Does Inflation Lead To Civilizational Collapse? An Examination of Rome

The US national debt currently stands at a staggering $34 trillion and continues to rise. The status of the US dollar as a reserve currency is under threat, inflation is eroding living standards, and the Biden administration is fueling costly wars on multiple fronts. This situation begs a comparison with the Roman Empire.

Understanding the Collapse of Rome

Culture Critic, a user on the X platform, recently shared a detailed analysis of the disintegration of Rome in the 3rd century. The thread started with a question: Does inflation lead to civilizational collapse? The Roman Empire in the 3rd century was crumbling under the pressure of state expenditure. The state resorted to money printing until the situation turned disastrous.

The Economic Challenges of Rome

When Emperor Augustus halted the expansion of the empire, the flow of wealth from conquered territories into the treasury ceased. Managing costs such as construction, armies, and bureaucracy became increasingly challenging. Whenever the costs surpassed the income from taxes, emperors minted new coins to cover the deficit. Mining precious metals increased the supply of gold and silver coins. For two centuries, things remained relatively stable. However, the army was a significant drain on the budget. By the mid-2nd century, it accounted for 70% of the entire budget, with half a million soldiers on the payroll.

The Crisis Strikes

In the 3rd century, the empire's frontiers came under attack. Military expenses skyrocketed as entire provinces were abandoned and their tax revenues lost. Additionally, the mines were depleting. When the state could no longer afford to pay the soldiers' wages, they were left with no choice but to "debase" the currency. Emperors started issuing new denarius (the silver coin used to pay troops) with progressively less silver content, effectively increasing the money supply. Nero had already begun clipping coins and diluting silver purity in 64 AD. The state soon became dependent on this method to solve its problems, and it also served to enrich political insiders. By the 3rd century AD, the denarius was down to 60% silver purity. As a result, prices inflated.

The Downfall

Despite the inflation, the state continued to spend in an attempt to maintain the illusion of prosperity. By 268 AD, the denarius was 0.5% silver. A bag full of coins replicated the silver content of a single coin a century earlier. By 300 AD, soldiers were paid 8x in denarius compared to a century ago, and wheat prices were up 200x. Unable to pay the troops, some soldiers abandoned the military and started looting towns. For half a century, the empire teetered on the brink of destruction with emperors being assassinated, barbarians sacking towns and enslaving citizens. Diocletian attempted to stabilize the situation by enforcing price caps on over 1,000 goods and services, but it was unsuccessful. A modius of wheat that had cost 0.5 denarius in the second century, sold for over 10,000 in 338 AD.

The Aftermath

When the money system failed, people paid with their freedom. The currency was so worthless that the state demanded forced labor rather than accept its own coins as tax. Merchants had to provide goods directly to the state and army, and leaving their trade was outlawed. The masses slipped into serfdom and unrest, while the state grew larger and more authoritarian in response. The state was now keeping itself alive at all cost. As Septimus Severus said: "Live in harmony; enrich the troops; ignore everyone else." It's said the Roman Empire fell due to apathy. By the time the 5th century barbarians came, belief in the system was gone, and invaders seen as liberators. "The empire could no longer afford the problem of its own existence."

Does History Repeat Itself?

This story may sound familiar because 80% of all dollars in circulation today were printed since Covid.

Additional Insights

1. The exploitation of the silver to gold ratio depleted Roman silver supplies as the creditor oligarchy exported coinage to India & the east. There the ratio was as low as 4:1 & 12:1 in Rome. 2. European gold & silver supplies were exhausted around 26BC. There was little plunder left available. 3. The role of debt was a monumental factor in Rome's rise & fall. An aggressive & brutal creditor oligarchy had sought land monopolization as they seized land as collateral for unpaid debts. Their actions have led many to conclude that life within the empire was like "hell on earth." 4. The church & the state also hastened Rome's decline as they sought tribute & taxes.

Responses

Well, Ludwig von Mises certainly agrees. Here's a quote from the Austrian–American Austrian School economist, historian, logician, and sociologist: …if inflation is not eliminated very soon, all our technological and scientific improvements will not prevent us from a tremendous… Daniel Webster, “Inflation is the surest way to fertilize the rich man's field with the sweat of the poor man's brow.”

Final Thoughts

The collapse of the Roman Empire serves as a cautionary tale about the dangers of unchecked inflation and excessive state spending. It raises questions about the sustainability of our current economic systems and the potential consequences of our actions. What are your thoughts on this matter? Do you see parallels between the Roman Empire and our current situation? Share this article with your friends and engage in a thought-provoking discussion. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.