The Fall of the Roman denarius
Monetary crisis – The end of the denarius
Every second, the government debt of the United States of America increases more than 35,000 U.S. dollars. Every American is burdened with more than 60,000 U.S. dollars worth of government debt. And yet the dollar is still functioning, and it has been functioning for more than 230 years. But even a high age does not protect against a crisis of confidence as shown by the history of the Roman denarius.
The denarius came to being as a gesture of defiance and pride in the war against Hannibal. Despite their economic crisis, the Romans introduced a new currency shortly before the year 211 BC. The denarius was independent of all other monetary systems. It consisted of almost pure silver and weighed about 4.2 grams.
The denarius followed the Roman troops, first on a small scale and then on a larger one. The Roman money supply increased tenfold during the 100 years after the capture of Macedonia in the middle of the 2nd century BC due to its rich silver deposits. During the first century BC, the denarius was so omnipresent that there was no need any more to specify where it came from. The legend ROMA disappeared. It was around the turn of the eras that the denarius was the most important currency in the entire Roman Empire. It did not only circulate in all Roman provinces but also everywhere the Romans were trading.
The Roman mint produced millions of denarii every year. The money demand was high after all. The biggest element of expenditure was the army. Every year is swallowed 100 to 120 million denarii – in times of peace. During a war, the sum would rise drastically.
In addition there were costs for the constantly expanding administration. Supposedly the costs were ca. 13 million denarii under Augustus, but during the middle of the 2nd century AD they had risen to 19 million.
Crop donations, official buildings and streets, infrastructure projects and the games probably took up between 5 and 15 million denarii.
All in all the Roman state thus had to raise 130 to 140 million denarii.
This worked out fine during normal years. The earnings roughly covered the expenses. But what if there were higher costs to defray? Debt was not an option. No Roman emperor ever took on a loan. If it became apparent that the expenses would exceed the receipts, the princeps would take special measures. He would often contribute sizeable funds from his personal assets. Or he would auction off superfluous treasures from the palace. Sometimes he would raise a nonrecurring special tax. And if that was not enough, he would lower the silver content of the denarii.
The denarii were not a currency that was estimated according to fineness or weight after all. They were a counted, and they were minted al marco. Al marco means that a certain amount of silver has to equate to a certain number of denarii. Individual pieces could weigh less or more. Nevertheless, 100 denarii still remained 100 denarii. Their silver content was of no relevance for that. Nero made use of this when financing the rebuilding of the city after Rome had burnt down. He drastically reduced fineness of the denarii, and nobody really cared. The denarius worked the same way it had before.
Later on, other emperors were also faced with financial gaps. Especially since the individual emperors had bought the loyalty of the army by raising their pay. In 84 AD, Domitian raised the regular pay by a third. Septimius Severus doubled it in 197. His son Caracalla added another half in 212. Thus the amount of annual costs rose to 600 million denarii.
In order to be able to mint that many coins, their silver content was reduced. While the denarius had contained 3.65 g of silver in the late republic, its fineness sank to close to 1.5 g of silver during Caracalla's times. Towards the end of his reign, Caracalla introduced a new coin, the double denarius, or – as numismatists say – the antoninianus. It was equivalent to two denarii, but it only contained as much silver as 1.6 denarii.
Nonetheless, there was no inflation. Or shall we say: no major inflation. At the beginning of the 3rd century, the inflation rate was approximately one percent. This is about half of the rate the ECB is aspiring to for Europe.
The reason for this was probably the large number of territories in the Roman Empire which were not fully monetarised yet. Everyone welcomed the denarius, townspeople and peasants, Roman citizens and the local population.
But in 235 AD, Maximus Thrax doubled the pay for the legionaries once more. Thus the national deficit increased dramatically and no emperor afterwards reigned long enough to consolidate the state budget. Once again, one took to debasing the money. Denarii and antoninianii contained less and less silver. The fact that citizens hardly saved contemporary coins anymore attests to their increasing unease. They only saved the old denarii with a high silver content.
It all changed under Gallienus, who ruled from 260 to 280. Large parts of the Roman Empire and their rich income was lost during his reign. The military expenses did not decrease though. This can be observed through Gallienus' coinage. His antoninianii contain less than 5% silver. The gold coins only weigh 1 gram. While the antoninianii continued to circulate under their nominal value, the aureus was traded for its gold value. Thus there were suddenly two currency systems in the Roman Empire. The stable gold currency and the antoninianus, whose value was constantly decreasing.
Even the state mistrusted its own silver currency, which did not contain any silver anymore. The administration insisted on taxes and duties being paid in gold or in kind. Who would still want to burden themselves with all these redundant antoninianii? Only, those who received their payment from the state did not have another choice. They spent this unpopular money as quickly as possible. And thus the prices increased.
Naturally there were monetary reforms. But even though Constantine managed to create a new gold coin, the solidus, which stayed stable for several centuries, no one could overcome the crisis of confidence concerning the change. Silver- and bronze coins disappeared from most people's everyday life.
In the west particularly, there was no one left, who ensured the supply of change. As a consequence, the cities degenerated. Their organisation had relied on a sufficient supply of change. Craftsmen had used it to pay their daily food requirements on the market. Without change, society resorted back to bartering and the self-sustaining farm became the most important economic system. The peasant Early Middle Ages came and places where international trade and urban economy had blossomed in Roman times were abandoned.