In the 1970s, economists discovered a phenomenon they had not anticipated: stagflation, a mix of stagnation and inflation. I will demonstrate, and explain here, an even stranger occurrence: inflationary deflation, the evo-devo of plutocratic economics.

When historians evoke the Decline & Fall of The Roman Empire, they rarely fail to mention, one way or another, the tremendous inflation that devoured Third Century Rome. Inflation got so ridiculous that government organs, such as the army, were thereafter greatly paid in goods. This fact is often used as exhibit number one of the badness of inflation.

Nowadays, this is used as an argument in favor of austerity. However, I will show it’s quite the opposite: the austerity caused the inflation. And we are repeating the performance.

I long pointed out that it’s the decline of Rome that caused the inflation, and not vice versa. Paul Krugman has joined that point of view. But a worst mistake has been made with the logic of the situation.

Verily, the deflation caused the inflation.

Roman coins speak to us:

Notice the Augusta (Reigning Empress, Died 175 CE)

Notice the Augusta (Reigning Empress, Died 175 CE)

[Augusta Faustina the Younger was the wife of Marcus Aurelius, and herself daughter of another Augusta. She accomplished military duties for years, in army camps, and died from them; by the way, the Solidus, the gold coin, was used until 1,000 CE, not just 693 CE.]

Granted, Rome was afflicted by a currency crisis (and a political crisis, and a chronic succession crisis, and a plutocratic crisis, and a fiscal crisis, and a military crisis, and a resource crisis, and a moral crisis, and two plagues, and multiple invasions, all the way from Mongolia, etc.)

Generally, when economists think of inflation, they think of too much money chasing too few goods. But what if that was wrong? What if it were the paucity of currency, not its over-abundance, that had caused much of the economic crisis? This is what I believe. And, certainly, Rome is a case in point.

An analogy may help, to understand what I am driving at: when people’s heart fails, it’s often through congestive heart failure. The heart becomes big, flabby, incapable of pumping as needed, just as an economy deprived of currency cannot function anymore.

This is a remark of some importance, as it has consequence today. Namely we could, unwittingly, have put ourselves in the same situation. And for the same fundamental reason: paucity of money starves the economy, driving up both deflation (for some), and inflation (for others).

In Third Century Rome the Denarius and its successor the Antoninianus, went from 75% silver in the mid-Second Century to 2%, in 100 years.

No More Silver: Down We Go

No More Silver: Down We Go

Four factors drove this:

a) The rich hoarded the silver (a good way to become richer quickly as silver became scarcer).

b) The economy had grown, more currency was needed to allow for the more numerous exchanges of the growing economy.

c) Just by sheer abrasion from usage, silver coins could lose up to 3% of their silver content a year.

d) Worst, and most importantly, Roman silver mines got exhausted. (New technology could have allowed to exploit them, but it was developed only in the Nineteenth Century; then Roman mines we reopened; see Rio Tinto in Spain, the most enormous mining area).

Considering that Rome ran out of silver, the only solution was to dilute the silver content, as was done. That, essentially, turned the (main) Roman currency into a fiat currency. The Franks themselves, seven century later, pretty much used a fiat currency, because, as in Rome, the nominative and real value of the coins were very different.

What’s a fiat currency? Some confuse paper money and Fiat Currency (Wikipedia claimed that Fiat Currency started with 11th Century China… In truth, (states in) “China” employed paper currency even earlier, from… lack of silver). I corrected this, pointing out that Rome used Fiat Currency, even under the Republic. (But I am used to having my smart corrections eradicated in Wikipedia!)

Fiat Currency and Legal Tender (something one can legally “tendre”, that is, give with an extended hand) are roughly the same: a symbol the state views as legal to give in exchange for the extinction of debt. Such as the debt incurred by eating a meal.

Fiat Currency, or Legal Tender, are expressions of the will and ability of the state(s) to impose the law. The law is always imposed by force (remember the fasces). Thus the strength of the Dollar ultimately rests on the Pentagon (or the military-economic might of the Eurozone, in the case of the Euro!).

I put state in a potential plural: as the case of the Thaler  (aka tolar, dollar) shows, a currency can rest on the collective might of many states (during 4 centuries in the case of the Thaler, three times the lifespan of the USA dollar, so far…) Yet, of course all these states were fragments of Renovated Roman Empire (aka Holly Roman Empire, after 1500 CE).

The Franks would correct this precious metal shortfall, by conquering silver mines in Eastern Europe in the 700s. Interestingly, emperor Marcus Aurelius was all set to invade and conquer Slovakia, just when he died (180 CE).

His lamentable son (and co-emperor!) Commodus, immediately abandoned all idea of expanding the empire (Commodus preferred to powder his hair, and play in the circus; this drastic change of policy has fed the idea that Commodus poisoned his father).

