A (Brief) 2,000 Year History Of Economic Collapses

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for most of human history, national economies didn’t really grow year over year like we expect our economies to in the modern day.


A year worse than the one that came before wasn't unusual at all, because most human industries relied on rainfall and crop yields rather than consumer confidence and BOND yields.

That’s why we’re focusing on when human error and meddling were the direct causes of financial catastrophe, rather than any REAL change in how the world operated.

And the place to start is going to be the inflation crisis during the Roman Empire.

Whereas most crashes are felt in the moment, the financial woes of the Iron Age Titans dragged out over centuries.

The resulting hyperinflation is often cited as one of the biggest reasons for the Empire’s eventual collapse. Some historians even say it was the reason the classical civilization became ancient history.

Here’s what you need to know: Rome’s currency wasn’t backed by gold in some national vault.

Modern-day currencies get their strength from something like a federal reserve bank controlling money supply, and the government asking for you to pay your taxes in that currency.

Coins are just symbols of worth.

But in Ancient Rome, coins were proof of worth.

A Roman Denarius was minted with 4.5 grams of pure silver – that’s high-grade stuff back in the day.

A single coin was approximately a day’s wage for a city craftsman.

Unfortunately, a limited supply of silver and precious metals impeded circulation. It took decades to accrue enough coinage to become a standard medium of exchange.

To increase circulation, Roman officials diluted the silver purity.

New coins were less expensive to make but were agreed to be as valuable as higher purity originals.

In other words, Roman emperors figured out that if they needed more money, they could just mint more money.

Don't say we don't get any great ideas from the Romans

But but the economists watching know what the emperors were about to find out: inflation, failure to understand supply and demand, and lack of fiscal regulation had put the empire on a course for economic collapse.

Unfortunately, the rulers needed more time to figure that out.

In the interim, minting more money meant they could overspend on public works and pet projects. Any time the bank account looked shaky they just lowered the purity of their silver coins.

In 161 AD, when Marcus Aurelius was in power, Denarius purity was 75%.

100 years later, during the reign of Gallienus, the Denarius lowered from 5% to 0.5%.

Coins were eventually bronze with just a thin silver coating.

But in 301 AD, Emperor Diocletian had an idea to save the stalling economy.

His ‘Edict on Maximum Prices’ targeted inflation by imposing limits on sales of things like pork, shovels, and slaves.

But this backfired.

A black market sprang up, and market competition resulted in bloodshed.

So, he introduced a new coin: the argenteus.

One was equal to 50 denarii.

Yet it did little to curb inflation.

One decade later, an argenteus was worth up to 100 denarii. Historians believe Roman inflation reached up to 15,000% between 200 and 300 AD.

So, what did the Roman Empire do next? The same thing every government does when it goes broke. It raised taxes.

And what did the people do when the taxes were too high? The same thing people do when the taxes are too high: they barter with goods and commodities.

With confidence in the centralized economy lost, the financial foundation of the empire was crumbling.

The military couldn’t fund its expansion or defences, and turmoil aggravated internal power struggles.

By 476 AD, the Roman Empire was over.

The good news is civilization learned from the errors of the empire and never repeated the same mistakes every again.