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Gold/Mining/Energy : GLD

GLD 363.00

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Oct 29 4:00 PM EDT

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From: ayn rand	6/11/2006 7:15:58 AM
	of 74

Inflation in the Roman Empire The episodes of extreme inflation took a standard form. First the government started building up the army and undertaking public works projects. These projects increased expenditures drastically and the government raised tax rates. But the higher tax rates encouraged tax evasion and discouraged economic activity. The tax base diminished and soon the tax needs exceeded the tax capacity of the government. The government then resorted to debasing the coins of the realm. This took the form of replacing the gold and silver in coins with copper and other cheaper metals. Over the period 218 to 268 A.D. the silver content of Roman coins dropped to one five thousandth of its original level. Sometimes the size and weight of coins were reduced. It also meant vastly increasing the amount of coins in circulation. There was a corresponding increase in prices. The emperors usually blamed the price increases on the greed of merchants. One famous episode occurred during the reign of the Emperor Diocletian in last part of the third century AD. Diocletian's predecessors had been issuing tin-plated copper coins for what had once been a silver coin. Diocletian tried to bring back some honesty to the coinage by issuing copper coins that were not purporting to be something they were not. Diocletian ordered a vast increase in the armed forces to guard against further attacks by the barbarians. Taxes were increased to pay for defenses but much of the funds raised went to pay for public monuments as well as rebuilding his new capital of Nicomedia in western Anatolia. When he ran out of funds Diocletian resorted to the use of forced labor for his projects. But Diocletian had issued vast amounts of copper coins. This led to price increases. When prices rose Diocletian attributed the inflation to the greed of merchants. In 301 AD Diocletian issued an edict declaring fixed prices; i.e., price controls. His edict provided for the death penalty for anyone selling above the control prices. There was also penalties (less severe) for anyone paying more than the control price. Irate consumers sometimes destroyed the businesses of those who sold higher than the control prices. In the short-run these draconian measures may have curbed inflation but in the long-run the results were disaster. Merchants stopped selling goods but this led to penalties against hoarding. People went out of business but Diocletian countered with laws saying that every man had to pursue the occupation of their father. The penalty for not doing so was death. This was justified on the basis that leaving the occupation of ones father was like a soldier deserting in time of war. The effect of this was to turn free men into serfs.

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