely composed of small peasant landholders

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with very small acreage, perhaps an average of two and a half acres.

283
00:33:32.300 --> 00:33:37.500
By the fourth century, those small holders had virtually disappeared

284
00:33:37.500 --> 00:33:46.300
and been replaced by vast estates controlled by a few large landowners.

285
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The peasants working the estates were the same people,

286
00:33:49.180 --> 00:33:56.180
But they had, in the meantime, lost their land to the larger landowners.

287
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In other words, land holding became a massive kind of agri-business.

288
00:34:04.180 --> 00:34:10.180
In this course of this, the population of Palestine, still principally Jewish,

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00:34:10.180 --> 00:34:17.180
also changed in that the ownership of land passed from Jews to Gentiles.

290
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and the reason for that undoubtedly was that the only people with large amounts of cash

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who could buy out these smallholders who were in distress were of course the government officials

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and we hear of them being called potentes, powerful ones.

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In effect, there's a shift in the distribution of wealth in Palestine

294
00:34:41.020 --> 00:34:47.460
and obviously this, from other evidence, similar things were happening in other places.

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With regard to taxes, they naturally increased across the board,

296
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but Diocletian decided that it was a very inefficient system that he had inherited.

297
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Every province more or less had its own system of taxation,

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going back to pre-Roman times actually.

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And so he, with his military mind, demanded standardization.

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00:35:08.500 --> 00:35:16.500
And what he did was to have all wealth, which was of course landed wealth,

301
00:35:18.500 --> 00:35:22.500
assessed in units of productivity.

302
00:35:22.500 --> 00:35:30.500
In other words, every person who had land was either singly, if he was a large landowner,

303
00:35:30.500 --> 00:35:36.500
fit into a particular unit, a tax unit called a UGM.

304
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and those who were smaller landowners were collectively put into a yugum

305
00:35:41.500 --> 00:35:46.500
and this meant that the emperor for the first time had the basis of a national budget

306
00:35:46.500 --> 00:35:49.500
something the Romans never had until Diocletian

307
00:35:49.500 --> 00:35:56.500
and therefore he knew at any given time how many taxable units of wealth there were in any province

308
00:35:56.500 --> 00:36:04.500
and he could simply levy an assessment and expect to get a fixed amount of money

309
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Unfortunately, this took no account of the fact that in agriculture, productivity varies considerably from season to season, and that if an army has passed through your district, it may take years to recover.

310
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The result is we hear of massive petitions from whole regions asking the emperor to forgive them their taxes, to remit five years of past dues and so on and so forth,

311
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or to reduce the number of units of productivity to reflect the loss of population or the loss of materials.

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As a matter of fact, when people began to say, it used to be I had five people paying this unit of taxation,

313
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but two of them have fled and there's only, you know, half the land in production,

314
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the response of the government was to say, that doesn't matter, you still have to pay for the land that is now out of production.

315
00:37:00.500 --> 00:37:06.500
So, I mean, there's no relationship between taxes and actual productivity.

316
00:37:06.500 --> 00:37:09.500
How did people protect themselves from this?

317
00:37:09.500 --> 00:37:16.500
Well, first of all, mortgages virtually ceased, long-term mortgages virtually ceased to be given.

318
00:37:16.500 --> 00:37:21.500
Long-term loans of any kind disappear.

319
00:37:21.500 --> 00:37:28.500
No one will lend unless they are guaranteed payment in gold or silver bullion.

320
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In fact, the government itself, under Diocletian and Constantine, refused to accept gold coins in payment of taxes, but insisted instead on gold bullion, so that the coins that you bought in the marketplace had to then be melted down and presented in the form of bullion, and the reason was the government was never sure how adulterated its own gold coinage really was, so they insisted on bullion.

321
00:37:56.500 --> 00:38:08.500
Pledges and securities for crops and for loans were always in either gold, silver, or indeed in crops themselves.

322
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In Egypt, we have a document in which the banks have been refusing to accept coins with the divine image of the emperor, in other words, state issues.

323
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The government's reaction to that, of course, was to force the banks to accept the coinage.

324
00:38:28.340 --> 00:38:34.540
This led to wholesale corruption in Roman society as the black market became a normal

325
00:38:34.540 --> 00:38:43.540
part as people refused to exchange coinage at the officially fixed tariffs, but instead

326
00:38:43.540 --> 00:38:49.580
coinage was passed on a market principle.

327
00:38:49.580 --> 00:38:55.380
There were obviously flight from the land, massive evasion of taxes, people left their

328
00:38:55.380 --> 00:39:02.420
jobs, they left their homes, they left their social status.

329
00:39:02.420 --> 00:39:13.620
Now Diocletian's final contribution to this continuing disaster was to issue his famous

330
00:39:13.620 --> 00:39:23.460
is edict on prices and the edict on prices of 301 very famous instance of a massive effort

331
00:39:23.460 --> 00:39:28.300
by the government to control inflation by price controls.

332
00:39:28.300 --> 00:39:34.700
You have to realize that there's a little problem.

333
00:39:34.700 --> 00:39:41.500
The Roman Empire was a vast region running from Britain in the west to Iraq, Mesopotamia

334
00:39:41.500 --> 00:39:45.820
in the East from the Rhine and the Danube to the Sahara.

335
00:39:45.820 --> 00:39:51.460
It included areas of very sophisticated and very primitive economies.

336
00:39:51.460 --> 00:39:57.100
And the result of that was the cost of living varied considerably from province to province.

337
00:39:57.100 --> 00:40:00.580
Egypt seems to have had the lowest cost of living.

