Two centuries ago in 1776, there were two books published in England, both of which are read avidly today.
One of them was Adam Smith's Wealth of Nations, and the other was Edward Gibbon's Decline and Fall of the Roman Empire.
Gibbon's multi-volume work is the tale of a state that survived for 12 centuries in the West
and for another thousand years in the East at Constantinople.
Yet Gibbon, in looking at this phenomena, commented that the wonder was not that the Roman Empire had fallen,
but rather that it had lasted so long.
And scholars since Gibbon have devoted a great deal of energy
to examining that problem.
How was it that the Roman Empire lasted so long?
And did it decline or was it simply transformed into something else?
That something else being the European civilization
of which we are the heirs.
Now, I've been asked to speak on the theme of Roman history,
particularly the problem of inflation and its impact.
My analysis is based on the premise that monetary policy cannot be studied
or understood in isolation from the overall policies of a state.
monetary, fiscal, military, political, economic issues are all very much intertwined.
And the reason they are all so intertwined is in part due to the fact that the state, any state,
normally seeks to monopolize the supply of money within its own territory.
Monetary policy, therefore, always serves, even if it serves badly, the perceived needs of the rulers of the state.
If it also happens to enhance the prosperity and progress of the masses of the people, that is a secondary benefit.
But its first aim is to serve the needs of the rulers, not the ruled.
And this point is central, I believe, to an understanding of the course of monetary policy in the late Roman Empire.
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.
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
in the Second Centuries, a period the historians speak of as the Augustan Principate.
To look at the mentality of the Roman emperors, we can look just at the advice that the emperor
Septimius Severus gave to his two sons, Caracalla and Geta.
This was supposed to be his final words to his heirs.
He said, live in harmony, enrich the troops, ignore everyone else.
There's a monetary policy to be marveled at.
Karakalla did not adhere to the first part of that.
In fact, one of his first acts was to murder his brother.
But as for enriching the troops, he took that so seriously to heart that his mother remonstrated
with him and urged him to be more moderate and to restrain his increasing military expenditures
and his very burdensome new taxes.
He responded by saying, there was no longer any revenue, just or unjust, to be found,
But Not to Worry, quote, for as long as we have this, he insisted, pointing to his sword,
we shall not run short of money.
His sense of priorities was made more explicit when he remarked, quote, nobody should have
any money but I, so that I may bestow it upon the soldiers.
And he was as good as his word.
He raised the pay of the soldiers 50 percent, and to achieve this he doubled the inheritance
taxes paid by Roman citizens. When this was not sufficient to meet his needs, he admitted
almost every inhabitant of the empire to Roman citizenship. What had formerly been a privilege
now became simply a means of expanding the tax base.
He then went further by proceeding to debase the coinage.
Now the basic coinage of the Roman Empire to this time, we're speaking now about 211,
was the silver denarius introduced by Augustus at the end of the first century before Christ.
Augustus had issued a silver coin, a denarius, that was about 95% silver, and that coin continued
for the better part of two centuries as the basic medium of exchange in the empire.
By the time of Trajan in 117, it was only about 85% silver, down from Augustus' 95.
By the age of Marcus Aurelius in 180, it was down to about 75% silver.
In Septimius' time, it had dropped to 60% and Caracalla evened it off at 50-50.
Caracalla was assassinated in 217 and there then followed an age that historians refer
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
This was totally unprecedented in Roman history with two exceptions, Nero, a suicide, and Caligula, assassinated earlier.
Caracalla had also debased the gold coinage.
Under Augustus, this circulated at 45 coins to a pound of gold.
Karakalla made it 50 to a pound of gold.
Within 20 years after him, it was circulating at 72 to the pound of gold,
reduced to 60 at the end of the century by Diocletian, only to be raised again to 72 by Constantine.
So even the gold coinage was in fact inflated, debased.
But the real crisis came after Caracalla between 258 and 275. In a period of
intense civil war and foreign invasions, the emperors simply abandoned for all
practical purposes a silver coinage. By 268 there was only five-tenths percent
Silver in the Denarius. And prices in this period rose in most parts of the empire by
nearly a thousand percent. The only people who were getting paid in gold were the barbarian
troops hired by the emperors. The barbarians were so barbarous that they would only accept
of Gold in Payment for Their Services.
Now, the situation did not change until the accession of Diocletian in the year 284.
Shortly after his accession, he raised the weight of the gold coinage, the aureus, to 60 to the pound.
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.
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.
This Argentius was fixed as equal to 50 of the old denarii, the old coinage.
It was designed to respond to the need for higher tariffed coins in the marketplace to reflect the inflation.
He also issued a new bronze coin, tariffed at 10 denarii, called the numus.
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.
In other words, despite his efforts, Diocletian had not been able to stop the inflation.
