Fall of Empires - Rome and US
This post is going beyond the scope of the page - entrepreneurship But it is wise to watch this video and learn from this. Paraphrasing Churchill, we say that going deep into history makes us fully understand and much more so the future We gain more insight into the currency management, money and credit and how they affect local business. Even the military, and strong local and central govts.
The Roman empire
This Maloney compares the Roman empire and the current US situation. There are parallels and we must be aware of the perils we are facing so that we can avoid the mistakes of the past civiization that has collapsed What must we do as individuals and entrepreneurs to avoid the doom and steer clear of the challenges posed by the debased monetary policy
1. Rome started with stable monetary policy, stable currency that was backed by pure gold
2. But the Punic wars (war with Hannibal) and massive military structure all over the empire and massive infrastructure caused the central govt (the Republic) caused to engage in deficit spending
3. This led to the debasement of the currency, like removal of edges of the coin, melting them and minting new coins or simply inflating the value of the coins
4. To appease the masses, the top brass of Rome, the emperors led in Circus and Bread programs. Circus - the regular spectacle at the coliseum featuring gladiators and the Bread - a welfare program where about 20% of the population get wheat ration daily. Where did Rome get the money for these
5. This lead to strong govt to collect taxes, made the central govt corrupt - due to cronyism. To curry favors from the emperor and the senate
6 Led to the strong influence of the military over the govt
These led to disorder chaos and eventual falll of the Roman empire It was not the war with Vandals that brought that Rome, the monetary system did and imploded the empire
Similarity with the US
1. The US started on a similar footing with Rome with stable currency/money in the beginning
The US Constitution prescribed only Gold and silver as the legal tender in the settlement of debt
and other obigations
- Clause 1 Proscribed Powers
No State shall enter into any Treaty, Alliance, or Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts, or grant any Title of Nobility.
Because of this the US dollar became merely a certificate of deposit of gold or silver The US dollar or silver can be redeemed through the US dollar
2. US has to engage in deficit spending due to its involvement in two World Wars
3. In 1944, just as the world war II was coming to an end, there was this Bretton Woods agreement that led to abandoning of the gold standard (perhaps to speed up war recovery through printing of loca currency and deficit spending by countries) and instead making the dollar the world currency pegged
(reserve) pegged at $35 dollars per ounce. This led to the establishment of the IMF and IBRD
So how then the value of currency determined - by comparing the value of currency against a basket of currrency that keeps fluctuating on a daily basis
4 Due to the deficit and massive spending due to Vietnam war Nixon on August 15, 19711 declared at least temporarily that redemption convertibility of US dollar to gold was to be no longer allowed. And strict price control for 90 days. It is to be noted that inflation or price of goods going up is not the product of manipulation by traders who are just out to make a living but because of wrong monetary policy and is merely a result of debasement of currency brought about by lack of a gold standard, and/or rise in money supply. Nixon is not only famous for Watergate scandal and or Vietnam war, but for the disruption/debasement of the US monetary system
