From the denarii to bitcoin and cryptocurrencies
Woe to the unfortunate person uncaring, uncompassionate, undisciplined, unfair, ‘un’ everything else you can hurl at them, who lets slip that the United States is massively in debt with no easy way out. That person will be ridiculed, marginalized, they will never be on CNN ever again, banished to bitter posting in Zerohedge.
Any currency backed by a commodity will be assaulted by the wrath of those benefiting, or wishing to, from fiat currency systems. And yet, for the first time in well over a century, the issue of what actually backs state-issued money has resurfaced as a political issue. Precious metals are seeing their greatest popular resurgence in decades, as, in tandem, interest in and usage of Bitcoin and other cryptocurrencies — precisely because of their irreproducibility and the quantitative limitations — expands rapidly.
In the good old days they didn’t have to endure all the humiliations, they were instead quickly killed…
Let’s begin and end a comparative analysis in Roman times. The denarii was the currency used during the bloody transition from Republic to Empire. It was persistently declining in value and ultimately was decimated.
The first noteworthy Roman currency reformer was Domitian, inheriting the problems associated with his forebears costly projects necessary to repair the structural damages of the civil wars that raged throughout the late Republic. In addition, he paid lofty financial incentives to regime-supporting historical writers and awarded pensions of up to 1,000 gold coins annually to a coterie of court intellectuals. Prior to his ascendancy the silver content of the denarius was reduced from roughly 94% to 90% purity.
In 82–84 AD Domitian improved the silver standard, and older coins averaging 88 to 92 percent silver were reminted into purer denarii (98 percent fine)
Domitian’s currency improvement was short-lived due to renewed foreign warfare. Between 85 and 89, fighting in Africa, the “purer coins had scarcely entered the marketplace when, in mid-85, pressed for money to pay war bills, again changed the standard, reducing it to 93 percent fine.
Domitian’s reign eventually devolved into tyranny and massive building projects echoing those of his predecessors, and culminated in a wealth confiscation edict so brutal that it [became] fatal to own a spacious house or an attractive property. In 96 AD, he was assassinated.
For nearly a century after Domitian’s fall, the debasement of the denarius continued apace, and by 148 AD devaluations became ritually associated not only with the start of wars and public projects but with inaugural events and holidays as well.
Pertinax was (blessed?) with an 86-day rule.
[O]n the day of his accession, he resigned over to his wife and son his whole private fortune, that they might have no pretense to solicit favors at the expense of the state. He refused to flatter the former with the title of Augusta, or to corrupt the inexperienced youth … by the rank of Caesar … giving] him no assured prospect of the throne.
[h]e forbad his name to be inscribed on any part of the imperial domains, insisting that they belonged not to him, but to the public. He melted the silver statues which had been raised to Commodus … selling] all his concubines, horses, arms, and other instruments of pleasure. With the money thus raised, he abolished all the taxes which Commodus had imposed.
On the heels of that, Pertinax “carried out an extraordinary … coinage reform that returned the denarius to the standard of Vespasian.”
The denarius was revalued from 74 to 87% silver by weight on new coins, several meetings of which were emblazoned with the motto “MENTA LAVANDA” (“noteworthy good sense”), In addition to this, Pertinax simultaneously embarked upon a fiscal rehabilitation program, the centerpiece of which were large budget cuts targeting the Roman military; he began by cancelling the customary bonus paid to soldiers by newly-seated emperors.
On the 86th day of his rule, his personal guard betrayed him and mutinied, gathering at the imperial domicile.
Macrinus (April 217 AD — June 218 AD)
Macrinus, From the start, he made clear his concern with establishing the public faith of cash for the Roman state. During his short reign, he raised the purity rate of silver from 1.66 grams of silver to 1.82 grams — and demonstrated an inclination toward diplomacy versus combat. When the Persians challenged the Roman army, Macrinus “tried to make peace with the Persian king” and “sent] back [their] prisoners of war voluntarily.” Consequently, he incurred the resentment of soldiers and further enraged them by introducing a pay system which paid them according to their rank and time-in-service.
[t]he increased silver content was clearly beneficial for the state, as it would instill more confidence among its recipients and presumably still inflation … [but] the major problem, of course, was Macrinus’ attempt at military reform … [The army would not stand for a curtailment of privileges, even among new recruits. So while Macrinus’ plan was … fiscal responsibility in the state, the strength of the army was too great to allow for it … [and] paved the way for Macrinus’ downfall.
Dissent soon erupted within the ranks and military forces, in a coup, elevated 15-year-old Elagabalus as the new emperor; a battle ensued between Elagabalus supporters and Macrinus loyalists. Macrinus’ forces were routed, and he was captured and executed.
Severus Alexander (March 222 AD — March 235 AD)
The new Emperor Elagabalus presided until his 18th birthday, profoundly debasing the denarius and squandering monstrous sums from the public treasury. “No fouler…monster” wrote the poet Ausonius, “ever filled the imperial throne of Rome”. After his assassination, his cousin Severus Alexander rose to power. And
[b]y the time that Alexander ascended the throne the question of the coinage, long acute, had become critical. Looking backwards one may see two centuries of fraud that the debasement of money had gradually but surely proceeded; in the future something little short of national bankruptcy awaited the Roman world unless measures were forthwith adopted to ward off [that] evil day.
Yet in a different strategy from Domitian’s, Alexander initially reduced the silver content of the denarius from 1.41 grams to 1.30 grams, and some years later not only raised it back to the old standard, but far beyond that to 1.50 grams; a quality it had not seen in decades. He…
restored the tarnished reputation of imperial money by improving the denarius and striking the first substantial numbers of brass sestertii and copper assets in a generation … they were well-engraved, struck on flans of traditional size and weight, and, as money, the equal of their more elegant ancestors.
He reduced taxes and attempted through various means to end the “singular system of annihilating capital and ruining agriculture and industry [which] was so deeply rooted in the Roman administration”. At the same time, though, he subsidized literature, art and science and socialized education.
When invaders from Gaul threatened the Empire, Severus Alexander attempted to buy them off rather than engage in a pitched, costly battle. This, once again, angered the legionnaires, who elevated General Maximinus as the new emperor. The military rebelled and, like Pertinax and Macrinus before him, Alexander Severus was executed.
Over the next three years, Maximinus doubled soldiers’ pay and waged nearly continual warfare. Taxes were raised, with tax-collectors empowered to commit acts of violence against delinquent or reluctant payers, as well as to summarily confiscate property for citizens in arrears. Over the next five decades…
emperors … debased the silver currency and raised taxes during what they perceived to be a temporary crisis, expecting windfalls of specie from victory, but war had changed from profitable conquest to a grim defense … The Roman world was treated to the spectacle of imperial mints annually churning out hundreds of millions of silver-clad antoninaniani by recycling coins but a few years old [which] removed older coins from circulation and destroyed public confidence in imperial moneys.
Characteristic of all monetary collapses, as the denarius withered into less than the value of its silver content a social currency was implemented, barter. Now, with that prelude, read this post… Cashless. Gold, Barter and Bitcoin. New ways to cheat at Monopoly