The Decline and Fall of the Roman Denarius

This article explores the rise and fall of the Roman Empire and more specifically their currency, the denarius. It was on a gold and silver standard that Rome ascended to the height of its power. Eventually government spending had outpaced their revenues leading to turmoil within the empire.

Chris Horlacher
Tuesday, February 28, 2012 at 12:27AM
Dollar Vigilante

History repeats itself, so the scholars say. But according to Mark Twain it just rhymes. Literary quips and hair-splitting aside, I’ve found that one of the most valuable things anyone can do to advance their knowledge and understanding of the world is the study of history. Now I’m not talking about the kind of history you get in grade school and university, where all you’re told to do is rote-memorization of people, dates and events. To get any value whatsoever out of studying history, you have to be able to discern cause and effect. What causes civilizations to grow to greatness, and what causes them to collapse?

There are few collapsed civilizations that have been studied in quite the depth as the Roman Empire. Many theories have been offered, some with more merit than others. Ludwig von Mises argued that Rome was eroded from within and that economics played a huge part in it. This is too big of a story for me to cover in a single article, so I will focus on one of the most important aspects; the currency.

For hundreds of years, the Romans were on a bimetallic standard, not unlike the currency system of the early United States. There was a gold coin, the aureus, which was popularized by Julius Caesar. There was also a silver coin known as the denarius, which was what most Romans used in their day to day transactions. It was on a solid gold and silver standard that Rome ascended to the height of its development and power.

One of the greatest enemies of mankind is hubris, and the Roman Empire was certainly not immune to this. The phrase “bread and circuses” refers to the massive welfare spending that occurred in Rome during the height of its power. With the treasury filled with gold, spendthrift politicians quickly used the money to buy influence, votes and curry favour with neighbouring states.

“The budget should be balanced, the treasury should be refilled, public debt should be reduced, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance.” – Cicero, 55 BC

When Julius Caesar first began minting large quantities of the aureus it was 8 grams of pure gold. By the second century it had declined to 6.5 grams and at the beginning of the fourth century it was replaced by the 4.5 gram solidus. The purity of the coin itself was never debased, but the ever decreasing weight was a sure sign that government spending had been outpacing revenues for centuries.

All of this however, pales in comparison with the devaluation of the denarius. The denarius was the backbone of the Roman economy. Citizens earning their income in gold were a rarity given that a day’s wage for an average labourer at the time is estimated at a single denarius. Thus it also became the target of severe abuse by the Roman authorities.

The denarius began as a 4.5 gram silver coin and had stayed that way for centuries under the Roman Republic. After Rome became an empire, things began to turn sour for the denarius and, by extension, the Roman economy. Base metals, such as copper were blended in with the silver and so even though the coin itself weighed the same, the amount of silver in it became less and less with each successive emperor. Throughout the first century the denarius contained over 90% silver but by the end of the second century the silver content had fallen to less than 70%. A century later there was less than 5% silver in the coin and by 350 AD it was all but worthless, having an exchange rate of 4,600,000 to a gold solidus (or nearly 9 million to the original aureus).

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