338
00:40:00.580 --> 00:40:06.940
Palestine had a cost of living twice that of Egypt, and Rome had a cost of living twice,

339
00:40:06.940 --> 00:40:18.700
Roman Italy and had a cost of living twice that of Palestine Diocletian ignored that he just issued

340
00:40:18.700 --> 00:40:25.820
a single standard price for the entire empire the result was it in Egypt the effects of the edict

341
00:40:25.820 --> 00:40:35.260
probably didn't exist because the price the maximum price fixed in the edict was very rarely

342
00:40:35.260 --> 00:40:41.500
reached in Egypt but it was the people in Rome of course had the

343
00:40:41.500 --> 00:40:46.540
maximum price lower than the market price okay now the result of that of

344
00:40:46.540 --> 00:40:52.260
course was riots in the street, disappearance of goods, the penalty for

345
00:40:52.260 --> 00:41:00.860
violating the law was death, very common penalty in Rome for almost anything and

346
00:41:00.860 --> 00:41:10.860
The mentality of diocletian comes out and the cause of the price, the maximum price edict, comes out in the preface to the law.

347
00:41:10.860 --> 00:41:22.860
I'll just quote briefly some of it. When you hear these first words, I'd like you to pay attention because you may have a different interpretation of them than diocletian meant.

348
00:41:22.860 --> 00:41:30.860
He says, if the excesses perpetrated by persons of unlimited and frenzied avarice could be checked,

349
00:41:30.860 --> 00:41:33.860
he doesn't mean himself,

350
00:41:33.860 --> 00:41:38.860
if the general welfare could endure without harm this riotous license,

351
00:41:38.860 --> 00:41:44.860
if these uncontrolled madmen, the unscrupulous, the immoderate, the avaricious,

352
00:41:44.860 --> 00:41:50.860
could be persuaded to desist from plundering the wealth of all, then all would be well.

353
00:41:50.860 --> 00:42:00.860
Who are these people? They are the merchants. They are the avaricious, greedy types who cause inflation, as we all know.

354
00:42:02.860 --> 00:42:13.860
Then he speaks about himself and his four partners, his three partners, human race. Sounds familiar, doesn't it?

355
00:42:13.860 --> 00:42:26.860
We are agreed that decisive legislation is necessary, so that the long hoped for solutions, which mankind itself could not provide.

356
00:42:26.860 --> 00:42:36.860
You know, it's the same stuff. We can't do anything ourselves. We need the legislator.

357
00:42:36.860 --> 00:42:48.860
By the remedies provided by our foresight, these things may be remedied for the general betterment of all.

358
00:42:49.860 --> 00:42:58.860
In fact, as you read through the rest of the thing, it becomes clear that the reason the edict on prices was issued, prices and wages was issued,

359
00:42:58.860 --> 00:43:08.740
was that the soldiers were the principal victims of the inflation and that

360
00:43:08.740 --> 00:43:16.940
Diocletian was afraid he was losing control of his army and so the people who

361
00:43:16.940 --> 00:43:27.740
are to be protected are the soldiers and the other servants of the state. Now

362
00:43:27.740 --> 00:43:40.740
Diocletian's monetary reforms were tentative steps in the right direction, except for the edict on prices, which, by the way, simply didn't work and was gradually dropped.

363
00:43:40.740 --> 00:43:48.740
But his steps were not radical enough. His inability to create a sufficient supply of gold and silver coinage,

364
00:43:48.740 --> 00:43:55.540
combined with his continued reliance on payments in kind for taxes and salaries

365
00:43:55.540 --> 00:44:02.420
and the continued issuance of fiat bronze coinage in endless amounts

366
00:44:02.420 --> 00:44:05.900
failed to make a significant dent in the problem.

367
00:44:05.900 --> 00:44:14.620
Constantine's reforms were also partial but of sufficient vigor and radical character to make a difference.

368
00:44:14.620 --> 00:44:20.060
Through his willingness to extract by compulsion the gold reserves of the taxpayers,

369
00:44:20.060 --> 00:44:25.340
forcing them to disgorge their bullion,

370
00:44:25.340 --> 00:44:31.100
he placed an ever-increasing supply of gold in the hands of the government officials.

371
00:44:31.100 --> 00:44:35.900
This was increasingly used to pay military bonuses, salaries for bureaucrats,

372
00:44:35.900 --> 00:44:39.580
and even payments for certain public works.

373
00:44:39.580 --> 00:44:44.220
Increasingly then, a two-tier monetary system emerged

374
00:44:44.220 --> 00:44:51.020
in which the government, the soldiers and the bureaucrats, enjoyed the benefits of a gold standard,

375
00:44:51.020 --> 00:44:59.420
while the non-governmental portion of the economy continued to struggle with a rapidly inflating fiat currency.

376
00:44:59.420 --> 00:45:07.520
The new gold solidus, circulated widely by its possessors, the government-salaried employees,

377
00:45:07.520 --> 00:45:15.360
sold at various market rates to customers who desperately needed it to pay their taxes.

378
00:45:15.360 --> 00:45:21.320
Thus, the state had found a way to protect itself and its servants

379
00:45:21.320 --> 00:45:27.560
from the unwholesome effects of its own earlier inflationary cycle,

380
00:45:27.560 --> 00:45:31.440
while slowly withdrawing itself from the cumbersome and wasteful system

381
00:45:31.440 --> 00:45:35.560
of accepting taxes and paying salaries in kind.

382
00:45:35.560 --> 00:45:41.060
Meanwhile, the masses suffered from massive injection of fiat money,

383
00:45:41.060 --> 00:45:44.860
which they had to accept in payment for government requisitions

384
00:45:44.860 --> 00:45:50.260
of such gold or silver or other commodities which the government demanded.

385
00:45:50.260 --> 00:45:57.060
And we may wish to find some lessons in this tale of

386
00:45:57.060 --> 00:46:00.660
monetary policies of the late Roman Empire.

