"Those Westerners don’t want to pay their bills. We’ve got dollars, they are gold, and we like it. I’ve got a railroad to run and I don’t need all these prices for iron and workers’ wages going up just because those Western crooks have a lot of silver dollars to spend. If Congress really starts buying up all that Western silver and striking silver dollars next year, they’ll hear about it from me and my friends at the ballot box. We railroad men made this country what it is today and we aren’t about to be ruined by a bunch or upstart farmers and cowboys out in Nevada and New Mexico Territory or any of those smart - aleck San Francisco businessmen."
"Who do those Eastern robber barons think they are, anyway? There are lots of people out here, and more are coming every day. We are raising food to feed this whole country. Our farms and cattle ranches are carrying this whole nation on our backs. Everybody knows that those played out Eastern farms could never grow enough food to teed us all, and we are feeding not only us but England and Australia as well. Now, Some of our boys got lucky up there in the Comstock, and they’ve found enough silver to put money in everybody’s pocket. I’m glad our men in Congress passed a law for the government to buy up our silver and strike it into dollars. With plenty of money in circulation, we can not only buy more, but sell more as well. I know that the East won’t like our competition and the fact that we are more economically independent of them, but that’s just tough!"
Before the Twentieth Century, money was represented by precious metals like gold or silver. When a government tried to base its money on both gold and silver, they immediately inherited a whole set of new problems. What happens when gold becomes more plentiful and silver more scarce? If the number of ounces of silver you can get for one ounce of gold stays the same, won’t people trade all their gold for silver? What happens to those people whose wealth is all in gold coins. Do they all of a sudden have less money? Do they have the same amount of money and is it less valuable? Can you buy less wheat with your gold, or can you buy more wheat with your silver? Will the price of wheat change at all under these circumstances? When a government bases its money on two precious metals, this is called a bimetallic money system or simply bimetallism.
"But, I thought we were talking about what an ancient denarius could buy?" You might ask. "What does all of this have to do with the price of bread and circuses in Rome?" A whole lot, I must say. We must remember that Nineteenth Century America had 2500 years of human experience with money to draw upon, and look how confusing and imperfect the money system was! The Romans started out by saying "Let this ingot of copper represent the value of one cow. We’ll figure everything else out from there." These copper ingots, cast roughly in the shape of a cow hide with little "feet" at the four corners, have been brought up from shipwrecks all over the Mediterranean. The Romans, in their inexperience, not only had a bimetallic system but a tri - metallic system by the time of the early empire. If Americans in the last century got into heated arguments and confused business transactions under a bimetallic system, think of what a system would be like in which gold, silver, copper, and brass were in circulation. The values of each was constantly changing against the other, leaving great opportunities for crooked government magistrates and moneychangers to make a profit off a poor and suffering populace.
Let us study one more example of an economic system before we decide on a working definition of money and economic wealth. During the Middle Ages, money almost totally disappeared from use. This was because land, not gold nor cows nor number of merchant ships became the thing that represented wealth. Now land is not a commodity that you can shove into your purse or money belt and go down and trade for corn and beans at the local market, so we can see that barter also took a back seat in this economic system, except amongst the peasants. For evidence of money’s low standing during the period from A. D. 500 until about 1500, just look at the cruddy little coins that circulated. They were either misshapen lumps of bronze or paper - thin flakes of silver. The silver issues from almost all kingdoms were dreadfully monotonous. There was a cross or a little stick figure image of a castle or some other symbol on one side and often a crude, cartooney full face image supposed to represent a king on the other. The letters in the inscriptions were formed with individual punch marks for the strokes. Sometimes, a distorted ruler’s monogram could be found on one side. Furthermore, most of the larger of these ugly little pieces of money are quite rare. In fact, due to a weird form of hypocrisy based on New Testament parables, the kings and ruling aristocracy thought it unseemly to their holy and consecrated character to tough "filthy mammon" and had a servant handle the little amount of money they used.
Briefly, this is how the medieval system worked in theory. A powerful military leader (such as William, Duke of Normandy) conquers a kingdom (such as Anglo - Saxon England) and has a vast amount of land at his disposal. The original inhabitants are lucky to be left with their lives to live out in poverty and humiliation. Now the conqueror becomes king, and begins to reward those ruffians and gangstas that helped him steal his new kingdom. These worthies become barons, dukes, and knights, depending on how much land the king gave them All the chief throat slitters and village burners that had brought the most soldiers with them to help in the conquest got the largest numbers of choice estates, scattered throughout the countryside (The king didn’t want any of his barons consolidating in one geographical area their holdings and becoming powerful rivals to the throne.) The plain old skull bashers who brought only twenty or thirty men with them got fewer estates of lesser quality. These barons and dukes in turn subdivided their estates and parceled them out to their head retainers, and so on until each one - horse knight had at least a modest estate. In return for the grant of tenancy to the lands (All property was, in theory still owned by the king and simply occupied by the barons as long as they kept up their feudal obligations), the lords, barons, etc., had to supply a certain number of fully equipped fighting men for so many days each year and a specified number of pigs, sheep, sacks of flour, cowhides, and other "in kind" items to his overlord. Thus, one can see that the medieval economy was one of service and rents in kind exchanged for tenancy and rights to land. It is very important to note that the medieval economies almost totally ignored foreign trade and most domestic trade, Commerce almost completely died out. All commerce and trade, except for simple barter, requires some form of money or medium of exchange in order to function at all.
The issue of money in the economy was one of the major factors that distinguished the vigorous, enlightened, dynamic classical civilizations from the stratified, stagnant and backward medieval kingdoms that flourished in Europe for a thousand years after the fall of Rome in the West. It was the re-emergence of a mercantile economy based on trading and money that brought us the prosperity of the Renaissance. (It was Gutenberg’s printing press that facilitated the rebirth and sharing of learning that were such a catalyst of the intellectual Renaissance, but that is a different story altogether). To understand anything about the buying power of the money in the late Roman Empire, we absolutely must understand how an economy based on land differed from a money economy, and how the Roman Empire was headed away from a money economy and toward a medieval land economy from the reign of Diocletian onward.
Return to The Roman Economy Table of Contents
The Ancients' First Use of Money
What are the Functions of Money?
Some Different Economic Systems in History
Inflation