End of the Dollar Bill: Ancient Rome Also Diluted Their Currency
November 30, 2012 in Economics
According to a recent article from Yahoo! News, it seems that Congress is mulling over taking the $1 paper bill from circulation and replacing it with a $1 coin. While this sounds intriguing at the onset, this does not seem to be the point of the article. Instead, there is something more sinister we learn of in the article.
The Mint is preparing a report for Congress showing how changes in the metal content of coins could save money.
The last time the government made major metallurgical changes in U.S. coins was nearly 50 years ago when Congress directed the Mint to remove silver from dimes and quarters and to reduce its content in half dollar coins. Now, Congress is looking at new changes in response to rising prices for copper and nickel.
At a House subcommittee hearing Thursday, the focus was on two approaches:
—Moving to less expensive combinations of metals like steel, aluminum and zinc.
—Gradually taking dollar bills out the economy and replacing them with coins.
Emphasis added. In other words: Devaluation of the currency.
Devaluation is nothing new and great empires like that of the Romans used devaluation during their decent to fallen empire. Incrementally, the value of the Roman currency was diluted by adding smaller amounts of silver in their currency. Eventually, the currency was so diluted that faith in the money was lost and their empire collapsed.
Here is a chart depicting the decline of Roman Currency:
Source: Zero Hedge
This chart shows the decline of the purchasing power of the U.S. dollar:
Looking at the two charts above, the similarities are striking if not prophetic.
In an article entitled Inflation and the Fall of the Roman Empire by Joseph R. Peden from the Ludwig von Mises Institute, Peden concludes the following about the fall of the Roman empire:
The early 5th century Christian priest Salvian of Marseille wrote an account of why the Roman state was collapsing in the West — he was writing from France (Gaul). Salvian says that the Roman state is collapsing because it deserves collapse; because it had denied the first premise of good government, which is justice to the people.
By justice he meant a just system of taxation. Salvian tells us, and I don’t think he’s exaggerating, that one of the reasons why the Roman state collapsed in the 5th century was that the Roman people, the mass of the population, had but one wish after being captured by the barbarians: to never again fall under the rule of the Roman bureaucracy.
In other words, the Roman state was the enemy; the barbarians were the liberators. And this undoubtedly was due to the inflation of the 3rd century. While the state had solved the monetary problem for its own constituents, it had failed to solve it for the masses. Rome continued to use an oppressive system of taxation in order to fill the coffers of the ruling bureaucrats and soldiers.
When in Rome, do as the Romans do? It would appear that should not be the case in this instance.