One Augustan denarius equalled in gold at today’s London fix ($385/troy
ounce) a nominal $3.83, or about 3/~~ of a gram of gold. This tells us nothing about
purchasing power; it simply says that the Augustan denanius was a solid silver coin
almost the size and weight of the solid silver quarter we used to have before the
government foisted on us those sandwich things. How much olive oil or meal that
would buy in Rome around 1 A.D. can be estimated from surviving records-but all the
gold in Rome could not buy an aspirin tablet or a paper of matches. No way to
compare. And hard money was not supplemented by printed money, bank checks, and
transactions that take place entirely inside computers-but I can’t go into how those
phenomena affect purchasing power without writing a book twice as long as this one
on fiscal theory (which I am quite willing to do but nobody would buy it).
What Augustus did was to stabilize Rome’s money by defining it in terms of
two commodities, each intrinsically valuable, each stable in supply, each almost
indestructible, and he defined also the legal ratio between the two coinages-an
effort to circumvent Gresham’s Law, unknown then but Augustus appears to have had a
gut feeling for it. (Not Bill Gresham-the other one. Thomas Gresham.) But a
bimetallic standard has its problems; the free economy ratio tends to drift away
from the legal ratio, and Gresham’s Law begins to work. But this happens very slowly
with
hard money and is not the disaster that printing-press inflation is, or the debasing
of hard~ money.
Caesar Augustus died in 14 A.D.
His corpse was hardly cold before the vultures got to work. Tiberius,
Caligula, Claudius, Nero-even Claudius did nothing to stop the robbery. Titus
attempted an Augustan return to honest money in 80 A.D. but he died in September the
following year; his successor was a disaster even as Caesars go.
“Put not your trust in Princes.” Debasement of the currency continued under
every Caesar for the next two centuries. Diocletian (reign: 294-305) inherited a
worthless denarius; he returned Rome to the bimetallic standard at a level barely
below that of Augustus. But he increased enormously the bureaucracy, instituted the
harshest of taxation to pay for his “reforms,” and decreed price-fixing-which worked
just as it always does.
On his retirement (not assassination~!]) debasement was resumed while taxes
stayed high, and Rome was on the skids. The decline and fall of the denarius and of
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Rome paralleled each other.
I’m tempted to discuss France’s incredible inflation and collapse thereof
during the French Revolution (and three more French inflations since then), and the
inflations of several other countries in other centuries. But they are monotonously
alike and differ from debasement primarily in the fact that the invention of paper
“money” permits the corruption of legal tender to get utterly out of hand before the
people notice it. In Germany in the early twenties people used to take wheelbarrows
to the grocery store-not to fetch back groceries but to carry money to the grocer.
But the early stages of disastrous inflation feel like “prosperity.” Wages and
profits go up, old debts are easier to pay off, business booms.
It is not until later that most people notice that prices and taxes have
gone up faster than wages and
profits, and that it is getting harder and harder to make ends meet.
There is a strong emotional feeling that “a dollar is a dollar.” (Hitler
called it, “Mark is Mark!”) But you can reexamine it in terms of prices on bread, or
how many minutes to earn a dollar. And don’t forget taxes! If you aren’t working at
least the first three months of each year to pay taxes before you can keep one
dollar for yourself, then you are on welfare, one way or another. You may not think
you are taxed that much- paycheck deductions and hidden taxes are extracted under
anesthesia. Try dividing the Federal Budget by the number of wage earners not on the
public payroll, then take a stab at where you fit in. Don’t forget the same process
for state, county, and city. There are Makers, Takers, and Fakers, no fourth