387
00:46:00.660 --> 00:46:09.660
The first lesson I think must be that if war is the health of the state, as Randolph Bourne said,

388
00:46:09.660 --> 00:46:15.660
it is poison to a stable and sound money.

389
00:46:15.660 --> 00:46:27.660
The Roman monetary crisis, therefore, was closely connected with the Roman military problem.

390
00:46:27.660 --> 00:46:35.660
Another lesson is that the problems become solvable when a ruler decides that something can be done and must be done.

391
00:46:35.660 --> 00:46:49.660
Diocletian and Constantine clearly were willing to act to protect their own ruling class interests, the military and the civil service.

392
00:46:49.660 --> 00:47:03.660
Monetary reforms were necessary to win the support of the troops and the bureaucrats that composed the only real constituency of the Roman state, and the two-tier system was designed to this end.

393
00:47:03.660 --> 00:47:16.660
It brought about a stable monetary standard for the ruling group who did not hesitate to secure it at the expense of the mass of the population.

394
00:47:16.660 --> 00:47:29.620
Now, the Roman state survived. The liberty of the Roman people did not. When freedom

395
00:47:29.620 --> 00:47:37.300
became possible in the West in the 5th century with the barbarian invasions, people took

396
00:47:37.300 --> 00:47:43.420
took advantage of the possibility of change.

397
00:47:43.420 --> 00:47:50.840
The tax burden remained burdensome even after the gold standard was reestablished.

398
00:47:50.840 --> 00:47:58.020
The peasantry had become totally alienated from the Roman state because it was no longer

399
00:47:58.020 --> 00:47:59.020
free.

400
00:47:59.020 --> 00:48:04.900
The business community likewise was no longer free and the middle class of the urban cities

401
00:48:04.900 --> 00:48:07.860
was no longer free.

402
00:48:07.860 --> 00:48:13.980
Now the economy of the West was perhaps more fatally weakened than that of the East.

403
00:48:13.980 --> 00:48:21.660
And when we read in the writings of the late, of the early 5th century Christian priest

404
00:48:21.660 --> 00:48:29.740
Salvian of Marseilles, his account of why the Roman state was collapsing in the West,

405
00:48:29.740 --> 00:48:31.900
He was writing from France, Gaul.

406
00:48:32.940 --> 00:48:37.940
Salvian says that the Roman state is collapsing

407
00:48:38.700 --> 00:48:40.940
because it deserved collapse,

408
00:48:40.940 --> 00:48:44.820
because it had denied the first premise of good government,

409
00:48:44.820 --> 00:48:47.580
which was justice to the people.

410
00:48:47.580 --> 00:48:51.140
And by justice, he meant a just system of taxation.

411
00:48:53.520 --> 00:48:58.520
Salvian tells us, and I don't think he's exaggerating,

412
00:48:58.520 --> 00:49:21.520
That one of the reasons why the Roman state collapsed in the 5th century was that the Roman people, the mass of the population, had but one wish after being captured by the barbarians, that they would never again fall under the rule of the Roman bureaucracy.

413
00:49:21.520 --> 00:49:30.520
In other words, the Roman state was the enemy, the barbarians were the liberators.

414
00:49:30.520 --> 00:49:37.520
And this undoubtedly was due to the inflation of the third century.

415
00:49:37.520 --> 00:49:42.520
While the state had solved the monetary problem for its own constituents,

416
00:49:42.520 --> 00:49:46.520
it had failed to solve that monetary problem for the masses

417
00:49:46.520 --> 00:49:56.520
and continue to use an oppressive system of taxation in order to fill the coffers of the ruling bureaucrats and military.

418
00:50:07.520 --> 00:50:11.520
Thank you very much, Joe. That was most interesting and informative.

419
00:50:11.520 --> 00:50:17.520
We'd be happy to entertain any questions or comments. I'd just like to make one comment.

420
00:50:17.520 --> 00:50:23.520
We like to think of ourselves, obviously, here in the 20th century as a very advanced society.

421
00:50:23.520 --> 00:50:27.520
I think technologically it's clear that we are.

422
00:50:27.520 --> 00:50:37.520
But isn't it interesting that in the midst of wars, taxes, inflation, government edicts to the contrary,

423
00:50:37.520 --> 00:50:42.520
That 1,600 years ago, people chose gold as their money.

424
00:50:42.520 --> 00:50:45.520
I wonder what it might say about us that we have.

425
00:50:46.520 --> 00:50:48.520
Any questions or comments?

426
00:50:51.520 --> 00:50:56.520
I think the other important message that Professor Peden has delivered to us

427
00:50:56.520 --> 00:51:04.520
is this notion that the inflation government creates in an attempt to curb it

428
00:51:04.520 --> 00:51:10.520
often results in a severe curtailment of our own economic freedoms.

429
00:51:10.520 --> 00:51:16.520
So the next time you hear the argument that, well, maybe a little bit of inflation is a good thing for a society,

430
00:51:16.520 --> 00:51:21.520
and that it might improve business conditions and things like that,

431
00:51:21.520 --> 00:51:26.520
argue to the analyst that, well, it's going to take away our economic freedoms eventually.

432
00:51:26.520 --> 00:51:28.520
Yes, we have a question back here.

433
00:51:28.520 --> 00:51:34.520
In today's economy we make the connection between government debt and inflation.

434
00:51:34.520 --> 00:51:42.520
Is there any evidence that the Roman government had access to borrowing and debt?

435
00:51:42.520 --> 00:51:51.520
It's amazing, but the Roman government does not seem to have had any kind of credit system that it could rely on.

436
00:51:51.520 --> 00:51:56.520
In other words, it did not normally go out and borrow money.

437
00:51:56.520 --> 00:52:02.520
When Marcus Aurelius, for example, needed funds to pursue his wars in the second century,

438
00:52:02.520 --> 00:52:07.520
he had to go out and sell the imperial jewels to raise the funds.

