What life in AD301 Can Teach Us Today

Why is it that so many famous quotes from history are attributed either to Winston Churchill or to Mark Twain?

Our war time leader is credited with saying ‘the further you look back into history the better you can understand the future’.

Given the bizarre world we find ourselves in today, I am going to follow Winston’s advise and take you on a history lesson. I’ve been re-reading Mike Maloney’s excellent work on precious metals – Guide to Investing in Gold & Silver – Protect Your Financial Future’. I bought the book when it was first published during the 2008 Great Financial Crisis so it seems relevant to revisit it as we seem like we are heading for another one.

What did the Romans ever do for us? They taught our politicians and central bankers how to debase a currency, generate massive inflation and trigger social unrest on an epic scale. They even taught price controls, wage freezes and the perils of over committing to a welfare state. More on that later.

After centuries of debasement to pay for wars across the Roman empire, it all came to a head in the reign of Diocletian who inherited the poison chalice in A.D. 284. Coins were just tin plated copper and inflation was proving somewhat more than transitory. So, in 301, Diocletian issued his Edict of Prices.

It was a scheme of great complexity that would not be attempted again for another 1,600 years. The edict imposed price “ceilings” for over 900 commodities, 130 different grades of labour, and a considerable number of freight rates. It also promised severe punishment to all “black market” operators who dared to buy or sell above the maximum.

I wish I could report that this bold policy was a great success. Sadly, then as now, when leaders try to manipulate markets there are unintended consequences. Merchants could no longer make a profit so they ceased trading and joined the 20% of the population receiving free wheat from the state. Yes, they even pre-dated furlough and stimmie checks by a couple of millennia.

A a role model for FDR in the 1930s, Diocletian then recruited thousands of the unemployed into the army and created public works projects to keep the off the streets. All funded by another prototype of 21st century government, deficit spending. And how was the deficit paid for? Yes, by money printing. Oh sorry, we haven’t invented the printing press yet. What I meant to say was more debasement of the coinage.

Fragments of documents have been discovered which confirm that, at the time of the Edict in A.D. 301 a pound of gold cost 50,000 Roman denari. By around A.D. 350 you would have needed to hand over 2.12 billion denari to buy the same pound of the yellow metal. Yes, the price increased by 42,400 times in fifty years. At times like this I take a fresh look at the $50 trillion Zimbabwe note on y desk. Of course, it could never happen in a modern day empire, could it?

Which brings me to Mike’s definition of the even Stages of Empire. Proven time and again across the centuries, read this and take a guess where we are at in the 2020s.

Stage 1 - a country starts out with good money which is either gold or silver or it's backed by gold or silver.

Stage 2 - as it develops economically and socially it begins to take on more and more economic burdens adding layer upon layer of public works and welfare programmes.

Stage 3 - as its economic affluence grows so does its political influence and it increases expenditures to fund a massive military.

Stage 4 - eventually it puts its military to use by going to war and expenditures explode.

Stage 5 - to fund the war it steals the wealth of its people by debasing their coinage with base metals or by replacing their money with currency that can be created in unlimited quantities.

Stage 6 - the loss in purchasing power of the expanded currency supply is sensed by the population in the financial markets triggering a loss of faith in the currency.

Stage 7 - a mass movement out of currency into precious metals and other tangible assets takes place. The currency collapses and gold and silver rise in price as they account for the huge quantity of currency that was created. This process transfers massive wealth to those who had the foresight to position themselves beforehand in real money, i.e. gold and silver.

Every policy that Diocletian used in A.D. 301 is being used in the 2020s. Price controls and capital controls are bound to be under discussion as politicians and central bankers figure out how to achieve the inflation they need to devalue their debts while avoiding food riots in the streets.

Mike’s book was written before the era of b*tcoin, but re-reading it today makes me think it’s time to increase my allocation to real money as we head from stage 5 to stage 6. I have a feeling we’re going to reach Stage 7 before this decade is out.

Let me finish with some good news. Mike has been generous enough to make his book available as a free download. You can grab your copy here and educate yourself on the importance of precious metals being part of your asset allocation.

https://pages.goldsilver.com/freebook ?

All the best

Graham