The next emperor who interfered with the coinage in a meaningful way was to be Constantine, the first Christian emperor of Rome.
Constantine, in the year 312, which is also the year he issued the Edict of Toleration for Christianity,
issued a new gold piece, which he called by a new name, the solitus, solid gold.
This was struck at 72 to the pound, so it was in fact debased over Diocletians.
These were very large issues, and historians have puzzled over where he got all the gold,
but I think the puzzle is not so much of a real puzzle once you begin to look at the legislation that took place.
First of all, he issued two new taxes.
One was taxed on the estates of the Senators.
And this was rather new because Senators generally were free of most taxes on their land.
He also issued a tax on the capital of merchants.
Not their earnings, but their capital.
And this was to be levied every five years.
And it was to be paid in gold.
He also required that the rents from the imperial estates, which were rented out to tenants, were to be paid only in gold.
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.
In other words, any city that had any gold bullion or silver bullion left in its treasury,
this was simply requisitioned by Licinius, and this passed on now into the hands of Constantine,
who had gotten rid of Licinius in a civil war.
We're also told that he stripped the pagan temples of their treasuries.
This he did rather late in his reign, still somewhat afraid of, apparently, in the early
In the early days of angering the gods of Rome, as his Christianity became more fixed,
he felt greater ease at robbing the temples.
Now, Constantine's reform, in one sense, began the reversal of the process.
The gold coinage was sufficiently large that it began to take hold and to become, circulate more freely.
The silver coinage failed, and what was worse, at no time in this period did the central government try to control the token coinage.
And the result of that was token coinage was being minted not only by the imperial mints but also by the mints of cities.
In other words, if a city couldn't pay its costs, pay its salaries to its employees,
It simply struck up some token coinage and issued that.
By the late third century, we also begin to have massive appearance of what numismatists call counterfeits.
I would say it would be called credit money today.
People need small change and they simply go and manufacture it.
All of which, of course, means that the amount of token coinage in circulation is uncontrolled and increasingly massive.
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
In token coinage or even in these debased silver coins, prices immediately rose.
Every time the silver value of the denarius dropped, prices naturally rose.
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,
Inflation, it began to demand payment of taxes in kind and services rather than in coin.
They wound up in effect in repudiating their own issues, not accepting them for tax collection
purposes.
With Constantine's reform, this situation changed somewhat and slowly but surely, the
government began to move away from collecting taxes in kind and from paying salaries in
kind and began to substitute paying salaries in gold and collecting taxes in gold.
Over the long run, this meant that the gold standard was strengthened and gold remained
the real money of the Roman Empire.
However, the inflation did not end
for the masses of the people.
In other words, gold was a hedge against inflation
for those who had it.
And these were principally the troops
and the civil servants.
The taxpayers had to buy these gold coins
in order to pay their taxes.
And so if they were wealthy enough,
they could afford to buy these gold coins,
which were increasingly expensive in terms of token money.
If they were poorer, they simply couldn't pay the taxes,
and this meant they lost their lands in one form or another
or became delinquents.
And we hear constant references
to people abandoning their land, disappearing.
As a matter of fact, in the third century, this was a constant problem in Rome that all
sorts of people were trying to escape the increased taxes that the military had needed.
The army itself, from the time of Augustus, when they had about a quarter of a million
troops, by the time of Diocletian, they had somewhat over 600,000.
So the army itself had doubled in size in the course of this inflationary spiral and
obviously that contributed greatly to the inflation.
In addition, the administration of the state had grown enormously.
Under Augustus, essentially, you had the imperial administration at Rome and the governors of
different provinces, the secondary level of administration, and then the primary governmental
The units in the Roman Empire in this time were the cities, the municipalities.
By the time of Diocletian, this pattern had been broken apart.
You had not one emperor, but you had, under Diocletian, four emperors, which meant four
imperial courts, four praetorian guards, four palaces, four staffs, etc., etc.
Under them were four praetorian prefectures, regional administrative units with their
staffs and their budgets.
Under these four prefectures, they were divided into 12 dioceses, each diocese having its
administrative staff and so on.
Under the diocesan rulers, the vicars of the diocese, we have the provinces.
In Augustus's time, there were approximately 20 provinces.
300 years later, with no substantial increase in territory,
there were over 100 provinces.
They had simply began to divide and subdivide provinces
for purposes of maintaining internal military control
of these regions.
In other words, the cost of policing the Roman state
became increasingly enormous.
All these costs then are some of the reasons why the inflation took place, I'll get to others in a moment.