439
00:52:07.520 --> 00:52:10.520
This was why they turned to inflation.

440
00:52:10.520 --> 00:52:17.520
They didn't have a system of government, you know, treasury bonds and things like that, just didn't exist.

441
00:52:17.520 --> 00:52:47.520
I haven't seen on the program there's any one particular time that we're going to talk about proposals for where we go from here about how do we get from where we are to some kind of more stable money and I just wondered if you have any ideas from historical perspective what you think the United States should be doing from here on out and what transition steps we should take and what kind of eventual gold standard we should be having.

442
00:52:47.520 --> 00:52:54.480
Well, I'm not an economist, so I couldn't go into the technical ends of it, but let

443
00:52:54.480 --> 00:53:00.120
me speak to at least the political problem.

444
00:53:00.120 --> 00:53:04.480
Inflation is not an act of God.

445
00:53:04.480 --> 00:53:12.520
It is an act of men, specific men, who foster it for their own particular ends.

446
00:53:12.520 --> 00:53:18.560
And therefore it seems to me the first step before we can be effective in devising an

447
00:53:18.560 --> 00:53:24.600
anti-inflationary policy is to clearly identify who actually is profiting from this system

448
00:53:24.600 --> 00:53:27.040
and who is not.

449
00:53:27.040 --> 00:53:32.760
It is naive to think that, you know, that no one profits from inflation.

450
00:53:32.760 --> 00:53:35.080
Certain people do.

451
00:53:35.080 --> 00:53:41.660
Clearly with the credit system of the United States government, the government itself,

452
00:53:41.660 --> 00:53:49.820
I would think could not possibly allow any serious deflation because its own public debt

453
00:53:49.820 --> 00:53:52.100
would have to be repudiated.

454
00:53:52.100 --> 00:53:56.900
And so, I mean, one of our basic problems is that the United States government is itself

455
00:53:56.900 --> 00:54:04.740
the largest obstacle to a non-inflationary policy.

456
00:54:04.740 --> 00:54:06.500
The economists may have more to say about that.

457
00:54:06.500 --> 00:54:09.980
But I think the political question is, who profits from this?

458
00:54:09.980 --> 00:54:14.380
So if we can identify those people, then we, it seems to me, then we can move ahead and

459
00:54:14.380 --> 00:54:21.020
find a political strategy to identify those people and identify those who are being hurt.

460
00:54:21.020 --> 00:54:24.020
And that would be my first step.

461
00:54:24.020 --> 00:54:29.020
But I think that assumes an intelligence on the part of those people that isn't there.

462
00:54:29.020 --> 00:54:36.020
I don't think there's a grand conspiracy to create inflation and then profit from it.

463
00:54:36.020 --> 00:54:45.020
Many of these people really think that they're doing something for the good of society and are simply misguided.

464
00:54:45.020 --> 00:54:52.020
They are not creating inflation on purpose so that they can profit more.

465
00:54:52.020 --> 00:54:56.020
They honestly believe that they are doing the right thing for society.

466
00:55:06.020 --> 00:55:18.020
I've never seen anyone do this as well as Ron Paul, and he shows people very graphically in his speeches, as I've seen,

467
00:55:18.020 --> 00:55:24.020
and you don't have to be a college graduate to understand that.

468
00:55:24.020 --> 00:55:31.020
In fact, he told me that some of the most ardent, hard-money people in Texas are taxi drivers.

469
00:55:31.020 --> 00:55:37.660
So, I don't think the problem of educating the mass of the public is very difficult.

470
00:55:37.660 --> 00:55:48.820
I think the problem of educating our leaders, our elites, is more difficult.

471
00:55:48.820 --> 00:55:52.620
But I think the reason for that is so many of our elites profit from the system.

472
00:55:52.620 --> 00:55:59.180
I mean, you're assuming they're just naive, but I notice they're naive in their own self-interest.

473
00:55:59.180 --> 00:56:15.140
I know that you could spend the whole weekend giving us more examples of this material and

474
00:56:15.140 --> 00:56:20.620
we would, I think, very much profit by going back to the ancient world and seeing that

475
00:56:20.620 --> 00:56:29.020
there was a whole cycle from prosperity to decline based on bad monetary ideas coming

476
00:56:29.020 --> 00:56:36.380
Coming Out of the State. I wanted to ask you a couple of questions that would, I think,

477
00:56:36.380 --> 00:56:45.100
illuminate one or two points. The ancient world, Mediterranean world, was dominated

478
00:56:45.100 --> 00:56:52.340
by big imperial bureaucracies, big military bureaucracies. And when we get to the period

479
00:56:52.340 --> 00:56:59.100
where there is a transition where the ordinary property owners lose their property to the

480
00:56:59.100 --> 00:57:03.060
large property owners, and this occurred at this time, but it had occurred at earlier

481
00:57:03.060 --> 00:57:04.060
points.

482
00:57:04.060 --> 00:57:10.180
I think it's important to relate that to your point about the state turning the large

483
00:57:10.180 --> 00:57:13.520
property owners into their tax collectors.

484
00:57:13.520 --> 00:57:20.460
And so in each stage, whether it's under the Basileus of the Persian Empire or under

485
00:57:20.460 --> 00:57:26.580
of the Hellenistic Successor States of Alexander and then the Roman Empire is the successor

486
00:57:26.580 --> 00:57:30.060
of the Persian and Hellenistic Empire.

487
00:57:30.060 --> 00:57:37.260
In each case, the large property owners are made the tax collectors, they are identifiable,

488
00:57:37.260 --> 00:57:40.140
they have wealth and the government says if you don't collect it from the others, you're

489
00:57:40.140 --> 00:57:41.860
going to have to cough it up.

