Two monetary crises two thousand years apart. Modern Venezuela and the Roman Empire have more in common than you might think. Both know too well the dangers of runaway inflation and collapsing investor confidence. But, only one has crypto on his side.
Venezuela’s official currency, the bolivar, has suffered from hyperinflation for half a decade due to repeated currency devaluations, minimum wage increases and large increases in government spending.
For an extended period of centuries, the Roman Empire benefited from the enormous trade and commercial advantages associated with the world’s first fiat currency, as explored in my book Pugnare: economic success and failure. Roman coinage consisted of three coins: gold (Aureus), silver (Denarius) and copper or brass coins (Sestertius and Dupondius). Basically, and despite fluctuations in the value of the underlying metal, the exchange rate between them was fixed by imperial decree.
This seemingly simple financial innovation brought untold wealth and business opportunities to the citizens of the Roman Empire, leading to Ancient Rome’s transition from an empire largely dependent on the spoils of war and imperial conquest to one founded on trade, trade and freedom. business.
Much like modern currencies, it was backed by a sophisticated banking system, which allowed goods to be bought and sold without the physical transfer of tons of precious metals. Most of their money was also like ours: created by the banks out of thin air when they made loans. Much like modern economies, the majority of Rome’s money supply was held in bank deposits rather than cash in circulation. Although modern electronic transactions are faster, whether you use a graphics card or a horse and cart, the process is much the same.
Much like today’s Venezuela, irresponsible government spending and currency depreciation in the empire has led to soaring inflation, a collapse in investor confidence and an abandonment of the consumer confidence that underpinned the exchange rate innovation. But if the Romans, alongside the citizens of present-day Venezuela, exchanged their Aureus for Ether (ETH) or if the government had implemented a “digital denarius”, could the empire have survived?
Related: Gold, Bitcoin or DeFi: How can investors hedge against inflation?
Centuries Apart, Rome and Caracas Face the Same Threat: Hyperinflation
From the time of Emperor Philip the Arab (244 AD to 249 AD), the fixed exchange system collapsed. Every day, business activity became more difficult because of the fluctuating exchange rate. The equivalent effect would be if ten dollar bills were worth a ten dollar bill one day and then a five dollar bill the next. Citizens no longer knew the value of their money. Economic activity has declined.
It was a dramatic fall from grace for the world’s first government-controlled currency, which had been used to pay for goods from Britannia to Judaea in Africa Proconsularis.
Unlike their Roman ancestors, digital currencies have offered Venezuelan citizens an innovative solution. They can circumvent the bolivar by adopting cryptocurrencies such as Bitcoin (BTC), Ether, Dash (DASH) and EOS (EOS), as the government introduced its own, petro, in 2018. Iran hopes to use profits from a booming cryptocurrency mining sector to support its economy while it is still beleaguered by US sanctions.
Related: US and Crypto Sanctions Strategy: The Cracks Are Feeling in Iran
Turning to cryptocurrency was, despite the many technological and societal advances they made, not an option available to the Romans. Instead, the collapse of the Roman coinage led to a drop in economic activity, delivering economic misery to once prosperous regions and triggering the start of a long, slow economic decline from which it would never truly recover. .
The Romans Could Have Made a Mint From Crypto
The cryptocurrency would also have relieved the Romans of having to maintain a mint as well. It eventually became increasingly difficult for the Romans to source gold and silver to make new coins, so the government cheated by increasing the amount of base metals. This led to inflation which eventually caused people to lose faith in the money they held.
The breakdown in trust was compounded by a civil war in 193 AD which led to key monetary reforms which had centralized control of the abandoned coinage. Once this control was lost, manufacturing and trade declined.
As in Venezuela, soaring inflation, a loss of confidence in the government, and civil unrest led to a collapse of the banking system and, ultimately, large-scale economic collapse. But, unlike the Romans, the decline of centralized currency offers a possible path out of Venezuela’s economic decline, not the slow-moving nail in the coffin that it was for the empire.
The cryptocurrency is used by Venezuelans for everything from hotel reservations to pizza deliveries. As President Maduro’s government released the Petro, the crypto was also used against them. Maduro’s rival, National Assembly Speaker Juan Guaidó, has used the stablecoin USD Coin (USDC) to bypass Venezuelan banks and send humanitarian aid to healthcare workers.
Power over the monetary supply of the empire was often contested between rival factions. For example, during the civil war of 193 AD, a new currency was opened in what is now Turkey and used by rival claimants to the imperial throne, Niger and Septimius Severus. In contrast, Emperor Vespasian was able to maintain a period of peace and stability between AD 69 and 79, in part because he recognized that he had to control the money supply, especially currencies.
Roman Cryptocurrencies Could Have Survived Modern Times
Governments in Venezuela, Iran, and elsewhere now considering adopting cryptocurrencies as official currencies should pay attention to the Roman example. This shows how badly things can go if the money supply is controlled by different or even rival organizations.
Perhaps if the Romans had not depended on physical currency but had had access to crypto, perhaps they would not have been destabilized by economic collapse and internal fighting.
If so, perhaps today the people of Venezuela would not be using Bitcoin or Ether, but rather a digital currency inherited from the times of Nero and Vespasian.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
George Maher is a scholar and author. His last book Pugnare: economic success and failure, explores the rise and fall of the Roman Empire from an economic perspective. He has been listed in the Financial Times and Money Week. George holds a PhD in Roman Empire Economics from King’s College London and a BA and MA Honors in Classics from Birkbeck University London. He is a Fellow of the Institute and Faculty of Actuaries and holds an Honors Honors degree in Mathematics from Trinity College Dublin.