To give you some idea of the situation after Constantine's reform of the gold,
let me just briefly give you the figures for what it cost in terms of the silver coinage or token coinage now,
Now, the denarius, for a pound of gold. In Diocletian's time, in the year 301, he fixed
the price at 50,000 denarii for one pound of gold. Ten years later, it had risen to
120,000. In 324, in other words, 23 years after it was 50, it was now 300,000. And in
In 337, the year of Constantine's death, a pound of gold brought 20 million denarii.
And by the way, just as we're all familiar with the German currency of the 20s with the
figures stamped on it, the Roman coinage also has stamps and over stamps on the metal indicating
multiples of value.
At one point, one of the Roman emperors had a marvelous idea.
Instead of issuing a single coin, he devised a method to handle the inflation.
He took brass slugs and put them in a leather pouch and called it a phallus and people began
passing these pouches back and forth as value.
I guess it was the Roman equivalent to those baskets of paper we see in the pictures of
Germany in the 20s.
Interestingly enough, within 10 years or so after that began, the word phallus, which
had meant this bag of coins, had now drifted to mean one of those plugs, one of those slugs
was now the phallus.
So they couldn't even keep the bags stable, they too were inflated.
One interesting thing with all this inflation, I think it should be a great comfort to us.
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
value, whereas all this coinage just became increasingly worthless. Now what
were the causes of this inflation? First of all, war. The soldiers' pay rose from
225 denarii during the time of Augustus to 300 denarii in the time of
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.
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.
The advance in the soldiers' pay in the rest of the third century and into the fourth century is not known.
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.
They were literally given food, clothing, shelter and other commodities in lieu of pay.
And this applied also to the civil service.
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.
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.
What we find is that the donatives had been given on the accession of a new emperor from the time of Augustus on.
Then they began to be given in the third century every five years.
By the time of Diocletian, donatives were given every year, so that the soldiers' donatives had in fact become part of their basic salary.
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.
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,
frequently by debasing, then by taxation, and then often simply by accusing people of treason and confiscating their estates.
One of the Christian fathers, St. Gregory Nazianzus, commented that war is the mother of taxes.
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.
Now, what were the consequences of inflation?
One of the odd things about inflation is, in the Roman Empire, that while the Roman state survived,
The Roman state was not destroyed by inflation.
What was destroyed by inflation was the freedom of the Roman people.
And particularly, the first victim was their economic freedom.
Rome had basically a laissez-faire concept of state-economy relations.
Except in emergencies, which were usually related to war,
the Roman government generally followed a policy of free trade
and minimal restriction on the economic activities of its population.
But now, under the pressure of this need to pay the troops
and under the pressure of inflation,
the liberty of the people began to be seriously eroded and very rapidly.
We could start with the class known as the Decuriones, the Decurions.
This was your prosperous, small and middle-land-owning class
who were the dominant elements of the cities of the Roman Empire.
They were the class from which were chosen the municipal councils, the municipal magistrates and officials.
And traditionally, they had viewed service in the governments of their towns as an honor.
And they had responded to this by donating, not merely their time, but their wealth to the betterment of the urban environment,
building stadiums and bathhouses and repairing the streets and providing for pure water.
These were considered benefactions. It was a kind of philanthropic element.
And their reward was, of course, public recognition and esteem.
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.
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.
The Decurians, of course, had as much difficulty as anyone else in doing this,
and the returns were, again, frequently inadequate,
so the government solved that problem by simply passing a law
that any taxes the Decurians could not collect from others,
they would have to pay out of their own pocket.
That's known as the incentive method for the tax collector.
As you can well imagine, as the crisis became greater and the economy was disrupted by civil
conflicts and invasions and the effects of inflation, the Decurians, strangely enough,
no longer wanted to be Decurians.
And they began to abandon their lands, abandon their cities, and escape to wherever they
They could find refuge in other larger cities or other provinces.
But they were not to be allowed to do that with impunity, and the law was then passed
that any decurian discovered somewhere else was to be arrested, bound like a slave and
carted back to his hometown where he was restored to his dignity as a decurian.
This third century is also the period of the persecution of the Church.
And we find that at least some of the emperors must have had a sense of humor because when
they passed a regulation that if a Christian was arrested and found guilty of capital punishment,
namely believing in Christ, he was to not be executed but offered the option of becoming
Being a Decurion.
Now the merchants and the artisans were traditionally organized into guilds and chambers of commerce
and that sort of thing.
They now too came under government pressure because the government could not obtain enough
material for the war machine through regular channels.
People, after all, don't want all that token coinage.
And so they were now compelled to make deliveries of goods, so that if you had a factory making
garments, you now had to deliver so many garments to the government requisitions.
If you had ships, you had to carry government goods in your ships.
In other words, what we have here is a kind of nationalization of private enterprises,
And this nationalization means that the people who risk their money and their talent are
compelled to now serve the state whether they like it or not.
