Inflation and the Fall of Rome - Economic History DOCUMENTARY

Inflation has come roaring back into the news lately and justifiably has a lot of people worried. But this phenomenon has been a feature of civilization since the dawn of our earliest economic systems. While imprecise, especially when dealing with the past, a study of inflation can nonetheless often reveal much about the history of a people. So today, let's explore the rise and fall of the Roman Empire through the lens of inflation. While ancient Romans and ourselves Sometimes it's nice to just kick back and enjoy collecting hordes of loot without considering the pesky economic consequences. And what better way to get that rush than to build a team from over 600 champions to fight epic bosses or explore mysterious dungeons. You can find all this adventure and more through our sponsor Raid Shadow Legends, available on mobile and PC. The game offers a ton of ways to play, with my top two champions being the following. 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You will find your rewards here in your inbox for the next 30 days only. Enjoy! We should begin with an understanding of inflation. Generally speaking, it is defined as the increase in the prices of goods and services over time. Yet despite this rather simple definition, there are many ways in which it can be measured. Typically, one does not look at the cost of a single item, but rather an assortment of goods and services from across an economy. At the end of the day, these can only give us an estimate of what is happening at any point in time. Even with our modern tools, this is difficult. Therefore, we must understand that any assessment of inflation in the distant past is a rather imprecise process. Without access to robust sets of data, researchers must rely on other key indicators which are related to changes in ancient economies. One of the best ways to do this is to look at the circulation of money, which leaves behind a clear physical trace in the archaeological record. Therefore, before we are able to answer the question of how the Romans dealt with inflation, it is important to first understand the history of Rome's currency. The Romans first entered the monetary system later than their Greek neighbors, only producing their own currency in the late 4th century BC. Like other civilizations, the Romans used their coins as both a way to trade precious metals and as a way to set a value to goods. Before coins were introduced, the Roman economy was largely based on a bartering system where folks exchanged goods and services such as livestock. While the early Romans did not mint coinage of their own, they did have a system of currency based on bronze weights known as the ace rudae. These were rather large chunks of raw bronze which were incredibly impractical for long-term use. That's no exaggeration either, one surviving ace rudae weighs about 324 grams, almost a pound of bronze. Yet despite their unwieldiness, they continued to be produced up until 218 BC. As the Romans expanded over central Italy, war booty meant coins could be produced using precious metals of bronze, silver, and rarely gold. From the ace rudae, four other coin types were introduced. Cast bronze ingots known as the ace signatum, coin silver and bronze, and cast heavy bronze discs known as the ace graue. Initially, the ace signatum replaced the ace rudae. These ingots were slightly more practical and aesthetic and were cast with the inscription Romano. There was no base weight standard for them and they were simply stamped bars of bronze weighing anywhere from a pound and a half to over 10 pounds. The first Roman silver coins meanwhile were produced in Neapolis and closely resembled Greek coinage. These copies of the Greek didracum are called the quadrigatus today, a reference to the four-horse chariot of victory on the reverse side. It was originally struck at 93% purity. Over time, the silver purity increased until it essentially became a pure silver coin at 98%. And finally, the ace graue were heavy bronze discs that weighed about one Roman pound. These were a slight evolution from the ace signatum in that they were vaguely coin-shaped but just as impractical. With each coin being about the size of a human palm, they were still a better measure for metal trading than for coinage. Both the ace signatum and the ace graue were cast in the city of Rome itself and both were mainstays of the Roman world. While silver coins were infinitely more practical, Rome simply did not have any silver mines. No silver mines meant that any silver had to come either from plundering or from outside trade. In theory, this could work. In practice though, it was a delicately balanced system that could not withstand any real pressure. That pressure came relatively quickly. In the 3rd century BC, the First Punic War put horrific costs on the Romans, measured both in currency and in dead citizens. The Romans lost fleet after fleet to either battles or storms and they simply didn't have enough silver to create enough money to replace them. Rome was able to mint about 6.5 million silver coins for the war. Carthage, on the other hand, is estimated to have minted coins worth 37 times that amount in the same period. Rome was destitute, relying almost entirely on combat loot and bronze coinage to fund its military expeditions and as a result began to debase their currency. The pure silver coins became diluted. 