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Inflation and the Fall of the Roman Empire

Inflation and the Fall of the Roman Empire

Peden discusses the problem of inflation and its impact; his analysis is based on the premise that monetary policy cannot be studied or understood in isolation from the overall policies of the state. Monetary, fiscal, military, political and economic issues are intertwined, in part due to the fact that the state always seeks to monopolize the supply of money within its own territory. Monetary policy, therefore, always serves the needs of state rulers first; if it also happens to enhance the prosperity of the masses, that is a secondary benefit.

There are lessons to be learned, writes Peden, from Rome.s experience. The first is that wars are anathema to a stable and sound monetary system; the Roman monetary crisis was closely connected with the Roman military problem. Another lesson is that problems become solvable when a ruler decides that something must and can be done. In the end, the Roman people, having been captured by the barbarians, had but one wish: to never again fall under the rule of the Roman bureaucracy. This attitude was undoubtedly 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 that monetary problem for the masses and continued to use an oppressive system of taxation in order to fill the coffers of the ruling bureaucrats and military.