Why did most ancient civilizations debase their currency over the centuries?

Discussion in 'Ancient Coins' started by Gam3rBlake, Jun 19, 2021.

  1. Gam3rBlake

    Gam3rBlake Supporter! Supporter

    Whether it’s the Greek drachma or Roman denarius in Ancient times or the Pound Sterling in the Middle Ages it seems like almost every major civilization debased their coinage over the centuries.

    For example when the Roman denarius was first minted around 211 BC it was originally a coin containing 4.5 grams of relatively pure silver (as pure as they could get it in those days) but by the 3rd century it contained less than 3.1 grams of less than 50% fine silver.

    Why did they do this? Didn’t they know it would cause serious inflation problems and was bad for the economy?

    If the King/Emperor etc., didn’t know personally surely one of their advisors did.

    finny, Rob Woodside and +VGO.DVCKS like this.
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  3. Al Kowsky

    Al Kowsky Supporter! Supporter

    It was the easiest way to make more money :smuggrin:.
  4. Gam3rBlake

    Gam3rBlake Supporter! Supporter

    Yeah but it’s not really making more money if everything is inflated right?

    For example if a 4 gram silver denarius is debased to 2 grams of silver and everything costs twice as much as before you still can only buy what you could originally.

    Except you have to pay twice as much to Mint the debased coins since you’ll have to make twice as many coins which will take twice as long.
    +VGO.DVCKS likes this.
  5. kevin McGonigal

    kevin McGonigal Well-Known Member

    For a while, over decades, if the purity of the coinage is reduced gradually, much of the populace won't notice. Yes, the purity of the denarius was close to 100% in 1 AD and 90% in 100 Ad. How many citizens do you think took note of that? Or the drop over the next century from 90% to 60% ? As a matter of fact prices for most goods do not appear to have been "inflationary" until the third quarter of the Third Century when even the least observant Roman citizens had to admit that their "silver" coinage contained very little silver and that did touch off a raging inflation. For as long as the coinage looked "silvery" it passed muster at face value and if the Roman state took this coinage in at face value in exchange for their gold coinage, which was not debased, the silvery coins were accepted in the market place as a kind of fiduciary coinage, just as later on folks accepted paper in lieu of any kind of specie at all. As long as our later cupro-nickel coinage can be converted into paper (which can be converted into gold) and which is accepted (or mandated) by the state in payment of taxes, good and services, most people will care little about any specie in the circulating medium. Of course the state knows full well what it has been doing for millennia. All of these practices allow it spend more on needed projects such as bread and circus and repelling the barbarians at the gates or other always worthy causes. Nihil novum sub solem.
  6. John Conduitt

    John Conduitt Well-Known Member

    It's not inflationary straight away. In those days you minted coins to pay your army, and a denarius was a denarius. You were likely fighting a protracted war, having already depleted your coffers, so you didn't have much of an eye on the long term. Of course, eventually your coins are known to be debased and it damages confidence in the currency and the economy.

    Henry VIII debased the English coinage to fund his wars with France, having already spent the vast wealth he'd confiscated from the church. But his daughter Elizabeth I reformed it a decade later when foreign merchants refused to accept the debased coins, therefore affecting trade. She did this by recalling all debased coins, melting them down and reissuing coins with a higher silver content - and made a lot of money doing so. It was a win for the monarch at both ends of the process.

    Here is a gratuitous Elizabeth I sixpence issued after the reform by French moneyer Eloy Mestrelle. It was England's first attempt at introducing milled coins to replace the crude, easily-counterfeited hammered coins.

    Elizabeth I Sixpence, 1562
    Tower, moneyer Eloy Mestrelle. Silver, 2.98g. Mintmark star (S 2595).
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  7. ancient coin hunter

    ancient coin hunter 3rd Century Usurper

    One of the theories I have read about, in addition to what @kevin McGonigal said seems to be that the mines during Roman times gradually were exhausted - Dacia was the last territory that was incorporated into the Empire that had extensive silver reserves. During the Republic conquest was a major source of silver entering into the monetary system. If there was no new silver and required expenditures continued to increase, then debasement was a short-sighted solution to the increasing economic problems.
    finny, Gam3rBlake, +VGO.DVCKS and 3 others like this.

