Transcript: Jeremy Ryan Slate: Rome's Currency Debasement Playbook

Jeremy Ryan Slate [0:07] You've had a dynamic where money's become freer than free. I mean, talk about a Fed just gone nuts, all, all the central banks going nuts. So it's all acting like safe haven.

Marty Bent [0:17] I believe that in a world where central bankers are tripping over themselves to devalue their currency, Bitcoin wins. In the world of fiat currencies, Bitcoin is the victor.

Jeremy Ryan Slate [0:28] I mean, that's part of the bull case for Bitcoin.

Marty Bent [0:31] If you're not paying attention, you probably should be. Probably should be. Probably should be. Jeremy, thank you for joining me.

Jeremy Ryan Slate [0:38] Hey, thank you for having me, man. I appreciate you inviting me on.

Marty Bent [0:40] Well, I'm very excited for this conversation. It's been a meme for the last couple years, but men thinking about the Roman Empire and what the trajectory of modernity, how it compares to what happened in Rome. I was telling you before we hit record how I found it. I think I remember now. I think it was a clip from your Sean Ryan episode The Federal Reserve one or no? No, it wasn't about money 'cause I was pumped when I DM'd you. I was like, hey, would love to have you on the show to talk about the history of Rome, but through the lens of their monetary system. You're like, this is my favorite topic, so.

Jeremy Ryan Slate [1:16] And it's the most important. You know, like everything else that was happening, like sure, history's never monocausal, it's never one thing, but like monetary policy, if you've got good money, you can make a lot of mistakes and everything will be okay.

Marty Bent [1:27] Well, and that's like, oh, one of our taglines of the show is fix the money, fix the world. So this show started in this city 9 years ago. moved around. I was in Texas, now in Philadelphia, but now coming up to record at PubKey. But I started the show because I'm a Bitcoiner. People are looking to learn about Bitcoin. And I truly believe that a lot of the issues that we see today as it pertains to social, political, economics stem from the fact that we've broken the money.

Jeremy Ryan Slate [1:54] 100%.

Marty Bent [1:54] Money is the root of everything we do as a society.

Jeremy Ryan Slate [1:57] Well, I'm glad this interview finally happened then because I have been banging the drum for this for probably 5 years that it's like, Borders, sure. You know, social policy, sure. But like money fixes a lot of mistakes. And you know, I think the Roman East is a really good example of that. The Eastern Roman Empire, which history likes to call the Byzantine Empire, that word didn't exist until the 16th century. One of the major reforms Constantine did is he actually fixed the money and that gave them 700 years without real inflation, which is pretty wild. So it can fix a lot of mistakes.

Marty Bent [2:27] Well, before we get to Constantine.

Jeremy Ryan Slate [2:30] Yeah. Sorry, go ahead.

Marty Bent [2:31] No, no, I think because I think it's important to like set the stage and, um, of how the denaria, how it was initially issued and how it inevitably became debased. And I mean, we don't have to go through the whole timeline, everything exactly happened, but like, I guess a broad brush.

Jeremy Ryan Slate [2:48] Yeah.

Marty Bent [2:49] What was happening socially in parallel to the debasement of the currency? What were the justifications for it and how did it happen initially?

Jeremy Ryan Slate [2:55] Well, I think just the one thing important to understand before we get into that is the idea of what was Rome, because I think a lot of people get confused. They hear Roman Empire, Julius Caesar being the first emperor, which he wasn't. Rome is a kingdom first in 753 BC. It becomes a republic in 509 BC, and then an empire somewhere between— it's debated, but somewhere between 31 and 27 BC. In the West, that goes till 476. So very often, we're talking about monetary debasement, we're actually talking about the empire. So we're talking about kind of that 2nd century is a really good period of time to put it.

Jeremy Ryan Slate ⋮ If you want to look at coinage, the reason coins existed, their main purpose was actually to pay the military. So it's important to understand when you're going to see a coin, why would you put the things on it you're going to put on it? So if you're a weak emperor, you're going to put a lot of things on it to make you look strong because you want the military to take that coin and be like, oh, guy's badass. Yeah, of course I'll take this money. That was a very important key component of trust. money isn't just money. It's also an amazing propaganda tool. There is a book, if anybody gets a chance to go grab it, by Zonker, I think it's called Propaganda in the Age of Augustus or something like that.

