Cato Institute senior fellow Jim Powell wrote in Forbes magazine about the inevitable and predictable decline of rich nations that debauched their currencies in order to pay their bills. Powell said that politicians’ urge to promise and then to spend is almost overwhelming, calling it “a visceral urge to spend money they don’t have. They can’t control themselves. They’ll weasel their way around any efforts to put the lid on the cookie jar.”
The Roman Empire was on a gold standard, minting and using the aureus from the 3rd century B.C. until the 4th century A.D. The aureus initially contained 10.9 grams of gold, which was worth about 25 denarii, or about a month’s wages. As the empire devolved into promising more and more services (grain subsidies, public entertainment, and a huge bureaucracy and military establishment) it soon exceeded revenues generated through taxation. To make up for the difference, the aureus was steadily debased so that by 50 B.C. it contained 9.09 grams of gold, 8.18 grams by 46 B.C., 7.27 grams by 60 A.D., 6.55 grams by 214 A.D., 5.45 grams by the year 292, 4.54 grams in 312, and 3.29 grams by 367.
Paper money was more easily debased, as the Chinese discovered. Powell noted that seven different Chinese dynasties issued paper money to pay their bills and all of them eventually collapsed or were defeated by others that issued their own paper currency.
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