The Roman Empire 2 of 5 Currency devaluation

All of these economic growth started way before the rise of Julius Caesar which belonged to the republican line of emperors. They are all well aware of the benefits of a free market system that further improved most of their Republican agenda and achievements. This system of prosperity would not last despite its attained success in the early imperial era. Later emperors such as Claudius, Caligula, Nero and Augustus believed that acquisition of new kingdoms and land would bring Rome more wealth than focusing only on improving their market systems. This idea proved to be beneficial as huge sums of new wealth coming in from newly conquered lands entered Rome’s treasury. In the long run, as an ever expanding Rome continued its military conquests, its spending was also expanding and getting bigger than ever. The conquest of Egypt, Judea, Gaul and the surrounding areas cost Rome an estimated 400 million Sesterces.
The drain of gold as a result of a trade deficit, combined with an ever increasing government spending for its standing army and other public works, set up Rome on an uncertain path. Despite of its inability to sufficiently produce state revenues, the empire’s army continued to double in size. Even if emperors are not on a conquest to acquire new territory, it had to maintain its massively expensive standing army which now requires newer weapons and more horses to maintain its edge. The Roman Empire’s inability to pay its legionaries promptly resulted in a loss of confidence and even loyalty of some of its soldiers. Out of this rose a few of Rome’s mortal enemies that were once a loyal soldier or even a general. The skirmish battles as a result of this revolt proved yet another burden on the treasuries of the Empire as it had to replenish lost soldiers and equipment.

Determined not to repeat this ordeal, emperor Nero devised a way to artificially increase the number of coins to keep up with the expanding government spending. Rome did not have the benefits of a fiat currency as it is under a bi-metallic standard which limits the amount of money that can be minted. Nero tampered with the coinage by decreasing the silver and gold content of its coins. Reducing the content to as much as 85% increased the monetary base as it allowed more extra coins to be minted as a result of this reduction. A pound of silver that produced 84 Denarii can now be stretched up to 96 pieces of Denarii. Later emperors followed this public deception that allowed them to increase the number of coins to pay for their ballooning government spending. The silver and metallic content reached below 50% during the reign of Lucius Severus as he increased the pay of the Empire’s soldiers hoping to maintain their loyalty. Over a span of 200 years, the silver content on coins went from pure to virtually 1% or even nothing. This resulted over the years, an increase in prices of goods. Wheat that once sold for 1 Denarius now sold for over 200 Denarii. Even with Rome’s adequate internal income from commerce it is inevitable that it needs new sources of income to support its growing borders and a massive army that no one dares to challenge.

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