Encyclopedia of Money: ROMAN EMPIRE INFLATION

During the third and fourth centuries CE, inflation in the Roman Empire rose to astronomical numbers, aiding and

abetting those internal forces of economic, political, and social decay that made the Empire easier prey for the

barbarians.

Early in the first century, Augustus had minted full-valued gold and silver coins. In the following two centuries, the Roman emperors slowly whittled down the weight of the coins and reduced the fineness of the silver coins. In the second century, the silver content of the denarius sank to 75 percent during the reign of that philosophic prince, Marcus Aurelius. By mid-third century, creeping inflation had gradually lifted prices about threefold.

Early in the third century, the Caracalla replaced the silver denarius with a new silver coin, 50 percent silver in content, called the Antoninianus. At midcentury, this coin still contained 40 percent silver, but thereafter debasement gathered momentum at a heady pace and reached a climax under Gallienus, emperor between 260 and 268 CE. The silver content sank to 4 percent, and prices—already triple the first-century level—finishing the third century at 50 to 70 times higher than the first-century price level.

The political stage mirrored the monetary disorder, or vice versa. In a space of 40 years, starting with the assassination of Gordian in 244, 57 emperors donned the imperial purple, until the accession of Diocletian in 284 ended the revolving door for the imperial title. The root cause of the inflation could be found in the fiscal affairs of the Roman government. The government paid its expenses in coins and had no major credit market in which to raise funds when expenditures exceeded tax revenue. Perhaps because of the inertia of tradition or political opposition, tax rates could be changed only with great difficulty. The more notorious emperors found that raising funds through taxes was not as easy as raising funds by condemning wealthy senators and citizens on trumped-up charges and confiscating their estates. The remaining alternative was debasement of the currency.

When Aurelian assumed the reins of power in 270, facing galloping inflation, he adopted a currency reform that was almost a good as printing paper money. He simply raised by about 2.5 times the nominal or face value of the silver-plated copper coins that had replaced the silver coins of the empire. Under his reign, the

treasury began supplying sealed bags that contained 1,000 of these silver-plated coins. During this inflationary ordeal, the government kept the gold coins much purer, but it paid its expenses in silverplated coins, which were legal tender.

Diocletian was the first emperor to aggressively combat the rampant inflation. He came to power in 284, amid an economy flooded with inferior coinage, and in 295, he put in place a major reform of the currency, issuing full-weight pure gold and silver coins. His aureus equaled onesixtieth of a pound of gold, and his pure silver coin equaled one-ninety-sixth of a pound of a silver. His coins were comparable in weight and fineness to the coins in Nero’s time, when prices were 100 times lower. Inflation continued to surge through the Roman economy and, perhaps out of frustration, Diocletian resorted to wage and price controls in 301. Raising prices

above legal levels became a capital offense, and inflation may have begun to slow a bit.

Constantine became emperor early in the fourth century. He eased up the wage and price controls and continued Diocletian’s policy of increasing the value of the currency. He minted a coin called the gold solidus, equal to oneseventy-second of a pound of gold. This coin maintained its value for 700 years, becoming one of the most famous coins in history. After making Christianity the official faith in 313, Constantine looted the pagan temples of vast quantities of gold to supply his mints. The government mints, however, continued to turn

out huge amounts of the debased copper coins, and the added supply of gold may have added fresh fuel to the fires of inflation. The debased denarii continued to fall in value. By the mid-fourth century, one gold solidus in Egypt equaled 30 million denarii. By then the government protected itself by collecting taxes in gold or in kind. The mass of the population paid the penalty for the inflation while the wealthy hedged against inflation

by investing in gold and land. The inflation began to decelerate toward the end of the fourth century, but by then the empire was tottering in the face of a barbarian onslaught. The Visigoths captured Rome in 410, and in 476, Odoacer the Barbarian replaced the last Roman emperor, Romulus Augustulus. Constantinople continued to mint the solidus.