Currency and Money in Ancient Times

This is the second post in a series entitled Currency, Money and the Economy.

During ancient times, gold and silver were used as both money and currency. Even in Biblical times, the three wise men gave Jesus gold. Egyptians, Greeks, and Romans also used gold and silver as the backbone of their economy at first. However, an interesting pattern emerges when looking at all major ancient civilizations from a financial standpoint.

1)  The civilization starts off as young sovereign state or republic with good money (gold or silver, or currency guaranteed by gold or silver).

2)  As the civilization grows, it becomes more socially responsible and takes on more and more economic burdens. It also needs to create a military to both defend its borders and expand its territories (for resources).

3)  The civilization engages in wars that are extremely costly, leaving the government in severe debt.

4)  In order for the government to continue functioning, it converts money to currency that has no backing. This allows the government to print as much as it needs to run its civilization. The citizens are anxious at first, but because life is still good in civilization, they accept it.

5)  As time moves forward, the civilization continues to spend currency on military and social endeavors (including dealing with natural disasters), forcing it to continue printing more and more currency.

6)  As some point, the amount of currency in circulation causes extreme inflation throughout its borders.

7)  The citizens, burdened by this inflation, lose faith in its own currency and revert back to accumulating gold and silver.

8)  The civilization, now without the support of its citizens or currency, declines into the history books, replaced by the next young sovereign state or republic waiting in the wings.

Time and time again, ancient history has followed the same pattern. For reference purposes, we will refer to this as the historical playbook. So how does the United States match up against the historical playbook? We shall see in the next few posts.