98% silver became 75, with the other 25% being copper or another added base metal. The heavy ace graue and ace signatum were melted down for use in both of these debased coins and in weapons, supplementing the state's metal supply. That 75% purity quickly became more diluted as the war continued and by the end of the First Punic War, very little silver was involved in making Italian silver coins. Supposedly, these retained their face value, but merchants measured value in silver and more coins had to be made to pay for the same services. Thus, we see the first major case of debasement leading to inflation. Victory in the war brought some relief to Rome. After all, Carthage was forced to pay a huge amount of silver to the victors as part of the settlement and Rome promptly used this silver to return to minting its pure silver coins. These coins apparently circulated at the same time as not only the Punic War coins, but also the incredibly debased ones, leading to some confusion. By the time the Second Punic War broke out, Rome's coinage system was even more fragile than it had been before the first, with people hoarding the more pure silver coins of higher value and attempting to get rid of the junk ones. It seems that Rome's entire economy depended on Carthage's supply of Spanish silver, and so when that suddenly stopped, Rome's mints immediately began once again debasing the currency. The silver coins were instantly reduced in value again, while previously sacred gold was melted down into gold coins called ore, but it was still not enough. After Hannibal's crushing victories, Rome's bronze supply was virtually non-existent. Desperately, Rome began to mint the equivalent of fiat currency. The Roman pound was split into six, and each of these bronze tokens, known as the ass, was expected to be traded as if it was worth a full pound. And within a decade, almost no ace graue or ace signatum remained in circulation. The only thing keeping Rome in the war was the intervention of Hiero II of Syracuse, who loaned enormous sums of silver to Rome. While this forced an increased amount of debt onto the Romans, it gave them a fighting chance, and as the war stabilized, Rome undertook a complete overhaul of its monetary system. The old hodgepodge currency system was replaced with the introduction of the denarius in 213 to 212 BC. This new silver coin weighed half as much as the old quadrigatus, but was essentially pure silver. The ass was introduced as a standardized bronze coin, ten of which were worth one denarius. While some other coins were minted in this time period, the denarius became the mainstay of the Roman world for the next 500 years. With the ensuing victories of Scipio Africanus and the Second Punic War, the Romans gained full control of the silver mines in Spain, and their currency was finally stabilized. In the following years, they exerted more pressure on the Mediterranean world, melting down millions of competing silver coins from other states and re-striking them into Roman coins, thus establishing the denarius as the eminent currency of the age. More than anything else, the Second Punic War forced the Romans to use cash. Coins were now used for most transactions and salaries instead of just for tax and government purposes. By 141 BC, the denarius was revalued to 16 asses and remained stable. Unfortunately in this time, the increase of silver supply coupled with decreasing the bronze weight standards pushed the In the late Republic, prices flared as Rome was flush with silver. This, combined with nearly a century of regular civil wars, caused the Romans to now bring back the minting of gold coins in bulk. As with most aspects of the Roman world, the economy finally stabilized once again with the ascension of Augustus and the end of civil wars and the return of peace. So far, we've talked a decent bit about coins being used. Let's now take a small detour and look into how they were made. There were several different methods of making metal with patterns in the ancient world. Casting was well known, as was engraving. While a skilled smith could make incredibly intricate patterns and art pieces, coinage was in its own category. Casting was not an option for coins. Not only was it too slow, but the cost of making so many identical casts would have been astronomical. Instead, mints followed a relatively simple formula. Unmarked pieces of metal were made, creatively known as blanks, to the desired purity or weight and were then used as the base metal for the coins. A bucket of these blanks would be warmed and brought to a stamp known as a die. The bottom of the stamp was built into a stable surface and the blank would be placed on top of it. A second person working the mint would place the top part of the die over the blank and strike it with a hammer. Thus, a new coin would be made. An efficient team could make about 20,000 coins in a single day using this method. Predictably, these