When people tried to get out of this, they were then, by law, compelled to remain in
the occupation that they were in.
In other words, you couldn't change your job or your business.
This was not sufficient because, after all, death is always a relief from taxes.
And so the occupations were now made hereditary.
When you died, your son had to take up your business, your trade, your profession.
If your father was a shoemaker, you had to be a shoemaker.
These started by being restricted to the defense-oriented industries.
But of course gradually it was realized that everything is defense oriented and the system just developed.
The peasantry, known as the Colony, these were leaseholders on both imperial and private estates.
They too, formerly a free class, were now under the same kinds of pressures that all
All small holders were in this situation, and they began to drift away trying to find
better opportunities, better leases, better occupations.
And so, under Diocletian, the Colony were now bound to the soil.
Anyone who had a lease on a particular piece of land could not give that lease up.
More than that, they had to stay on the land and work it.
In effect, this is the beginning of what in the Middle Ages is called serfdom, but it
actually has its origins here in the late Roman society.
We know, for example, from studies of Palestine, particularly in the rabbinical writings, that
in the course of the third and early fourth century, the structure of landholding in Palestine
changed very dramatically.
in the second century was largely composed of small peasant landholders
with very small acreage, perhaps an average of two and a half acres.
By the fourth century, those small holders had virtually disappeared
and been replaced by vast estates controlled by a few large landowners.
The peasants working the estates were the same people,
But they had, in the meantime, lost their land to the larger landowners.
In other words, land holding became a massive kind of agri-business.
In this course of this, the population of Palestine, still principally Jewish,
also changed in that the ownership of land passed from Jews to Gentiles.
and the reason for that undoubtedly was that the only people with large amounts of cash
who could buy out these smallholders who were in distress were of course the government officials
and we hear of them being called potentes, powerful ones.
In effect, there's a shift in the distribution of wealth in Palestine
and obviously this, from other evidence, similar things were happening in other places.
With regard to taxes, they naturally increased across the board,
but Diocletian decided that it was a very inefficient system that he had inherited.
Every province more or less had its own system of taxation,
going back to pre-Roman times actually.
And so he, with his military mind, demanded standardization.
And what he did was to have all wealth, which was of course landed wealth,
assessed in units of productivity.
In other words, every person who had land was either singly, if he was a large landowner,
fit into a particular unit, a tax unit called a UGM.
and those who were smaller landowners were collectively put into a yugum
and this meant that the emperor for the first time had the basis of a national budget
something the Romans never had until Diocletian
and therefore he knew at any given time how many taxable units of wealth there were in any province
and he could simply levy an assessment and expect to get a fixed amount of money
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.
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,
or to reduce the number of units of productivity to reflect the loss of population or the loss of materials.
As a matter of fact, when people began to say, it used to be I had five people paying this unit of taxation,
but two of them have fled and there's only, you know, half the land in production,
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.
So, I mean, there's no relationship between taxes and actual productivity.
How did people protect themselves from this?
Well, first of all, mortgages virtually ceased, long-term mortgages virtually ceased to be given.
Long-term loans of any kind disappear.
No one will lend unless they are guaranteed payment in gold or silver bullion.
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.
Pledges and securities for crops and for loans were always in either gold, silver, or indeed in crops themselves.
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.
The government's reaction to that, of course, was to force the banks to accept the coinage.
This led to wholesale corruption in Roman society as the black market became a normal
part as people refused to exchange coinage at the officially fixed tariffs, but instead
coinage was passed on a market principle.
There were obviously flight from the land, massive evasion of taxes, people left their
jobs, they left their homes, they left their social status.
Now Diocletian's final contribution to this continuing disaster was to issue his famous
is edict on prices and the edict on prices of 301 very famous instance of a massive effort
by the government to control inflation by price controls.
You have to realize that there's a little problem.
The Roman Empire was a vast region running from Britain in the west to Iraq, Mesopotamia
in the East from the Rhine and the Danube to the Sahara.
It included areas of very sophisticated and very primitive economies.
And the result of that was the cost of living varied considerably from province to province.
Egypt seems to have had the lowest cost of living.
Palestine had a cost of living twice that of Egypt, and Rome had a cost of living twice,
Roman Italy and had a cost of living twice that of Palestine Diocletian ignored that he just issued
a single standard price for the entire empire the result was it in Egypt the effects of the edict
probably didn't exist because the price the maximum price fixed in the edict was very rarely
reached in Egypt but it was the people in Rome of course had the
maximum price lower than the market price okay now the result of that of
course was riots in the street, disappearance of goods, the penalty for
violating the law was death, very common penalty in Rome for almost anything and
The mentality of diocletian comes out and the cause of the price, the maximum price edict, comes out in the preface to the law.
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.