490
00:57:41.860 --> 00:57:50.420
And then the consequence of that is that the rich become the tax collectors when the ordinary

491
00:57:50.420 --> 00:58:20.420
The rich man gets his property in order to pay the state, and the result is, in the biblical writings, in the Old Testament, in the New Testament, in the Fathers of the Church, where you see a tax on the rich, what they're attacking isn't the rich, it's the tax collector who's rich because he's benefited from being a tax collector, and the modern contemporary liberation theology going back to the biblical writings and to the Fathers of the Church and finding

492
00:58:20.420 --> 00:58:24.920
Passages where they're saying, you rich, you have done this to the poor.

493
00:58:24.920 --> 00:58:31.920
The poor are poor because they were taxed out of their wealth and the rich are rich because they're state employees.

494
00:58:31.920 --> 00:58:35.420
It's not because of wealth. It's not because of productivity.

495
00:58:35.420 --> 00:58:40.420
It's because they are part of the state apparatus who have benefited from that.

496
00:58:40.420 --> 00:58:43.920
And the fathers of the church and the prophets are not attacking the wealthy.

497
00:58:43.920 --> 00:58:49.920
They're attacking the tax collectors and the state for expropriating the property holders.

498
00:58:49.920 --> 00:59:03.920
Property is a positive thing in the fathers and in the prophets. What's being attacked is the state, the wealthy are the people who have expropriated the property holders by using state power.

499
00:59:03.920 --> 00:59:17.920
Probably the most graphic description of that process that you've so well described is in Salvian of Marseilles, this early 5th century Catholic priest from southern Gaul.

500
00:59:17.920 --> 00:59:27.760
and in there he makes the point what had happened already some earliest almost a

501
00:59:27.760 --> 00:59:34.800
century earlier was that the government had instead of collecting taxes directly

502
00:59:34.800 --> 00:59:42.760
had given to the large local landlords the ability to collect taxes from the

503
00:59:42.760 --> 00:59:47.720
other people in the district they felt that they'd have one man on the scene

504
00:59:47.720 --> 00:59:54.740
that they could hold responsible rather than chasing peasants through the woods but that

505
00:59:54.740 --> 01:00:02.280
didn't work out quite as they thought because these large landowners then used their tax,

506
01:00:02.280 --> 01:00:09.440
as you suggest, their tax-collecting power to compel the smallholders to surrender their

507
01:00:09.440 --> 01:00:15.680
lands to the large landowners who said, you know, just surrender your land to me.

508
01:00:15.680 --> 01:00:22.440
You can have it on a cheap lease, from me, and I will take care of the taxes, okay?

509
01:00:22.440 --> 01:00:27.280
Well of course what happened eventually was that he took care of the taxes by collecting

510
01:00:27.280 --> 01:00:36.400
it from the tenants and giving to the state less than he collected, or not giving anything

511
01:00:36.400 --> 01:00:42.520
to the state because he was a powerful political figure and who's going to, you know, challenge

512
01:00:42.520 --> 01:00:45.520
and his tax collecting.

513
01:00:45.520 --> 01:00:50.520
So what Salvian does is he describes this whole system

514
01:00:50.520 --> 01:00:56.520
and he makes the point you're making that the landlords

515
01:00:56.520 --> 01:01:00.520
are not just landlords, they're powerful political figures,

516
01:01:00.520 --> 01:01:05.520
they control the courts of law, the police force and the tax collecting

517
01:01:05.520 --> 01:01:10.520
and they themselves are not paying taxes because of their political position.

518
01:01:10.520 --> 01:01:18.920
In effect, what's happening is the bureaucracy in its desire to get more money had undermined itself

519
01:01:18.920 --> 01:01:30.120
by creating in the rural areas a large number of people who began to take on the powers of the state themselves.

520
01:01:30.120 --> 01:01:36.320
Some people see in this the first foreshadowings of the dispersion of the feudal system.

521
01:01:36.320 --> 01:01:47.880
But Salvian's work is called The Governance of God, and he tries to explain why the Romans deserve to lose their empire from a Christian perspective.

522
01:01:47.880 --> 01:01:52.920
You look over this history, it's pretty dismal history, it keeps on going down, down, down to dark ages.

523
01:01:52.920 --> 01:01:58.960
And, you know, I'm always hearing people talking about how the United States is following the trend and that kind of thing.

524
01:01:58.960 --> 01:02:03.480
And I'm just wondering, I don't think the analogies are all there.

525
01:02:03.480 --> 01:02:09.480
Were there any records or do you know of any ideological movements such as like the Mises Institute

526
01:02:09.480 --> 01:02:15.480
or any of the Freedom Movement anytime during that period and what was, if there were, what was going on?

527
01:02:15.480 --> 01:02:24.480
Well, we know Lactantius, for example, a Christian writer at the time of Diocletian,

528
01:02:24.480 --> 01:02:29.480
whom he wrote a book called On the Death of the Persecutors,

529
01:02:29.480 --> 01:02:32.480
and Diocletian was the last great persecutor of the Christians,

530
01:02:32.480 --> 01:02:35.480
and he opens up a comment on Diocletian by saying,

531
01:02:35.480 --> 01:02:37.480
Diocletian an inventive criminal,

532
01:02:37.480 --> 01:02:43.480
and he goes on to show what terrible things Diocletian did,

533
01:02:43.480 --> 01:02:47.480
that all he had to do was see a beautifully kept estate

534
01:02:47.480 --> 01:02:49.480
and he would have the person who owned it

535
01:02:49.480 --> 01:02:53.480
condemned to death on some trumped up charge and confiscate it.

536
01:02:53.480 --> 01:02:56.480
Now he may exaggerate a bit,

537
01:02:56.480 --> 01:02:59.480
he sounds like an old fashioned taff Republican at times,

538
01:02:59.480 --> 01:03:17.480
But his description of the situation is pretty accurate and so I would say some of the church fathers were perfectly aware of the inequities of the system.