mints were heavily guarded with some legionary fortresses being built around them. After all, they were center points of precious metals and so they were essential for any man who aspired to the imperial throne. Now back to our timeline. Despite the chaos engulfing the end of the Republic, Roman currency remained relatively stable thanks to the enormous amount of loot that streamed in from all quarters. Weights and values remained standardized, a policy that Augustus encouraged. The emperor, always a supporter of order, fixed some of the problems that had been inherent in the system. There was too large of a gap between the denarius and the os, and the smaller silver coins had turned out to be impractical. Therefore, Augustus introduced a new brass coin called the sestertius. It was valued at four os, meaning that four sestertii would equal one denarius. The os would now be made of copper instead of bronze. It was a low value coin that was pocket change. The silver denarius remained the base currency and could be trusted to literally be worth its weight in silver, while the gold oreus, worth 25 denarii each, was rare and only used for major transactions and large ceremonial gifts. Not only were these values trusted and adhered to across the empire, but they were equally valued, even beyond the borders, and because of their purity, these coins were used as a standard weight measurement for trading precious metals. By now you're thinking, what does this all mean? How far did money go in the empire, and what was the general cost of basic items? For the sake of ease, most of our discussion here will be about the sestertii and the denarii. Let's break these down and see where your money would take you in the Roman Empire. To give you an idea of what each coin meant, take into consideration that a farmer in Egypt could expect to earn about one to two denarii a day in the mid 2nd century AD. In Dacia, however, a miner could expect to earn as little as one to two sestertii a day at about the same time period. Compare that to a casual worker earning three to four sestertii a day in the first century BC in Rome. And finally, a soldier generally earned an annual initial salary of 900 sestertii. Food and clothes were deducted from that, so soldiers would generally only see about two-thirds of it, roughly two sestertii a day. So now let's put this all in perspective. What could a person buy with their money? Since we don't have a good record of local prices, the best we can do is estimate, based on the surviving figures from Egypt and Dacia. Wheat prices, for instance, were generally about two denarii per modus, and in general, people lived on five modii of grain per month, meaning that for many people, most of their income would go towards basic sustenance, which is why keeping the grain price artificially low was absolutely essential for every emperor who wanted to stave off the crowds. Beyond this, we have some small indication of prices in the early empire. While a bad glass of wine could be had for as little as a single ass, a good glass of wine would probably cost two sestertii. A good-sized bottle of wine went for one denarius, and for one to seven denarii, you could get a nice red tunic, depending on quality. At these prices, most people would have had to save just to buy that nicer tunic. When Indian trade exploded in the first century, the cost of many items came down, but some things would remain outside the ability of most people to buy. For example, cinnamon was one of the most valuable imports, selling at a whopping 1,500 denarii per pound. Incidentally, when a fire burned down a warehouse holding thousands of medical texts, notes, and some small jars of cinnamon, the cinnamon was considered to be the most tragic loss. The monetary system established under Augustus continued throughout the early principate, and the state minted high-quality coins from Augustus to Nero. Unfortunately for Nero, the great fire of Rome happened alongside a grinding war in Armenia, destroying most of the city and straining available resources. Incredible amounts of silver were being exported every year to distant lands, and now the state needed an equally huge amount of money to rebuild the palace. With these mounting costs in sight, Nero dramatically debased the coinage. He believed that by reducing the weight and fineness of the coins while retaining the same face value, the state could increase the actual supply of money. Therefore, he reduced the weight by an eighth and the purity from 98 to 93%. Thus, he could melt down a million pure denarii and produce 1.2 million debased denarii. Free money. As any economist will tell you, this obviously didn't work. The debasement of the denarius had severe impacts on Roman currency that continued up until the beginning of the 3rd century. Not only did he cripple confidence in the purity of the imperial mint at home and abroad, but he created a tradition where any emperor who needed more cash than he had on hand would simply debase the denarius. Initially, the Flavian emperors continued this policy, and thanks to the crisis of 69 AD, the imperial treasury was horrifically deep in debt, and as a result, Vespasian