?? How Inflation Nearly Destroyed Two Great Empires and Gold Saved Them?

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Yep, the British Empire, the largest empire the world has ever seen, was on the brink of destruction in the early 19th century due to a crisis in the financial system, with high inflation at the heart of that crisis.

Another great empire, actually the greatest civilization of the ancient world—the Roman Empire—was nearly on the verge of total collapse in the 3rd century, primarily due to high inflation, which led to extreme political instability.

In both cases, these great empires reset their monetary standards by reestablishing the gold standard, which prevented their downfall. The successful restructuring of the monetary system provided them with another century to survive and thrive.

So, let’s understand the actual process from centuries back:

[1] Let's Start with the Roman Empire

Rome—the mother of Western civilization—was initially a small republic founded in Italy, starting with the city of Rome and its neighbors.

The Roman Republic was established around 500 BCE.

From 500 BCE to 250 BCE, Rome unified the Italian peninsula.

From 250 BCE to 20 BCE, over the course of almost 250 years, the Roman Republic conquered Spain, North Africa, and almost all of modern-day Greece, Turkey, Cyprus, and Syria.

After nearly 500 years of rule, the internal political structure of the Roman Republic was fundamentally broken, and fragmentation emerged around 27 BCE.

This was the time of the famous Roman leader Julius Caesar. He and another prominent figure, Augustus, engaged in fierce battles, ultimately leading to a civil war. Augustus emerged victorious, and Julius Caesar was defeated.

Augustus, also known as Octavian, became the first Emperor of Rome, marking the transition from the Roman Republic to the Roman Empire.

From 27 BCE to 180 CE, the Roman Empire functioned relatively efficiently.

However, continuous debasement of gold coins led to rising prices and growing frustration among the general populace.

After the death of the renowned Emperor Marcus Aurelius in 180 CE, this frustration led to another civil war among political leaders and army generals across the empire.

The political unrest and ongoing wars resulted in further debasement of gold coins, worsening the situation.

After 284 CE, a more competent ruler named Diocletian took charge.

He understood the root cause of the crisis and introduced a new monetary system, issuing a new gold coin with high purity, famously known as “Solidus.” This change altered the course for the next centuries.

The Solidus was accepted and trusted as common money from Spain to China. It survived and functioned as money for the next 1,000 years in the Eastern Roman Empire.

With the introduction of the Solidus in the late 3rd century, the political crisis was resolved, and the empire gained almost two centuries of stability until the fall of the Western Roman Empire in the 2nd half of the 5th century.

Yes, that’s the power of gold—the money of God, the sound and true standard of money.

[2] What About the British Empire

Britain became the ruling state of the world in the late 17th century. However, just a century later, in 1797, their empire faced one of its most dangerous moments, with the situation threatening to collapse.

How did it all start?

In 1797, the French invaded the UK, marking the last invasion of Britain.

The invasion spread panic across the nation, and people rushed to banks to exchange Bank of England paper notes for gold.

However, the Bank of England had issued 9/10 times more paper notes than it had gold in its vaults. Consequently, the Bank of England struggled to meet all depositors' demands to exchange paper for gold.

No matter what, if all depositors of any bank today demanded their deposits in cash, every single bank, including the largest, like JP Morgan Chase, would fail.

The banking system at that time was no different. As a result, the Bank of England banned the conversion of gold to paper notes for the general public, leading to widespread panic in 1797 and causing the entire system to crumble.

From 1797 to 1820, the next 23 years were highly unstable for the British economy, politics, and their global dominance.

Finally, in 1821, Britain reinstalled the gold standard, allowing the conversion of paper into gold. This stabilized the British financial system and economy, providing Britain with the means to rule the world for another century.

Yes, inflation—the issuance of more money and expansion of the money supply—was at the heart of the 1797 crisis.

Gold saved them.

These are just two examples.

The effects of inflation are extremely severe.

It erodes social structures, values, and the functioning of public institutions.

Inflation can indeed destroy even the most powerful empires.

Ultimately, every empire collapses when it fails to address the issue of inflation.

Do your research and look for answers—you will surely find them.

That’s all for now.

Thank you for your valuable time.