539
01:03:17.480 --> 01:03:23.480
There were also people who opposed the government and its collection of taxes.

540
01:03:23.480 --> 01:03:29.840
Taxes. There are constant, almost all the time, revolts of the peasantry. I mean, people

541
01:03:29.840 --> 01:03:35.760
revolt in different ways. Some of them flee. Others revolt and kill the tax collector.

542
01:03:35.760 --> 01:03:39.800
Others try to escape by turning their land over to someone else and let him worry about

543
01:03:39.800 --> 01:03:44.000
paying the taxes. They'll just work as a serf and live their life as quietly as they

544
01:03:44.000 --> 01:03:45.000
can.

545
01:03:45.000 --> 01:03:50.280
But in Gaul and Spain, you also had another phenomenon, widespread peasant rebellions.

546
01:03:50.280 --> 01:03:57.840
It was a group called the Bogotai and they're uniformly described as terrorist and it turns

547
01:03:57.840 --> 01:04:04.420
out that the people they terrorized were the Roman tax collectors and and large parts of

548
01:04:04.420 --> 01:04:11.280
Gaul in the third and fourth century and then of course in the fifth century for long periods

549
01:04:11.280 --> 01:04:17.880
of time 25-30 years there were parts of Gaul that couldn't be visited by a Roman official

550
01:04:17.880 --> 01:04:26.720
Was the situation different in the Eastern Empire where the Byzantine Empires didn't

551
01:04:26.720 --> 01:04:31.320
really experience the dark ages that continued to thrive?

552
01:04:31.320 --> 01:04:36.960
The difference probably lies in the fact that the economy of the Eastern Empire was, on

553
01:04:36.960 --> 01:04:46.640
the whole, more well-developed, greater resources, greater technological skills, and much greater

554
01:04:46.640 --> 01:04:51.840
Agricultural wealth, heavier population. And so strategically they were in better shape.

555
01:04:51.840 --> 01:04:56.960
And then they also did not experience something else. The barbarian invasions

556
01:04:56.960 --> 01:05:03.520
tended to move in the West. And so the people had no opportunity really to perform

557
01:05:03.520 --> 01:05:08.160
the way the Western peasantry did, which was to vote with their feet by joining the barbarians.

558
01:05:08.160 --> 01:05:15.120
It's very interesting that in Egypt and Syria, as soon as a liberator or potential liberator arrived,

559
01:05:15.120 --> 01:05:22.120
which was in the 7th century when the Arabs swept out of the desert into Egypt, Syria, Palestine.

560
01:05:22.120 --> 01:05:25.620
Those provinces went over like that to the Arabs.

561
01:05:25.620 --> 01:05:28.920
They opened the gates of the city and said in effect,

562
01:05:28.920 --> 01:05:33.420
rather the Arabs than Constantinople and the tax collectors.

563
01:05:33.420 --> 01:05:41.120
So it was a delay of two centuries but when the opportunity presented itself, they took advantage of it.

564
01:05:41.120 --> 01:05:44.320
Joe, thank you very much for an interesting and informative discussion.

565
01:05:44.320 --> 01:06:14.320
I think I'll just break it off here for a moment, we've touched on a number of themes thus far this morning that are most interesting and I'd like to continue the questioning for just a few more minutes and then we'll take a short coffee break, we'll just cut our break by a little bit so we can keep going with the questions for now, the number of themes we're touching on you'll hear repeated throughout the rest of the day, so if we don't get time to discuss

566
01:06:14.320 --> 01:06:20.320
If that's everything in depth right now, I hopefully will by the end of the day, so let's continue with the question, gentlemen over here.

567
01:06:20.320 --> 01:06:29.320
Has any civilization ever recovered from the devaluation of currency in what we have?

568
01:06:29.320 --> 01:06:43.320
Well, the Roman Empire recovered because the long-term effect of the re-monetization of gold under Constantine and his successors,

569
01:06:43.320 --> 01:06:54.320
I didn't go into that, but by the end of the 4th century, the bronze coinage slowly began to be called in and reduced.

570
01:06:54.320 --> 01:06:56.320
That was the inflated coinage.

571
01:06:56.320 --> 01:07:04.320
And it was replaced not only by increasing issues of the solitus, but also by fractional gold coinage,

572
01:07:04.320 --> 01:07:09.320
which meant that by the end of the 4th and by the beginning of the 5th century,

573
01:07:09.320 --> 01:07:15.320
There was now a gold coinage that could be used in the daily market purchases of people.

574
01:07:15.320 --> 01:07:25.320
And so in a sense, as the bronze coinage declined, for example, in the early 5th century,

575
01:07:25.320 --> 01:07:36.320
a pound of gold was circulating at about 6,000 denarii from like 12,000 20 years before, 10 years before.

576
01:07:36.320 --> 01:07:50.720
So there was a gradual lessening of the inflation, and ultimately the bronze issues ceased, and Rome went back on a full gold with an occasional silver issue, and the bronze coinage disappeared.

577
01:07:50.720 --> 01:08:06.720
Now, that gold coinage, the solitas, begun by Constantine, in other words, over a century later, had more or less become the standard coin in the market transactions.

578
01:08:06.720 --> 01:08:16.720
And that coinage maintained itself at the same level of purity and weight until the middle of the 11th century,

579
01:08:16.720 --> 01:08:25.720
which is one of the longest, I would think, cases of a gold maintaining itself, you know, without debasement.

580
01:08:25.720 --> 01:08:36.720
And that then led to the survival of the Roman state in the East, because it lasted until, well, the 11th century,

581
01:08:36.720 --> 01:08:39.720
and then it lasted, technically speaking, until the 15th century.

582
01:08:39.720 --> 01:08:46.720
This situation wasn't compounded by only the unbelievable sonnets of these third world countries in the world.