cut the purity of the denarius to 89%, with such little oversight that it sometimes dipped as low as 80%. Domitian attempted to return to the Augustan standard, but a lack of silver in the economy forced them to keep to Nero's silver standard of about 93% pure silver. This remained the standard, no matter the influx of silver, to the point that Trajan purposely gathered all currency of the Augustan standard and recast it. While the coin would enter further shifts in purity, its actual value remained stable until the reign of Marcus Aurelius. The economy took a severe hit under his reign, due to a deadly plague that wiped out approximately 10% of the population. The plague was followed by repeated and costly military campaigns to fend off both Parthia in the east and Germanic invaders along the Danube. In response, Marcus Aurelius desperately debased the coinage below 80% for the first time, but the worst was yet to come. Cassius Dio darkly writes that upon his death, quote, this history now descends from a kingdom of gold to one of iron and rust, as the pharaohs did for the Romans of that day. While Roman prices and coinage had remained relatively stable from 30 BC onwards, the reign and death of Marcus Aurelius collapsed all faith and responsibility around the denarius. Now, each successive emperor was forced to offer massive bribes to the army, and to afford that, they would debase the denarius. Each debasement gave the emperors an initial jolt of income, until people caught on, with each round of debasement coinciding with the rise in prices. The face value of the denarius no longer had any respect. All that mattered was the inherent weight of its silver content. Eventually in 200 AD, Caracalla tried more financial trickery. The denarius was replaced with the introduction of the double denarius, the Antoninianus. This coin type had the face value of two denarii, but was really worth one and a half as much in silver content. This move essentially collapsed the economy. People simply hoarded denarii with as much silver content as possible, causing prices to skyrocket. Meanwhile, military expenditure also rose dramatically under Septimius Severus and Caracalla, with estimates of 70% of the state's budget being used for the military under Caracalla with just 5% allocated to civic officials. The Severan dynasty was able to pause the spiraling effects of the currency for a short time, abandoning the Antoninianus and actually increasing the purity of their coins by a small degree. But the crisis of the 3rd century caused Rome's coinage to descend once more into mayhem. The crisis was noted by a few factors, constant warfare, immense debts, and an entirely unstable imperial government. The Sassanid Empire meanwhile, glorifying in their golden age, carried out constant wars against Rome's east. Meanwhile, European tribes flooded over Rome's borders in the north. These raids had a costly side effect, with the invaders carrying off enormous amounts of pure gold and silver, further depleting the Roman supply. And even just to prevent such raids and wars, Roman emperors gave enormous amounts of precious metals as tribute in a vain effort to Not only that, pretenders to the throne grew up like weeds, with each one needing to pay their soldiers with lavish bonuses. But with no gold or silver to pay off such debts, the only thing that potential emperors could do to make money was to continue debasing the currency. To make matters worse, 3rd century coins were manipulated to appear more valuable than they actually were worth, with lower content denarii being given finer silver surfaces. Essentially, the Roman administration was issuing high quality fakes. By about 238, the Antoninianus was resurrected, and the denarius was almost entirely abandoned. Unfortunately, this new coin suffered the exact same problem as the now defunct denarius. Emperors looking to make a quick buck promptly began debasing the Antoninianus, and the coin became essentially worthless within just 30 years. The general population noticed these changes, and acted appropriately, by paying taxes with newer, worthless coins of the same face value, and either hoarding or melting down the older, more valuable coins. Because the imperial coins were so debased, it became nearly impossible to detect actual forgeries, to the point that the money changers, known as the numillarii, could not even keep up. In short, the economy of the late Roman empire was almost completely defunct, and as a result, the empire itself was actively collapsing, with minor empires splitting off from the aged Roman state. Only a miracle could stabilize things. That miracle took the form of a humble soldier who rose through the ranks, eventually being proclaimed as the Emperor Aurelian. Once Aurelian assumed power, his first goal was to restore the empire by reclaiming the Gallic territories and achieving victory over the Palmyrenes. This task having been achieved, the emperor then took on a far greater task, restoring the economy. Aurelian inherited a completely bankrupt state and sought to restore trust in the currency. He began these reforms in 274 AD, going after the workers at the imperial mint for debasing