He says, if the excesses perpetrated by persons of unlimited and frenzied avarice could be checked,
he doesn't mean himself,
if the general welfare could endure without harm this riotous license,
if these uncontrolled madmen, the unscrupulous, the immoderate, the avaricious,
could be persuaded to desist from plundering the wealth of all, then all would be well.
Who are these people? They are the merchants. They are the avaricious, greedy types who cause inflation, as we all know.
Then he speaks about himself and his four partners, his three partners, human race. Sounds familiar, doesn't it?
We are agreed that decisive legislation is necessary, so that the long hoped for solutions, which mankind itself could not provide.
You know, it's the same stuff. We can't do anything ourselves. We need the legislator.
By the remedies provided by our foresight, these things may be remedied for the general betterment of all.
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,
was that the soldiers were the principal victims of the inflation and that
Diocletian was afraid he was losing control of his army and so the people who
are to be protected are the soldiers and the other servants of the state. Now
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.
But his steps were not radical enough. His inability to create a sufficient supply of gold and silver coinage,
combined with his continued reliance on payments in kind for taxes and salaries
and the continued issuance of fiat bronze coinage in endless amounts
failed to make a significant dent in the problem.
Constantine's reforms were also partial but of sufficient vigor and radical character to make a difference.
Through his willingness to extract by compulsion the gold reserves of the taxpayers,
forcing them to disgorge their bullion,
he placed an ever-increasing supply of gold in the hands of the government officials.
This was increasingly used to pay military bonuses, salaries for bureaucrats,
and even payments for certain public works.
Increasingly then, a two-tier monetary system emerged
in which the government, the soldiers and the bureaucrats, enjoyed the benefits of a gold standard,
while the non-governmental portion of the economy continued to struggle with a rapidly inflating fiat currency.
The new gold solidus, circulated widely by its possessors, the government-salaried employees,
sold at various market rates to customers who desperately needed it to pay their taxes.
Thus, the state had found a way to protect itself and its servants
from the unwholesome effects of its own earlier inflationary cycle,
while slowly withdrawing itself from the cumbersome and wasteful system
of accepting taxes and paying salaries in kind.
Meanwhile, the masses suffered from massive injection of fiat money,
which they had to accept in payment for government requisitions
of such gold or silver or other commodities which the government demanded.
And we may wish to find some lessons in this tale of
monetary policies of the late Roman Empire.
The first lesson I think must be that if war is the health of the state, as Randolph Bourne said,
it is poison to a stable and sound money.
The Roman monetary crisis, therefore, was closely connected with the Roman military problem.
Another lesson is that the problems become solvable when a ruler decides that something can be done and must be done.
Diocletian and Constantine clearly were willing to act to protect their own ruling class interests, the military and the civil service.
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.
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.
Now, the Roman state survived. The liberty of the Roman people did not. When freedom
became possible in the West in the 5th century with the barbarian invasions, people took
took advantage of the possibility of change.
The tax burden remained burdensome even after the gold standard was reestablished.
The peasantry had become totally alienated from the Roman state because it was no longer
free.
The business community likewise was no longer free and the middle class of the urban cities
was no longer free.
Now the economy of the West was perhaps more fatally weakened than that of the East.
And when we read in the writings of the late, of the early 5th century Christian priest
Salvian of Marseilles, his account of why the Roman state was collapsing in the West,
He was writing from France, Gaul.
Salvian says that the Roman state is collapsing
because it deserved collapse,
because it had denied the first premise of good government,
which was justice to the people.
And by justice, he meant a just system of taxation.
Salvian tells us, and I don't think he's exaggerating,
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.
In other words, the Roman state was the enemy, the barbarians were the liberators.
And this undoubtedly was due to the inflation of the third century.
While the state had solved the monetary problem for its own constituents,
it had failed to solve that monetary problem for the masses
and continue to use an oppressive system of taxation in order to fill the coffers of the ruling bureaucrats and military.
Thank you very much, Joe. That was most interesting and informative.
We'd be happy to entertain any questions or comments. I'd just like to make one comment.
We like to think of ourselves, obviously, here in the 20th century as a very advanced society.
I think technologically it's clear that we are.
But isn't it interesting that in the midst of wars, taxes, inflation, government edicts to the contrary,
That 1,600 years ago, people chose gold as their money.
I wonder what it might say about us that we have.
Any questions or comments?
I think the other important message that Professor Peden has delivered to us
is this notion that the inflation government creates in an attempt to curb it
often results in a severe curtailment of our own economic freedoms.
So the next time you hear the argument that, well, maybe a little bit of inflation is a good thing for a society,
and that it might improve business conditions and things like that,
argue to the analyst that, well, it's going to take away our economic freedoms eventually.
Yes, we have a question back here.