583
01:09:09.720 --> 01:09:15.520
Because what happened was, one of the characteristic features of the Roman government of the Middle Ages was

584
01:09:15.520 --> 01:09:22.220
that rather than fight wars, it used to pay off the barbarians. They sent them tribute in gold.

585
01:09:22.220 --> 01:09:27.320
Now what was a barbarian to do with gold except buy Roman goods?

586
01:09:27.320 --> 01:09:35.320
Okay? So that in that sense, it cost them less to ship the gold to the barbarians

587
01:09:35.320 --> 01:09:38.720
than it would if they had to actually fight the barbarians.

588
01:09:38.720 --> 01:09:43.280
Now, of course, they're constantly criticized as being, you know, wimps and weaklings.

589
01:09:43.280 --> 01:09:44.760
They didn't defend themselves.

590
01:09:44.760 --> 01:09:45.840
But I think they really did.

591
01:09:45.840 --> 01:09:51.880
They took the cheapest form of defense, which was to kind of deflect the invaders.

592
01:09:51.880 --> 01:09:58.160
I might add that there's been a number of other examples where societies have survived

593
01:09:58.160 --> 01:10:04.480
highly inflationary conditions, and increasingly what we as economists are seeing in such societies

594
01:10:04.480 --> 01:10:10.560
Is that it required complete overhaul of their monetary and fiscal arrangements.

595
01:10:10.560 --> 01:10:14.640
Whether we'll get to that point in the United States obviously remains to be seen.

596
01:10:14.640 --> 01:10:16.600
Do we have a question over here earlier?

597
01:10:16.600 --> 01:10:17.600
I think I've...

598
01:10:17.600 --> 01:10:18.600
Yes.

599
01:10:18.600 --> 01:10:19.600
I'll get to you in just a second.

600
01:10:19.600 --> 01:10:23.040
Q. Could you give us a role of a Roman Welfare today, as we have today?

601
01:10:23.040 --> 01:10:28.980
Sometimes we hear in traditional textbooks that the Roman names were drawn and written by people who knew before.

602
01:10:28.980 --> 01:10:31.940
I wonder if this is a different role for the price?

603
01:10:31.940 --> 01:10:42.440
A. Yes. There was always 150,000 to 200,000 people in Rome itself who were on the dole.

604
01:10:42.440 --> 01:10:47.600
And when Constantine built a new capital, which was tremendously expensive,

605
01:10:47.600 --> 01:10:55.960
He also added a dole in Constantinople of about 80,000 people, this is early in the 4th century.

606
01:10:55.960 --> 01:11:00.160
And then other cities said, well, why can't we, we're big cities too, why can't we have a dole?

607
01:11:00.160 --> 01:11:03.640
So they gave it to Alexandria and Antioch and Carthage.

608
01:11:03.640 --> 01:11:11.280
So yeah, those doles were always there and the bread and circuses were there and massive buildings.

609
01:11:11.280 --> 01:11:20.680
In fact, one person has commented, I think it was Spengler, Oswald Spengler said that

610
01:11:20.680 --> 01:11:26.680
the winter of a civilization is always marked by the massiveness of its buildings.

611
01:11:26.680 --> 01:11:28.960
And that's certainly true for the late Roman Empire.

612
01:11:28.960 --> 01:11:34.520
The most massive buildings were erected in the time of Constantine.

613
01:11:34.520 --> 01:11:36.040
He built St. Peter's.

614
01:11:36.040 --> 01:11:38.400
He built St. John Lateran in Rome.

615
01:11:38.400 --> 01:11:39.800
He built the Church of the Holy Sepulcher.

616
01:11:39.800 --> 01:11:45.720
I mean those are just the most noteworthy ones and other vast building projects.

617
01:11:45.720 --> 01:11:51.880
Diocletian was even worse. He didn't build churches, but he built other things.

618
01:11:51.880 --> 01:11:58.120
And these were often welfare-related things. They provide employment for people and so on.

619
01:11:58.120 --> 01:12:08.400
So much of our political rhetoric today is trying to get this notion of a global ideological struggle

620
01:12:08.400 --> 01:12:14.360
between Capitalism and Communism to be the underpinning for our continuance as a warfare

621
01:12:14.360 --> 01:12:20.360
state. Everything around the world, any situation, any conflict, always the bottom line is always

622
01:12:20.360 --> 01:12:25.200
looked at by the politicians in terms of, well, it's us versus them. I just wonder if

623
01:12:25.200 --> 01:12:31.020
the Roman propaganda mill during the period that you talked about had a similar conception

624
01:12:31.020 --> 01:12:35.840
in terms of justifying the increases in military spending in terms of, well, it's either us

625
01:12:35.840 --> 01:12:40.840
If they don't get us, then we don't get them, they'll get us.

626
01:12:40.840 --> 01:12:45.840
Did they use that type of propaganda to justify the increase in military spending?

627
01:12:45.840 --> 01:12:53.840
They used the coinage itself for propaganda.

628
01:12:53.840 --> 01:12:58.840
And there's an interesting kind of change that took place on one issue of coinage.

629
01:12:58.840 --> 01:13:07.400
There had been a coinage that was issued in which they had a personification of abundance and this

630
01:13:09.000 --> 01:13:16.760
goddess of abundance was depicted pouring out her horn of plenty on a civilian.

631
01:13:18.680 --> 01:13:22.520
In the third century, this suddenly changed and the civilian became a soldier.

632
01:13:22.520 --> 01:13:30.240
In other words, abundance was still worship, but she was going to the soldiers, not to

633
01:13:30.240 --> 01:13:31.240
the civilians anymore.

634
01:13:31.240 --> 01:13:36.400
As I say, it's kind of a mental change that takes place.

