History records countless examples of currency debasement, i.e., the steady reduction in a money's precious metal content or "backing" (principally gold or silver), followed in modern times by the introduction of fiat (unbacked) paper money, which then depreciates as governments print more and more of it to buy votes, run budget deficits, and spend like tomorrow doesn't matter.
It's a sad story that dates back at least as far as the prophet Isaiah, who condemned his ancient Israelite compatriots for turning their silver coinage into "dross." (See Isaiah 1:22.)
The dollar was "as good as gold" when Woodrow Wilson commenced America's monetary deterioration in 1913. In December of that year, he signed into law the Federal Reserve Act, which reduced the paper dollar's "gold cover" to 40 percent. It also created a central bank that would go on to cause the Great Depression and a string of recessions as it steadily inflated away at least 90 percent of the dollar's 1913 value.
In 1933, Franklin Roosevelt ordered American citizens to turn over their monetary gold to the government or face fines and imprisonment. Under Lyndon Johnson in the 1960s, the silver content of the country's coinage was removed. Then in 1971, Richard Nixon ended the last, tenuous link between the currency and a precious metal by refusing to honor foreign claims on the dollar in gold.
No American president since William McKinley did anything to reverse this debauchery. Ronald Reagan was perhaps the only one to at least raise the issue—he even created a commission to explore the options for restoring a gold standard—but nothing ever came of it. The last time the federal government affirmed sound money was with the enactment of the Gold Standard Act of 1900 or, even more dramatically, with the formal end of Civil War paper money inflation in 1875.
This familiar pattern in monetary history rarely produces any heroes. Political leaders are happy to cowardly defer real reform to some future generation and, in the meantime, do nothing more than "manage" the decline.
My purpose in this essay, however, is to acquaint readers with one of the few exceptions—a leader who briefly stopped the policy of debasement and strengthened his country's currency. An ancient Roman emperor named Pertinax was born on August 1 in the year 126 A.D.
Fast forward to December 31 in 192. Rome's emperor is a hated brute and megalomaniac by the name of Commodus (depicted by actor Joaquin Phoenix in Gladiator). Ranking among his many public sins are taxes and tortures, both of which he increased notably during his fifteen-year reign. He also was a notorious money mobster.
In 180 A.D., Commodus reduced the size of the principal Roman coin, the denarius, and cut its silver content from 79 percent to 76 percent. Six years later, he diluted it further to 74 percent. Perhaps the numbers seem insignificant, but these two devaluations were Rome's largest since Nero nearly a century and a half before. The resulting price inflation was a reason the Roman historian Cassius Dio lamented the reign of Commodus as a descent "from a kingdom of gold to one of iron and rust." To the joy and relief of most Roman citizens, conspirators, including his wife, assassinated Commodus on New Year's Eve 192.
Enter Pertinax and 193, known as the Year of the Five Emperors. A senator and former military man, Pertinax assumed the imperial purple on the first day of a tumultuous twelve months. To his credit, he set about to clean up the mess his predecessor created. In his famous work, Roman History, Dio labeled him "an excellent and upright man," who practiced "not only humaneness and integrity in the imperial administrations, but also the most economical management and the most careful consideration for the public welfare."
Pertinax attempted with limited success to restrain government spending. In the face of stiff resistance, he even tried to cut the alimenta, one of the expensive Roman welfare state's core programs. He knew that the Praetorian Guard, the elite military unit protecting the emperor, was corrupt and took steps to rein it in. But he earns his highest marks from me for what he did with the currency. Reversing Commodus, he boosted the silver content of the denarius from 74 to 87 percent. In Dark History of the Roman Emperors: From Julius Caesar to the Fall of Rome, historian Michael Kerrigan writes,
Pertinax was a serious statesman talking earnestly about the need to address the abuses of the previous reign, for radical reforms to the economy, and belt-tightening. It wasn't what the guardsmen wanted to hear... The Guard distrusted his economizing instincts. They weren't sure about him, so he was going to be an Emperor on probation... The people hadn't wanted him, partly because they didn't know him and partly because what little they did know was that he planned to cut back on the 'bread and circuses' they loved.
Eight-seven days into his tenure, Pertinax fell to the same fate as Commodus. He tried courageously (if not foolishly) to reason with the Guard and explain why Rome's decline necessitated his reforms. He was killed on the spot, whereupon the Guard proved his point by brazenly offering the emperor's position to the highest bidder. As I explained here, the winner was Didius Julianus, whose rule lasted a mere 66 days, to be followed before year's end by three more ill-fated autocrats.
The fifth of the emperors who took office in 193, Septimius Severus, ruled for 18 years. A big spender, he resumed the debasement of Roman coinage. By the time he died in 211, the silver content of the denarius stood at a paltry 54 percent.
By 193, the old Roman Republic with its liberties and limited government was long gone. The imperial dictatorship we know as "the Empire" was drowning itself in foreign adventures, political tyranny, and suicidal economics. The mob wanted its public handouts at other people's expense, and corrupt conmen were constantly conniving to give it to them in exchange for power for themselves. At this late stage, Pertinax was probably too good for Rome and the Romans.
If any of this rings a bell, it's because history has a way of repeating itself, and people have a way of ignoring its most salient lessons. But perhaps we can hope, however naively, that if we continue to commit the same errors as Rome, we can somehow escape the same outcome.
About the author