In today's economy we make the connection between government debt and inflation.
Is there any evidence that the Roman government had access to borrowing and debt?
It's amazing, but the Roman government does not seem to have had any kind of credit system that it could rely on.
In other words, it did not normally go out and borrow money.
When Marcus Aurelius, for example, needed funds to pursue his wars in the second century,
he had to go out and sell the imperial jewels to raise the funds.
This was why they turned to inflation.
They didn't have a system of government, you know, treasury bonds and things like that, just didn't exist.
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.
Well, I'm not an economist, so I couldn't go into the technical ends of it, but let
me speak to at least the political problem.
Inflation is not an act of God.
It is an act of men, specific men, who foster it for their own particular ends.
And therefore it seems to me the first step before we can be effective in devising an
anti-inflationary policy is to clearly identify who actually is profiting from this system
and who is not.
It is naive to think that, you know, that no one profits from inflation.
Certain people do.
Clearly with the credit system of the United States government, the government itself,
I would think could not possibly allow any serious deflation because its own public debt
would have to be repudiated.
And so, I mean, one of our basic problems is that the United States government is itself
the largest obstacle to a non-inflationary policy.
The economists may have more to say about that.
But I think the political question is, who profits from this?
So if we can identify those people, then we, it seems to me, then we can move ahead and
find a political strategy to identify those people and identify those who are being hurt.
And that would be my first step.
But I think that assumes an intelligence on the part of those people that isn't there.
I don't think there's a grand conspiracy to create inflation and then profit from it.
Many of these people really think that they're doing something for the good of society and are simply misguided.
They are not creating inflation on purpose so that they can profit more.
They honestly believe that they are doing the right thing for society.
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,
and you don't have to be a college graduate to understand that.
In fact, he told me that some of the most ardent, hard-money people in Texas are taxi drivers.
So, I don't think the problem of educating the mass of the public is very difficult.
I think the problem of educating our leaders, our elites, is more difficult.
But I think the reason for that is so many of our elites profit from the system.
I mean, you're assuming they're just naive, but I notice they're naive in their own self-interest.
I know that you could spend the whole weekend giving us more examples of this material and
we would, I think, very much profit by going back to the ancient world and seeing that
there was a whole cycle from prosperity to decline based on bad monetary ideas coming
Coming Out of the State. I wanted to ask you a couple of questions that would, I think,
illuminate one or two points. The ancient world, Mediterranean world, was dominated
by big imperial bureaucracies, big military bureaucracies. And when we get to the period
where there is a transition where the ordinary property owners lose their property to the
large property owners, and this occurred at this time, but it had occurred at earlier
points.
I think it's important to relate that to your point about the state turning the large
property owners into their tax collectors.
And so in each stage, whether it's under the Basileus of the Persian Empire or under
of the Hellenistic Successor States of Alexander and then the Roman Empire is the successor
of the Persian and Hellenistic Empire.
In each case, the large property owners are made the tax collectors, they are identifiable,
they have wealth and the government says if you don't collect it from the others, you're
going to have to cough it up.
And then the consequence of that is that the rich become the tax collectors when the ordinary
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
Passages where they're saying, you rich, you have done this to the poor.
The poor are poor because they were taxed out of their wealth and the rich are rich because they're state employees.
It's not because of wealth. It's not because of productivity.
It's because they are part of the state apparatus who have benefited from that.
And the fathers of the church and the prophets are not attacking the wealthy.
They're attacking the tax collectors and the state for expropriating the property holders.
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.
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.
and in there he makes the point what had happened already some earliest almost a
century earlier was that the government had instead of collecting taxes directly
had given to the large local landlords the ability to collect taxes from the
other people in the district they felt that they'd have one man on the scene
that they could hold responsible rather than chasing peasants through the woods but that
didn't work out quite as they thought because these large landowners then used their tax,
as you suggest, their tax-collecting power to compel the smallholders to surrender their
lands to the large landowners who said, you know, just surrender your land to me.
You can have it on a cheap lease, from me, and I will take care of the taxes, okay?
Well of course what happened eventually was that he took care of the taxes by collecting
it from the tenants and giving to the state less than he collected, or not giving anything
to the state because he was a powerful political figure and who's going to, you know, challenge
and his tax collecting.
So what Salvian does is he describes this whole system
and he makes the point you're making that the landlords
are not just landlords, they're powerful political figures,
they control the courts of law, the police force and the tax collecting
and they themselves are not paying taxes because of their political position.
In effect, what's happening is the bureaucracy in its desire to get more money had undermined itself
by creating in the rural areas a large number of people who began to take on the powers of the state themselves.
Some people see in this the first foreshadowings of the dispersion of the feudal system.
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.
