The backbone of the Roman empire was its currency.
The denarius enabled the Romans to build large cities with sewage systems and highly specialised jobs such as making eyes for statues.
Its far-reaching bank branches enabled trading over vast distances as merchants could avoid dangerous journeys with large quantities of precious metals.
It was stable for 200 years. But when the denarius collapsed, so did the Empire, and the disastrous downturn triggered 1,500 years of economic depression.
Had the Romans switched to cryptocurrency, however, this may have been prevented.
That’s according to the academic and actuary Dr George Maher, whose book Pugnare: Economic Success and Failure is the first account of the Roman economy from a modern-day business perspective.
Similar to modern-day Venezuela, the Roman empire suffered from irresponsible public spending.
It became more and more expensive to source gold and silver for new coins, leading the Roman Senate to increase the amount of base metal. This caused rampant inflation and a collapse in investor confidence and consumer trust.
A civil war in 193 AD, which culminated in key currency reforms that abandoned the centralised control of the money supply, eroded the breakdown in public trust even further.
The Roman Senate tried time and time again to reverse the economic development throughout the second half of the third century AD.
‘One of things that happens is that the emperors last only three-to-six months, whereas before they ruled for 10-15 years. There were dozens of emperors all trying, all failing, and all being replaced,’ Maher told Citywire Selector.
‘You stop seeing bankers being mentioned in scripts from around 250 AD, and cities started building big city walls for the first time. It’s around that time that the army salary goes completely out of control. It’s also when you see collapse in building work.’
If the Romans had not been reliant on physical currency and instead, like the Venezuelans, had access to cryptocurrency, it could have prevented the breakdown in the monetary system and the trading it facilitated.
‘The Roman payment system was based on denarius which was being debased, on a banking system which required political stability.
‘Cryptocurrency as a payment system would have been superb, because if it works, there’s an alternative. The whole system isn’t critically dependent on one engine,’ Maher said.
Lessons from the past
Winston Churchill famously proclaimed that ‘the farther back you look, the farther forward you are likely to see’. Maher believes the economic downturn of the Roman Empire offers many lessons for today’s central bank leaders.
‘Our system is fundamentally built on the US dollar. Central banks’ core holding is the US dollar. If the US dollar were to go the way of the Roman currency, that would critically and catastrophically damage our system,’ said Maher.
‘What I think is very worrying is that some of the people in charge have an almost religious approach to it. There are different theories about the cause of the current inflation, but you don’t run a business on theories. You run it pragmatically.’
Maher said this is clearly the case when it comes to the inflationary risks with monetary easing. ‘The government distributed the increased money supply as furloughs and loans, and bank deposits of private individuals and companies have gone up by 20% on average.
‘But if you do a word search for “quantitative easing” in the Bank of England’s monetary policy report, it is only referenced in passing at the beginning. In a 50 page report, you’d expect it to be mentioned in at least five pages, but it’s completely blank. So they ignore it.’
This strong monetary conviction among central bank leaders is ‘groupthink gone mad’, according to Maher, and similar to the political mismanagement of the Roman ‘Age of Chaos.’
‘It’s the sort of thing you wouldn’t have expected in the Roman Senate in the 1st century AD, when they were running things smoothly. They would have had reasonable debates. But you would, however, expect it in 250 AD.’
Dr George Maher holds a PhD in the economy of the Roman Empire from King’s College London and is a Fellow of the Institute and Faculty of Actuaries. He is the managing director of the management consultant and actuaries company Maher & Co.