    +VGO.DVCKS Well-Known Member

    ...Here's a story (true, though). One year, when I was somewhere in my mid-teens, I did an exhibit for the (verrry) local coin show, "The Decline of Rome, and the Debasement of its Coinage." ...An easy project for someone on my budget. Won Best of Show. It was largely based on an old but good ANS monograph whose author's name escapes me. (The next one, on medieval coins, didn't do nearly as well.)
    Roman Collector and Gam3rBlake like this.
  9. hotwheelsearl

    hotwheelsearl Well-Known Member

    Why did every modern civilization also debase their coins?
  10. hotwheelsearl

    hotwheelsearl Well-Known Member

    How many American consumers took note of, or really cared THAT much when coins went from 90% to 0% silver? Far as I am aware, it was pretty much business as usual.
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  11. scottishmoney

    scottishmoney Unwell Unknown Unmembered Supporter

    One very strong argument for Queen Elizabeth's mark in history is that she cleverly aligned herself with sage advisors, in the financial realm that was Thomas Gresham of Gresham's Law - "bad money drives out good" Which is why they drove out the bad money and brought back sterling coinage - it solidified the realm. Other countries in Europe were dilly dallying with billon etc coinage think Spain, France etc and their powers waned whilst England was at a zenith culminating in the resounding defeat of Philip's forces in 1588.
    +VGO.DVCKS and John Conduitt like this.
  12. Gam3rBlake

    Gam3rBlake Supporter! Supporter

    Thomas Gresham himself played a role in that!

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  13. Gam3rBlake

    Gam3rBlake Supporter! Supporter

    Apparently the English noticed it. ;)

  14. Kavax

    Kavax Well-Known Member

    it's the easiest way to increase the monetary basis in crisis time.
    You may know that 22% of all existing USD has been created in 2020...
  15. Gam3rBlake

    Gam3rBlake Supporter! Supporter

    But USD is fiat.
  16. scottishmoney

    scottishmoney Unwell Unknown Unmembered Supporter

    All money issued since Mexico stopped putting silver in their peso coins in the 1990s is fiat. Most currencies have been fiat since the late 1960s, but starting as early as late 1920s.
    finny likes this.
  17. hotwheelsearl

    hotwheelsearl Well-Known Member

    Like SM said, so is literally every currency in the world. Nobody minds, nobody cares that coins don’t have silver anymore. All anyvody cares is that their money can buy food and shelter at a price they expected yesterday.
  18. Gam3rBlake

    Gam3rBlake Supporter! Supporter

    Yeah I know but my point is that since USD is fiat it can’t really be debased.

    I mean what are they gonna do? Lower the paper content?
    finny likes this.
  19. hotwheelsearl

    hotwheelsearl Well-Known Member

    USD was metal backed until 1971 when the silver standard was abolished. However, nobody I know of cared at the time. One day coins were mostly silver and the next they were mostly not silver. Some folks stacked silver, sure, but by and large the average consumer didn’t know and if they did, they didn’t care.

    buying power was not decreased when silver disappeared.

    In the context of ancients, as long as the buying power of a bronze coin with silver wash was the same as a silver coin, then they would not have really cared so much and just gone on with their day.

    let me ask you - if the US coinage went from being a majority copper to a majority tin (a much cheaper metal), would you care? Would you HOARD the older ones? Maybe a bit, but overall your tin quarter still buys the same gumball as the copper quarter. Life keeps on keeping on
  20. Tejas

    Tejas Well-Known Member

    Interesting discussion. I’m a central bank economist, so these questions a close to my heart.
    1. Q: Why have ancient governments debased their coins? A: It is a great covert way of making money. It was used when a lot of money was needed in a short period of time and when taxation was not practicable or whatever reason (mostly during wars). Since the price effect, i.e. the increase in inflation, comes later the debasing government can greatly increase its purchasing power for a certain period of time

    2. Q: Why are modern governments not debasing their coins? A: They have already reached the limits of debasement and switched to fiat currencies. The US demonitized and illegalized gold coin in the 1930s and finally reneged on the promise of gold convertibility in 1971.

    3. Q: So no more debasement in the present or the future? A: It is not called debasement, but with fiat money, the money supply can practically be increased at will, by printing more dollar bills or by crediting the reserve accounts of banks at the Fed. This has been done to a magnitude last year that has never been seen before in the history of mankind. Result: massive asset price inflation, house price inflation at 15% pa.
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  21. Tejas

    Tejas Well-Known Member

    It is, for the debasing government, its agencies and everybody close to the government. As the new money disperses throughout the economy it gradually prices. This is called the Cantillon-Effect in economics. The losers are those who receive the new money last - usually those on fixed incomes, pensions and grants.

    It is exactly the same with a private money forger. Like the government, the money forger creates new money and purchases goods and services with the new money at prices that have not been effected by the increased money supply.
    Last edited: Jun 20, 2021
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