You look over this history, it's pretty dismal history, it keeps on going down, down, down to dark ages.
And, you know, I'm always hearing people talking about how the United States is following the trend and that kind of thing.
And I'm just wondering, I don't think the analogies are all there.
Were there any records or do you know of any ideological movements such as like the Mises Institute
or any of the Freedom Movement anytime during that period and what was, if there were, what was going on?
Well, we know Lactantius, for example, a Christian writer at the time of Diocletian,
whom he wrote a book called On the Death of the Persecutors,
and Diocletian was the last great persecutor of the Christians,
and he opens up a comment on Diocletian by saying,
Diocletian an inventive criminal,
and he goes on to show what terrible things Diocletian did,
that all he had to do was see a beautifully kept estate
and he would have the person who owned it
condemned to death on some trumped up charge and confiscate it.
Now he may exaggerate a bit,
he sounds like an old fashioned taff Republican at times,
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.
There were also people who opposed the government and its collection of taxes.
Taxes. There are constant, almost all the time, revolts of the peasantry. I mean, people
revolt in different ways. Some of them flee. Others revolt and kill the tax collector.
Others try to escape by turning their land over to someone else and let him worry about
paying the taxes. They'll just work as a serf and live their life as quietly as they
can.
But in Gaul and Spain, you also had another phenomenon, widespread peasant rebellions.
It was a group called the Bogotai and they're uniformly described as terrorist and it turns
out that the people they terrorized were the Roman tax collectors and and large parts of
Gaul in the third and fourth century and then of course in the fifth century for long periods
of time 25-30 years there were parts of Gaul that couldn't be visited by a Roman official
Was the situation different in the Eastern Empire where the Byzantine Empires didn't
really experience the dark ages that continued to thrive?
The difference probably lies in the fact that the economy of the Eastern Empire was, on
the whole, more well-developed, greater resources, greater technological skills, and much greater
Agricultural wealth, heavier population. And so strategically they were in better shape.
And then they also did not experience something else. The barbarian invasions
tended to move in the West. And so the people had no opportunity really to perform
the way the Western peasantry did, which was to vote with their feet by joining the barbarians.
It's very interesting that in Egypt and Syria, as soon as a liberator or potential liberator arrived,
which was in the 7th century when the Arabs swept out of the desert into Egypt, Syria, Palestine.
Those provinces went over like that to the Arabs.
They opened the gates of the city and said in effect,
rather the Arabs than Constantinople and the tax collectors.
So it was a delay of two centuries but when the opportunity presented itself, they took advantage of it.
Joe, thank you very much for an interesting and informative discussion.
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
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.
Has any civilization ever recovered from the devaluation of currency in what we have?
Well, the Roman Empire recovered because the long-term effect of the re-monetization of gold under Constantine and his successors,
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.
That was the inflated coinage.
And it was replaced not only by increasing issues of the solitus, but also by fractional gold coinage,
which meant that by the end of the 4th and by the beginning of the 5th century,
There was now a gold coinage that could be used in the daily market purchases of people.
And so in a sense, as the bronze coinage declined, for example, in the early 5th century,
a pound of gold was circulating at about 6,000 denarii from like 12,000 20 years before, 10 years before.
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.
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.
And that coinage maintained itself at the same level of purity and weight until the middle of the 11th century,
which is one of the longest, I would think, cases of a gold maintaining itself, you know, without debasement.
And that then led to the survival of the Roman state in the East, because it lasted until, well, the 11th century,
and then it lasted, technically speaking, until the 15th century.
This situation wasn't compounded by only the unbelievable sonnets of these third world countries in the world.
Because what happened was, one of the characteristic features of the Roman government of the Middle Ages was
that rather than fight wars, it used to pay off the barbarians. They sent them tribute in gold.
Now what was a barbarian to do with gold except buy Roman goods?
Okay? So that in that sense, it cost them less to ship the gold to the barbarians
than it would if they had to actually fight the barbarians.
Now, of course, they're constantly criticized as being, you know, wimps and weaklings.
They didn't defend themselves.
But I think they really did.
They took the cheapest form of defense, which was to kind of deflect the invaders.
I might add that there's been a number of other examples where societies have survived
highly inflationary conditions, and increasingly what we as economists are seeing in such societies
Is that it required complete overhaul of their monetary and fiscal arrangements.
Whether we'll get to that point in the United States obviously remains to be seen.
Do we have a question over here earlier?
I think I've...
Yes.
I'll get to you in just a second.
Q. Could you give us a role of a Roman Welfare today, as we have today?
Sometimes we hear in traditional textbooks that the Roman names were drawn and written by people who knew before.
I wonder if this is a different role for the price?
