12. Currency Debasement in Olden Times

CHAPTER

TWELVE

Currency Debasement in Olden Times

There is a very bad tendency for some historians to ascribe virtues to past generations and vices to those living today. I should be very unhappy if you were to believe that what I wanted to say was that all ages were very virtuous and that inflation appeared only since the invention of the printing press and the development of paper money. But there were inflationists already in the ages long, long before the printing press. You should not believe that inflation is a vice of our ages only. But the early governments had a more difficult problem than modern governments; the old governments had to deal with money manufactured, minted, out of the precious metals of silver or gold. And neither silver nor gold can be increased in quantity the way paper can be increased and stamped as money.

Again and again problems developed due to the fact that these pieces, these money pieces, were treated in a way that violated agreements and hurt the interest of some people for the benefit of others. If you want to study this process today, go to a museum where they have coins minted in the past and see what happened to the silver coins of the ancient Roman Empire of the third century. In a city like New York especially you have a great choice of such collections. You can look at these coins from various points of view. Most people look at them from the point of view of esthetics, but you could also look at them from the point of view of the history, not of coins, but of money. And there you will see what governments did in order to profit by falsifying the system of money, by increasing illegally and against the wishes of the people, the quantity of money.

The various kinds of money often had to fight two diseases. One disease, coin clipping, brought about a shrinking in the size and weight of the money pieces. And the second disease, which was very often connected with the first, changed the color of the silver coins, practically the only coins that were used in those days. What these old governments very often did was mint the coins in the traditional shape, but they mixed with the silver or gold some less precious metal like copper. Unfortunately copper has another color from silver, and another specific weight, so it could be discovered by people who had available the technological methods and instruments. It was a very difficult process. But they did this. And they didn’t mention it. The coins slowly changed color in the course of the years, became a little bit reddish, not because they were affected by communist political ideas, which we today call “red,” but because the governments that manufactured them put more and more copper in the coins which were assumed to contain only pure silver. When the governments became more and more aggressive, let us say, and added more and more copper, the color of the coins changed still more. Also most people are not color blind, especially not color blind in regard to money. This was too much for the people. So it was not very easy to continue to maintain this fiction. The coins became redder, and thinner and thinner.

The government maintained that the new coins minted by them were not different from the coins that had been minted before. In some way or other it was always a catastrophe for the citizens who did not know how to fight it. But it was a small evil, in spite of the fact that the effects, the unavoidable effects of inflation, became visible even in those days. It took some time for the simple citizens to discover it. But even citizens with very little information and knowledge of metal could discover the differences between a legally and ritually [properly] coined piece of money and another piece which was not. The people soon discovered that the government could spend more, and did spend more, than it had before. And prices went up.

The very famous Roman emperor, Diocletianus (286—305 AD), was very well known in religious history—I wouldn’t say for his good deeds—but he was also known in the history of monetary annals. The more the silver content of the currency dropped as against the copper content, the more prices went up. And Diocletianus behaved in the same way as does our present government. He said it was somebody else’s fault, the fault of the businessman. And therefore he resorted to price ceilings. Our price ceilings are printed on paper, but in the 3rd century, in the time of the emperor Diocletianus, such a system of price ceilings was printed on stone, the way we make our monuments. Therefore, his interference with the market has been preserved because of his law of prices. We still have carved on stone today the Law of Diocletianus in which he decreed price ceilings, maximum price ceilings, with the same success—or let us say with the same lack of success—with which our present day price ceilings meet.

The government’s coining power, minting power, began simply with the fact that government said, “This is a definite quantity, a definite weight, and a definite quality of the precious metal.” Previous to this, under the old Roman law, the original Roman law, the act of purchasing land required the presence of a man with scales to establish the correct weight of the quantity of precious metals entering into the transaction. At the end of this development, the government presumed that it had the right to say what the precious metal is and what a definite quantity of this precious metal is. An evolution of thousands of years—really thousands of years because there were such problems under special conditions 2,000 years ago—means that governments even then tried to interfere with the market by interfering with the money.