coinage, in what is referred to as the War of the Moneyers. This move could be taken in a few ways. On the one hand, the emperor was arresting people for minting coins as they had been instructed. On the other hand, the mints were well known as hotbeds corruption, often benefiting the moneyers far more than they did the Roman people themselves, and there's even evidence to suggest that they actually debased the currency more than was requested, pocketing the extra silver. Aurelian next standardized the Antoninianus, calling it the Aurelianus, which bore a distinctive mark, XXI in Latin or Ka in Greek. The mark indicated that this series of coins was now standardized, though it's a bit unclear exactly what it's referring to. Some speculate that it's indicative of the exchange rate to one of the old denarii, while others think that it's the exchange rate to the Sistertius. Either way, the coin, which could not without any honesty be called silver anymore, finally plateaued at about 5% purity. The coinage at this time also appears in much better shape thanks to reforms of improving the appearance and composition of the new coins. This, in addition to new price controls and food availability, was very popular with the people. These new coins were conveniently inscribed with Aurelian's title, Restitutor Orbis, or Restorer of the World. Yet despite the grand program of reform, Aurelian's ambitions struggled to survive his death. Successive emperors began to be tempted by the trap of debasement once again, and the coins soon lost any semblance of silver, reverting to simple bronze or other base metals. These coins were essentially worthless, and by the end of the 3rd century, Rome experienced a period of hyperinflation, with prices rising weakly at a completely unsustainable rate. Another reform was necessary. This would culminate in the works of one of Rome's most famous emperors, Diocletian. Diocletian had a number of problems to fix, and one of the most pressing was the Roman economy. In the first years of his reign, he organized one of the largest and most successful financial reforms in human history. Diocletian's major monetary reform attempted to emulate the Augustan system that relied on gold, silver, and billion. Coins were minted exclusively by the imperial mints, coinage was minted in Latin, and the denominations of currency were now exclusively based in the Roman system. Because the army had doubled in size, imperial mints were also established along the frontiers to accommodate the military. The problem with this initial reform was that the empire was now minting coins at a loss. Prices had risen so high that the new coins, minted at a far higher purity than anything in the last two centuries, were too valuable for the current climate. So, new coins were hoarded rather than being spent, and the people could just take advantage of fixed prices to accept valuable coins in exchange for cheap ones. By 305 AD, inflation had once again set in. To combat this rising inflation, Diocletian now issued the currency edict, which attempted to reform the currency and taxation system. Following this, Diocletian passed the Edict of Maximum Prices, which attempted to set fixed prices on goods throughout the empire. Anyone cut selling goods for more than the amount stated by law faced severe punishment and repercussions. Unfortunately, this was a blundered approach to resolving the crisis and just created more problems. If we were to believe Lactantius' account, this edict was a disaster. He also, when by various extortions he had made all things expensive, attempted by an ordinance to limit their prices. Then, much blood was shed for the various trifles. Men were afraid to expose ought to sale, and the scarcity became more excessive and grievous than ever, until in the end, the ordinance, after having proved destructive to multitudes, was from mere necessity abrogated. Despite Diocletian's attempts at fixing the economy, ultimately these reforms failed. Diocletian's Edict of Maximum Prices did not account for the law of supply and demand, nor that prices fluctuated from various regions across the empire. Bartering therefore became more widespread in this period, but the exact numbers of how prevalent it was remains a mystery. Like Aurelian, Diocletian's reforms were generally abandoned almost as soon as he abdicated the throne, and the finances of the Roman Empire once again fell into disorder. At this point, silver clearly could not handle the current system. Constantine was the final emperor to reform the Roman currency system in the west, replacing the aureus with the gold zolitis. Unlike silver coins, gold coins had never been truly debased, only reduced in size. These then became the new basis of currency for a new age of Rome, which we know today as the Byzantine Empire, but its history and struggles with inflation will have to wait for another time. For now, I hope you've enjoyed this video. A huge thanks to the patrons for funding the channel, and to the researchers, writers, and artists for making this video possible. Be sure to like and subscribe for more content, and check out these other related episodes. See you in the next one.