A. Yes. There was always 150,000 to 200,000 people in Rome itself who were on the dole.
And when Constantine built a new capital, which was tremendously expensive,
He also added a dole in Constantinople of about 80,000 people, this is early in the 4th century.
And then other cities said, well, why can't we, we're big cities too, why can't we have a dole?
So they gave it to Alexandria and Antioch and Carthage.
So yeah, those doles were always there and the bread and circuses were there and massive buildings.
In fact, one person has commented, I think it was Spengler, Oswald Spengler said that
the winter of a civilization is always marked by the massiveness of its buildings.
And that's certainly true for the late Roman Empire.
The most massive buildings were erected in the time of Constantine.
He built St. Peter's.
He built St. John Lateran in Rome.
He built the Church of the Holy Sepulcher.
I mean those are just the most noteworthy ones and other vast building projects.
Diocletian was even worse. He didn't build churches, but he built other things.
And these were often welfare-related things. They provide employment for people and so on.
So much of our political rhetoric today is trying to get this notion of a global ideological struggle
between Capitalism and Communism to be the underpinning for our continuance as a warfare
state. Everything around the world, any situation, any conflict, always the bottom line is always
looked at by the politicians in terms of, well, it's us versus them. I just wonder if
the Roman propaganda mill during the period that you talked about had a similar conception
in terms of justifying the increases in military spending in terms of, well, it's either us
If they don't get us, then we don't get them, they'll get us.
Did they use that type of propaganda to justify the increase in military spending?
They used the coinage itself for propaganda.
And there's an interesting kind of change that took place on one issue of coinage.
There had been a coinage that was issued in which they had a personification of abundance and this
goddess of abundance was depicted pouring out her horn of plenty on a civilian.
In the third century, this suddenly changed and the civilian became a soldier.
In other words, abundance was still worship, but she was going to the soldiers, not to
the civilians anymore.
As I say, it's kind of a mental change that takes place.
There were ideological reasons for fighting the barbarians.
The Romans had always been ethnocentric, following the Greeks, who were also very ethnocentric.
But nothing like this, nothing like the ideological struggle of the US and Russia. It didn't
have that quite fineness. It was more or less based simply upon, we don't like those guys
because they wear trousers and they use bear grease on their hair and stuff like that.
Is the loss of freedom pretty typical of all the inflation throughout the street?
I'm only a specialist in a few areas.
I will say this, that in Roman history it certainly is, because remember that the final...
Rome had already gone through a dramatic transformation in the days of the late republic, in the first and second century before Christ.
And in that period, again, extensive wars and civil wars in particular, between various factions of the Roman army,
Rome became militarized, militarized state, those wars led to a collapse of the republican carnage.
And Augustus' issuance of a whole new coinage was based upon his bringing about a state of peace
at the price, of course, of the death of the republic.
And so the Augustan coinage that I've described, its destruction 200 years later,
was itself instituted as a reform having to replace the republican coinage which had been destroyed by inflation.
So I would think a loss of freedom is almost inevitable whenever you get a combination of war and monetary inflation.
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.
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,
but instead tries to do minor and circumferential things to affect the inflation.
Clearly then you'll have a loss of freedom.
We've seen that historically. We've seen it in the United States, as you mentioned.
Thank you. Professor Peden, I know that at a gathering like this, it's pretty risky to say anything good about politicians,
and I quite agree with your conclusion, and I certainly enjoyed your presentation,
but it worries me a little bit in terms of what one of the questioners asked.
Do you have any suggestions on how we get from here to there?
And I wonder if, in your research, if you found any indication that in the olden days
that there was an attempt to bastardize the language like we're doing today.
For example, the monitors have a quite different idea about the meaning of the word inflation.
And I don't mean to be overly simplistic, but if you're going to communicate with the
politicians, you've got to be pretty simple-minded.
And with that being the case, it worries me because, as I observe this veil of tears,
it occurs to me that we really are getting representative government, and that's what
scares me to death.
And I just wondered if you see they're bastardizing the language today with the word inflation,
that we don't seem to be able to distinguish the difference between price inflation and
money inflation.
That's an interesting question.
Well, changes in language. There is one or two interesting aspects. For example, in the
rabbinical sources, which have been reviewed recently by an Israeli scholar, Daniel Sperber
in a series of books on Roman Palestine, he notices that in the first and second centuries
In other words, the rabbis refer to a coin called the menna, and it clearly means one
denarius.
In the third century, they're still using the word menna, but it now means a hundred
denarii.
In other words, the word remains the same, but its connotation has changed.
Likewise, when they use the word denarius in their sources, in the first century they
mean a silver coin.
When they want to refer to the gold coin, they call it a gold denarius.
By the third century, whenever they use the word denar or denarius, it always means a
gold coin.
So there's been a shift.
The words are the same, but there's been a total shift in the content.