Fiat Currency was already practiced during the Roman Republic. Yet, as this was the world’s strongest state, this was not a problem: the currency’s worth was whatever the state said. There was just one mint. In Rome.  This happy state was compromised during the Civil Wars that ended the Republic. For example the denarii struck by Mark Antony to pay his army during the war against Octavian were made of debased silver. Moreover, they were smaller in diameter. Under the early Antonine emperors, the state was very strong, and inflation only 1% to 2% a year.

By the Third Century, all the necessary ingredients for a Fiat Currency failed: the will, the ability, the imposition, the law and the force. Thus, in a situation when, for dearth of silver, the currency had to be Fiat, the state was incapable to impose it as needed with enough will, ability, law and force.

The Franco-Roman empire, or to give it its official name, the Renovated Roman Empire of Charlemagne, and his Franco-German successors in the next 12 centuries, did not have this problem: they had plenty of will, ability, law and force.

The striking thing about the Franko-Roman state was its power: it has been the only unconquered empire of the world, for 2,000 years.

After the Franks chased and defeated the Huns in 451 CE, at Chalons (with the help of the Visigoths and the standard Roman army, shadow Roman emperor Aëtius commanding), until this day, the heart of the empire that the Franks took control of, was never seriously penetrated by outside influences (the most serious penetration was by Arab and Berber armies in the 8C; the weird fasco-plutocratic turmoil of the 20C was an insider job… of the type that brought Rome down).

The Huns Wandered One Rhine Too Far

The Huns Wandered One Rhine Too Far

A strong state is only allowed by a strong Fiat Currency. The Franks’ Fiat Currency was well protected. The old fashion way. By sheer legal terror. The legal punishment for counterfeiting currency was death by boiling (this was practiced in the German Roman empire part until the 16 C).

Back to the Roman state of affairs in the Third Century: Lacking silver, the currency wilted from lack of intrinsic value.

This could have been compensated with a strong state, imposing said value (as the Yuan did in China with their paper… until their state collapsed, and paper became without any value, like Confederate currency in the USA).

However, the Severus dynasty soon collapsed into mediocrity. Various armies elected various would-be emperors, getting at each others’ throats in various ways. In 49 years or so, dozens of Barrack Emperors grabbed the throne. Fifteen barracks emperors or so in 33 years, two years on the throne in the average (although Philippe the Arab and Aurelian each lasted around 5 years before being killed). Only one had a natural death. The Gallic empire, with Gallia, Germania and Britannia, split away for a while (and was negotiated back in). It struck coinage (a privilege  Lugdunum, Lyon, “Capital of the Gauls”, long shared with Rome).

This mess that pretended to be a state did not inspire awe. People did not respect the nominal value that the state imposed to the currency, because they did not respect the state.

The dearth of currency entailed the rise of a barter economy, and of the localization of economic activity, and a devolution of specialization. The mass high tech of the Romans for the public became high tech from specialized artisans serving the Lords. That in turn, stole power from workers. As specialization went down, so did technological progress…. except in weaponry, as that served the Lords The economy completely devolved. It became incapable of supporting Roman public works, including roads, water works and military factories.

What happens when the Public economy collapses? Well, the plutocratic economy replaces it. So Public school, Public services, and Public health services all go down. This is what happened in Rome in the late Second Century. In other words, the Republic collapses.

Services are reserved to the hyper rich, only the hyper rich get served. Only the hyper rich can afford school for their children, etc.

So money starvation (deflation) makes the prices of services that used to be public skyrocket. As one did observe in Rome, and one can observe in the USA today.

Going to a plutocratic economy is accomplished with a carefully timed mix of deflation (of the money supply) and inflation (of goods and services that used to be common and public). The plagues that fractured Rome no doubt had to do with the degradation of the Res Publica, and its incapacity to take counter-measures (similarly Pericles was put on trial for having mishandled a plague at the start of Peloponnesian war, by stuffing the army in ships). When the terrible Black Plague of 1348 CE, struck Europe, the aristocracy was barely touched, demonstrating the connection between politics and pandemics.

Presently, for a member of the Public to listen to (supposedly, but not really) left wing economists such as Krugman or Stiglitz will cost of the order of twice the USA family income. And this, only after you have been carefully vetted by the administration of a plutocratic university. This is a reminder of what happen under the Antonine emperors: never have intellectuals been more rich and famous, and never so mediocre, considering the situation civilization faced. An example is Aelius Aristides, who made a famous discourse to the imperial court in which he said that never had things been so good, and never so Imperium Francorum ominous.

Why so ominous? Because the plutocrats refused to pay for the army. In the end, their descendants, after destroying the currency as I explained, would go as low as allying themselves with the Huns themselves.

In 750 CE the Imperium Francorum was operating at full power, after defeating three massive Muslim invasions (& causing the fall of the Arab Caliphate). A law was passed rendering free public secular teaching mandatory for any religious establishment, church or monastery, under the threat of being shut down. It was the return of the Public in the Res Publica (in theory Frankish leaders were elected). It was the exact opposite of inflation-deflation, the return of the deepest value: free education.

