Whatever Happened To Penny Candy Ch 2

Roman Inflation and Counterfeiting

• Double-digit inflation plagued Western civilization (including Japan) in the 1970s and 1980s, with prices rising by 10% or more annually.
• Similar widespread inflation occurred in the Roman Empire.
• Inflation and recessions are recurring economic issues, not modern phenomena. The Greeks faced similar problems centuries before the Romans.

Roman Government Finances

• Roman government, like modern governments, had public works, wars, and welfare programs.
• Welfare programs give aid to the poor, while subsidies aid the wealthy. The Romans faced economic limitations (tanstaafl) regarding funding their projects.
• The concept of "tanstaafl" (There Ain't No Such Thing As A Free Lunch) emphasizes that nothing is free; resources and services require compensation.
• The Roman government financed its activities primarily through taxation.

Tanstaafl and Counterfeiting

• Tax increases led to public discontent and potential revolts.
• To avoid higher taxes, the Roman government resorted to counterfeiting.
• Counterfeiting involved altering coins (clipping or debasing) to increase the money supply.

Coin Alteration and Debasing

• Roman coins, primarily the denarius, were made of 94% silver initially.
• The government clipped coins (shaving edges), melted them down, added base metals, or reduced the silver content to create more coins without increasing taxes.
• This process progressively lowered the silver content of coins.
• A denarius, originally at 94% silver, fell to 43% silver by 218 AD, and to less than 1% shortly after.
• The public recognized reduced silver content and saved high-silver coins, hoarding them.
• This process demonstrates Gresham's Law: bad money drives out good money, as people preferred to spend the circulated debased coins.

Modern Relevance

• Similar economic practices have occurred in modern times.
• The United States experienced a decline in the silver content of coins starting in 1965.
• This created a surplus of low-value coins.
• People hoarded the high-silver coins, leading to a shortage of those coins.

Coin Reeding and Recognition

• In later centuries, notches (reeding) were added to coin edges to detect clipping
• This practice is also used on modern dimes, quarters, and half-dollars.