635
01:13:36.400 --> 01:13:43.440
There were ideological reasons for fighting the barbarians.

636
01:13:43.440 --> 01:13:49.760
The Romans had always been ethnocentric, following the Greeks, who were also very ethnocentric.

637
01:13:49.760 --> 01:13:58.520
But nothing like this, nothing like the ideological struggle of the US and Russia. It didn't

638
01:13:58.520 --> 01:14:03.040
have that quite fineness. It was more or less based simply upon, we don't like those guys

639
01:14:03.040 --> 01:14:08.040
because they wear trousers and they use bear grease on their hair and stuff like that.

640
01:14:08.040 --> 01:14:18.040
Is the loss of freedom pretty typical of all the inflation throughout the street?

641
01:14:18.040 --> 01:14:24.040
I'm only a specialist in a few areas.

642
01:14:24.040 --> 01:14:31.040
I will say this, that in Roman history it certainly is, because remember that the final...

643
01:14:31.040 --> 01:14:39.540
Rome had already gone through a dramatic transformation in the days of the late republic, in the first and second century before Christ.

644
01:14:39.540 --> 01:14:48.340
And in that period, again, extensive wars and civil wars in particular, between various factions of the Roman army,

645
01:14:48.340 --> 01:14:56.340
Rome became militarized, militarized state, those wars led to a collapse of the republican carnage.

646
01:14:56.340 --> 01:15:04.780
And Augustus' issuance of a whole new coinage was based upon his bringing about a state of peace

647
01:15:04.780 --> 01:15:08.540
at the price, of course, of the death of the republic.

648
01:15:08.540 --> 01:15:13.620
And so the Augustan coinage that I've described, its destruction 200 years later,

649
01:15:13.620 --> 01:15:21.340
was itself instituted as a reform having to replace the republican coinage which had been destroyed by inflation.

650
01:15:21.340 --> 01:15:32.060
So I would think a loss of freedom is almost inevitable whenever you get a combination of war and monetary inflation.

651
01:15:32.060 --> 01:15:41.020
We certainly see it in the United States because they're passing more and more restrictions and more penalizing laws with what the tax is pretty obvious.

652
01:15:41.020 --> 01:15:52.820
I especially see it when the government that has instituted the inflation doesn't take steps to get at the root cause of it to cure the inflation,

653
01:15:52.820 --> 01:15:59.420
but instead tries to do minor and circumferential things to affect the inflation.

654
01:15:59.420 --> 01:16:01.620
Clearly then you'll have a loss of freedom.

655
01:16:01.620 --> 01:16:06.420
We've seen that historically. We've seen it in the United States, as you mentioned.

656
01:16:06.420 --> 01:16:15.420
Thank you. Professor Peden, I know that at a gathering like this, it's pretty risky to say anything good about politicians,

657
01:16:15.420 --> 01:16:20.420
and I quite agree with your conclusion, and I certainly enjoyed your presentation,

658
01:16:20.420 --> 01:16:26.420
but it worries me a little bit in terms of what one of the questioners asked.

659
01:16:26.420 --> 01:16:30.420
Do you have any suggestions on how we get from here to there?

660
01:16:30.420 --> 01:16:38.220
And I wonder if, in your research, if you found any indication that in the olden days

661
01:16:38.220 --> 01:16:41.820
that there was an attempt to bastardize the language like we're doing today.

662
01:16:41.820 --> 01:16:47.180
For example, the monitors have a quite different idea about the meaning of the word inflation.

663
01:16:47.180 --> 01:16:50.940
And I don't mean to be overly simplistic, but if you're going to communicate with the

664
01:16:50.940 --> 01:16:53.140
politicians, you've got to be pretty simple-minded.

665
01:16:53.140 --> 01:17:01.740
And with that being the case, it worries me because, as I observe this veil of tears,

666
01:17:01.740 --> 01:17:05.460
it occurs to me that we really are getting representative government, and that's what

667
01:17:05.460 --> 01:17:06.460
scares me to death.

668
01:17:06.460 --> 01:17:10.660
And I just wondered if you see they're bastardizing the language today with the word inflation,

669
01:17:10.660 --> 01:17:14.420
that we don't seem to be able to distinguish the difference between price inflation and

670
01:17:14.420 --> 01:17:15.420
money inflation.

671
01:17:15.420 --> 01:17:18.900
That's an interesting question.

672
01:17:18.900 --> 01:17:26.020
Well, changes in language. There is one or two interesting aspects. For example, in the

673
01:17:26.020 --> 01:17:34.020
rabbinical sources, which have been reviewed recently by an Israeli scholar, Daniel Sperber

674
01:17:34.020 --> 01:17:40.300
in a series of books on Roman Palestine, he notices that in the first and second centuries

675
01:17:40.300 --> 01:17:46.460
In other words, the rabbis refer to a coin called the menna, and it clearly means one

676
01:17:46.460 --> 01:17:48.700
denarius.

677
01:17:48.700 --> 01:17:52.940
In the third century, they're still using the word menna, but it now means a hundred

678
01:17:52.940 --> 01:17:53.940
denarii.

679
01:17:53.940 --> 01:17:59.740
In other words, the word remains the same, but its connotation has changed.

680
01:17:59.740 --> 01:18:05.020
Likewise, when they use the word denarius in their sources, in the first century they

681
01:18:05.020 --> 01:18:07.660
mean a silver coin.

682
01:18:07.660 --> 01:18:14.260
When they want to refer to the gold coin, they call it a gold denarius.

683
01:18:14.260 --> 01:18:19.720
By the third century, whenever they use the word denar or denarius, it always means a

684
01:18:19.720 --> 01:18:20.720
gold coin.

685
01:18:20.720 --> 01:18:22.600
So there's been a shift.

686
01:18:22.600 --> 01:18:25.680
The words are the same, but there's been a total shift in the content.