As title says, with the followup question whether your answer says anything about whether central banks have been successful (on average) in controlling inflation at a desirable level?
In: 1
Yes it’s always been a problem. Debasing the value of currency due to many different emperors printing cash to fund civil wars was a big part of why the Roman Empire collapsed.
In this time inflation took the form of using cheaper metals to adulterate the coin meaning it physically represented a less valuable piece of metal. Another inflationary move was to decrease the size of coins.
Soldier pay kept on being boosted to keep soldiers loyal, and taxation networks were often wrecked by war, so the Roman Empire saw extreme inflation in the 2nd and 3rd centuries.
It contributed to the rise of the “villa system” where wealthy Roman’s sought to create self sufficient “households”. Transactions within a household weren’t taxable and didn’t use cash as an exchange so this was a useful economic innovation at the time for those wishing to protect their extreme wealth. In Rome, a “household” included all slaves and dependents so these “households” could be small towns and entire villages operating as a closed economic unit. Another way of saying this is that inflation became so bad, large parts of the economy reverted to essentially a barter system under the rule of a local powerful lord.
The other effect of inflation was to ruin the labor market so instead of working for coin, free laborers became less free and tied to the land as serfs (“coloni”) instead of exchanging labor for coin, because coin became useless, the contract became access to land to feed yourself in exchange for some of the product of that land and rent going to the lord of the villa.
Inflation was so bad in the Roman Empire it played a key role in creating feudalism.
Latest Answers