By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some…..Those to whom the system brings windfalls….become profiteers.
-John Maynard Keynes
People think currency, such as the U.S. Dollar, is money. It is not. Historically money has an intrinsic value within itself. Think of gold and silver and other precious metals – they are money. Our paper and coins are fiat currency. A fiat currency is an arbitrary order, given by a body, typically a government, which has the power to enforce it. All currencies today are fiat currencies.
Here’s a dirty little secret: Fiat currency is designed to lose value. Its very purpose is to confiscate your wealth and transfer it to the government. Government monetary policy as implemented with our fiat currency – the U.S. Dollar – is a “hidden tax” on all of us. Consider this: every time the government prints a new dollar and spends it, the government gets the full purchasing power of that dollar. Where did that purchasing power come from. It was taken from the dollars you hold in your wallet, savings or investments. As each new dollar enters circulation it devalues all the dollars in existence because they are now more dollars chasing the same amount of goods and services. This causes prices to rise. This is the insidious stealth tax of inflation.
Rome supplanted Greece as the dominant power of the ancient world. During Rome’s centuries of dominance it achieved greatness in many ways. However, as with every empire in history, Rome did not learn from mistakes of the past. As a result they were doomed to repeat them.
Over the course of 750 years various leaders inflated the Roman currency supply by debasing their coinage to pay for war, public works and welfare. Coins were made smaller or a portion of the edge of gold coins were clipped off as a tax when entering a government building. The clippings would be melted down to make more coins. And, just as the Greeks did, the Romans mixed common metals such as copper into their gold and silver. And last but not least they invented the “art” of currency revaluation – they minted the same coins with a higher face value on them.
By the time emperor Diocletian took the throne in 284 A.D., Roman coins were nothing more than tin-plated copper or bronze. Inflation was raging.
In 301 A.D. Diocletian issued his infamous Edict of Prices, which imposed the death penalty for anyone selling goods for more than the government mandated price. The edict also froze wages. Prices, however, just kept rising. Merchants who could no longer sell their goods at a profit just closed up shop. People either left their careers to seek work where wages weren’t fixed or they just gave up and and accepted welfare from the state. In fact, the Romans invented welfare. Rome had a population of about one million and during this period of time the government was doling out free wheat to about 200,000 citizens – 20 percent of the population. Today in the United States nearly 43 million – about 14 percent of the population is on food stamps.
Diocletian put people to work by hiring thousands of new soldiers and funding numerous public works projects (I wonder if they were shovel ready?). This effectively doubled the size of the government and military. Today in the United State more that 1.9 million people, excluding the Postal Service, work for the federal government alone. When you include all branches of the federal government, and state and local governments the total approaches 22 million. See the Bureau of Labor Statistics website for details.
Of course all these additional government employees had to be paid and the government had to find a way to pay for its welfare programs. Deficit spending went into overdrive. When he ran short of funds, Diocletian simply minted new copper and bronze coins and further debased the Roman currency.
This resulted in the world’s first documented hyperinflation. At the time of Diocletian’s Edict or Prices a pound of gold was worth 50,000 denari. By 350 A.D. a pound of gold was worth 2.12 billion denari. The price of gold rose 42,400 times in about fifty years. Currency based trade came to a standstill. The Roman economic system reverted to a barter system.
To put this in perspective, fifty years ago the price of gold was $35 an ounce in the United States. If it rose 42,400 times, the price today would be just under $1.5 million dollars an ounce. That means, for example, that if a new car sold for $2,000 fifty years ago (which is about what they sold for), that same car would sell for $85 million today.
It was the deficit spending and currency debasement used to fund the military, public works and social programs that collapsed the Roman Empire. As with every empire throughout history the Romans thought they were immune to the laws of economics. They were not.
- It’s Greek To Me “The farther backward you look, the farther forward you are...