Deflate the plutocracy, inflate the Public: such is the way of the Republic. What we have now is a deflation of the Public, and an inflation of the oligarchy, and the money it has at its disposal, precisely because the Public has ever less of it.

One of the guys Obama put in charge of providing “Affordable Health Care “ for the citizens of the USA, made for himself, just last year, 109 million dollars. That one guy sanctified by Obama, made about 2,000 times the average family income in the USA. Deflationary inflation in action. Enough with these Barrack Emperors and Barack emperor. Time for some Res Publica, enough Res Plutocracia.

Patrice Ayme


7 Responses to “INFLATION FROM DEFLATION: Rome & Now”

  1. Dominique Deux Says:

    Interesting that you could draw a parallel with currency-short Rome, when we are awash with daily triliions being exchanged all over legit and backroom financial places.

    But of course it is only virtual money, with even less substance than the warring Roman factions’ debased coinage. That this observation runs counter to accepted monetary wisdom (hah!) and makes me a nimrod exonomist at best does not stop it from faithfully describing the situation. Worse, that useless, permanent tsunami probably washes away huge quantities of the real stuff as well, never to be seen back except as demented luxury goods consumption. Hence a Roman situation all over again.

    • Patrice Ayme Says:

      Dear Dominique, exonomist (good word!): (Some of) My points are that:
      1) Both in the case of Rome, and in our case, the currency based economy, that is, the real economy, got debased. How? Deflation.
      2) What’s deflation? Well, the price of some goods and services go down. That can be terrible for workers, if the deflation affects their livelihoods. Deflation, like inflation, can hit some goods and services and not others.
      It can also be excellent for plutocrats, if their real (REAL estate!) possessions go up in value.

      Basically what we have now, and 2008 was a boost that way, is that plutocracy is inflating, everybody else is deflating.
      In Rome, that was obtained by an inflation (roughly comparable to the one we have today, if one does not just look at CPI!) that starved the real economy of enough money to operate. The starvation is what killed People’s work, hence power.

      We have a Roman situation again, because the force of the Dark Side is winning…
      Got to run (hence the somewhat disjointed thoughts!).

  2. John Rogers Says:


    Thanks. More good stuff. I learn more real information (which is to say analysis of how the parts fit together) on your site that I ever did in getting several conventional degrees.

    Probably nothing is as symptomatic of this sort of economic lunacy and the plutocratic ascendancy in the US today as “student loan” serfdom. The young (and immature) are inveigled into massive debt to pay for the education (which should be free) that they need to “get ahead”. Then, no jobs!, they are unable to service the debt and surprise!, it’s not dischargeable in bankruptcy and is a permanent terrible millstone around their necks. Crushing them and any hope. It forecloses any chances of a normal life (you know stuff like peace of mind, being free of harassing debt collectors, starting a family, buying a house, etc).

    I don’t think any of us have to wonder about the terrible possibilities inherent for a country that does this to their young while making guns so freely available.

    • Patrice Ayme Says:

      Dear John: Thanks a zillions for the extreme compliment. I try to put on this site, aside form the occasional rare joke, the most dependable data I can find. That makes my prose sometimes as light and nimble as a super tanker.
      True, education ought to be free. That both the (republican) Romans and the Franks made it so is pretty telling.
      The middle Middle Age university system grew out of the “cathedral schools” of the Franks, mandated 4 centuries before the first universities officially opened (Bologna, Paris, etc.). So Abelard taught at the Notre Dame cathedral school (in the cathedral that preceded the present one!)

      The important point is that it was clear that mission number one of the Res Publica was free education.

  3. aaron greenbird Says:

    another really interesting post and discussion, thanks to all. “hence a roman situation all over again.” well said….the parallels are obvious, but, coincidence ? “Rome never fell….” indeed. and i agree with john rogers, “real information ” is awakening. Patrice, you put the pieces together really well, wonderful….the puzzle begins to take shape…… aaron

    • Patrice Ayme Says:

      Thanks Aaron. Yet, the force (of the Dark Side) is strong. It just dominates media. Look at the Huffington Post, for example. Although I posted there a few times long ago a few innocuous things, I was immediately on some black list (same on the New York Times). Long term, it has an effect.
      For example, the negative aspects of Obamacare were blatant at inception. Yet, if one said anything, one was labeled a racist Obama hater, enemy of the uncovered.

      Conclusion: the plutophiles set up a monstrous Plutocare, over the years, when Medicare For All could have been started in minutes.

  4. Patrice Ayme Says:

    Economy is whatever the government wants it to be. I am not sure the value of the pound did not change for centuries. Closer by, the “30 glorious years” had persistent inflation. I have reasons to love inflation.
    In any case, there few weapons against deflation, short of a massive command economy.
    And I have a technico-ecoomical reason for inflation…

    4% inflation best:

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