The above chart demonstrates the annual production of coinage during the Roman Republic 155-66BC. We can differentiate periods of contraction (deflation) from inflation. We can see that some periods were clearly deflationary and there emerged a shortage of money at times. The Roman Emperor Tiberius, who followed Augustus in 14AD, was notoriously frugal. We find private coinage appearing as tokens to make up the difference for such periods of deflation.
The private token issues during the period of Tiberius (14-37AD) are reminiscent of the Great Depression when hundreds of cities issued Depression Scrip. We also find private token coinage produced during the American Civil War. They even issued Postage Currency whereby stamps were exchanged as money.
If we then can ascertain the annual production of coinage with a reasonable degree of accuracy, adding up those annual production figures will give us a look at the total money supply. We are then able the also reasonably ascertain that the Roman government collected only about 80% of its total expenditure from taxes. The rest was not borrowed, but simply produced.
Consequently, this provides the understanding as to why there would even be the practice of debasement. The fact that tax revenues fell short of expenses explains that about 20% of the annual budget was covered by new mine production. Rarely has there ever been a “balanced” budget based exclusively on tax revenue.
This further explains why coins of someone like Gordian I (238AD) who reigned only thirty-six days have survived and bring today about $3,000 instead of hundreds of thousands.
Then there is the coinage of Didius Julianus, his wife and daughter who ruled only for 66 days in 193AD. The corruption had reached such levels that it was clear that the decline and fall of the Roman Empire began at this junction in time. The Praetorian Guard actually accepted bids for the position of Emperor. There were two rival bidders who presented themselves – Titus Flavius Sulpicianus (father-in-law of Pertinax) and Marcus Didius Julianus. Didius’ bid was 25,000 sestertii per man, which was the high bid and he was duly declared Emperor. This is why there was so much coinage which has survived for someone who was in office just 66 days.
Today, to cover the short-fall, governments borrow each year with no intention of paying anything back. The Romans did not borrow, they increased the money supply to cover the short-fall in expenditure. This was the common practice and it did not cause runaway inflation. That came during the 3rd century following the capture of Valerian I by the Persians who turned him into a royal slave and when he died, they stuffed him as a trophy. This resulted in the collapse in the money supply as people hoarded and feared the invasion of barbarians. This is when the wall was built around Rome by Aurelian (270-275AD).
Should we stop the borrowing and just increase the money supply as a finite percent of GDP? This makes sense when at time up to 70% of the accumulated national debt has been simply interest expenditures.