Jeremy Ryan Slate ⋮ But if you look up Dr. Frederick Zonker on Amazon, you can find it. And it kind of goes over more of the symbols and things people put on coins. So coinage is vital. Now, when you look at the denarius, the silver denarius was their kind of key type of money they used. Now, they had gold coins and things, but the main things that would be used in the marketplace was the solidus. So that— or that— oh, I'm sorry, the denarius. The solidus is the gold coin. The denarius would be, in the time of Augustus, or that's about the 1st century AD— well, 1st century BC to 1st century AD— it's about 95% pure silver.

Jeremy Ryan Slate ⋮ Now, what you end up seeing is by the 270s, so we're deep into what's called the 3rd century crisis at this point in time, it's somewhere between 2% and 4% pure. A really easy number to say is 5% because we really just don't know the exact purity because coins differed so much, but it had lost 90% of its silver content in about a 200-year period. So that shows you that debasement kind of hit a certain point and hits the gas, and there's a really great chart out there which shows kind of the value of Roman currency, and it kind of goes across, goes across, just drops off a cliff, and then goes flat.

Jeremy Ryan Slate ⋮ The thing you wanna find out is why does that happen? And this goes back to the military again, which is a really key point. So in 193, there is Commodus, who is the son of Marcus Aurelius, and he dies, the calendar's changed since then, but sometime around January of 193. And that year is what's called the Year of the 5 Emperors. So the guy that takes over for Commodus, which Commodus is killed, by the way, he's strangled to death by a gladiator after there's several botched assassination attempts on him, including his concubine trying to poison him them with wine. They just really didn't like this guy.

Jeremy Ryan Slate ⋮ The guy that takes over for them is a senator named Pertinax, and Pertinax is very well thought of. He's had a senatorial family for a very long time, but he reigns for somewhere around 80 days, because what ends up happening is he wants to start to try to handle some of the debt. He starts to pull back some of the pay that's promised to the Praetorians, which is something you just don't really do, so the Praetorians kill him, and they actually take the empire and put it up for auction, and the man that ends up winning has one of the best names in Roman history, which is Didius Julianus, and he bids 25,000 sesterces per man, per guard member, and he becomes the new emperor.

Jeremy Ryan Slate ⋮ Now, there is a politician who's not really a general yet, but he will become one in North Africa, and from an area named Leptis Magna, and his name is Septimius Severus. He's actually gonna come with a legion, from North Africa into Italy, have Didius Julianus killed, and then place himself upon the throne. He's going to remove those guys from the Praetorian Guard that have been a problem, replace them with his own men, and what he does after that is this kind of key thing to what causes the debasement of currency. So what he's going to do is double legionary pay. He's going to somewhere around double the size of the legions, because he realizes, I need a bigger army to control things like what just happened.

Jeremy Ryan Slate ⋮ And when a new emperor took over, they did something called a donative. That was a gift they gave to the military. So he gives the largest one since Marcus Aurelius. So we're going like 4 emperors before that. So a huge gift and double legionary pay, and that's going to be a blueprint that every emperor after him into the 3rd century is going to follow, and that's why money is going to lose value so quick. And how did they do that is they would actually clip off pieces of the coins, and they would add other base metals to take apart the size and the weight and everything else.

Jeremy Ryan Slate ⋮ So you're gradually seeing this silver coin become bronze on the inside with a nice type of aluminum foil version of the silver on the outside. So there's lots of other causes you could say of what destroys money, but that's really the key one, is military pay and what they were doing with it.

Marty Bent [8:02] Yeah.

Jeremy Ryan Slate [8:02] It was a little long-winded, so I'm sorry.

Marty Bent [8:03] No, no, no, this is, I mean, I'm happy you said that because this is something I've been saying, confirms and validates something I've been saying. But ultimately, 'cause after that you had the Roman army spread out throughout their part of the world, right?

Jeremy Ryan Slate [8:19] Yes.

Marty Bent [8:19] And that was ultimately, I think, fast forward to the end, what led to the whimper of the fall of Rome, which was the military came back and said, hey, we just went and fought these wars, can you pay us? They got the currency, they're like, this is worthless.

Jeremy Ryan Slate [8:31] Well, and there's a little bit more to it than that as well, Obviously, there's other things that cause the currency to collapse faster, like Severus's son Caracalla is in a real need for money. So he's— in 212, he's going to take about 30 million people and make them citizens overnight, because now it changed the way they were taxed. He could also tax their inheritance. So he's really in a need for new money. But then also, if you look at how the military changes, that's a really key component too, because why would this military come back and say, hey, we're not happy with this money? And that's because for the most part, they had become less and less Roman.

Jeremy Ryan Slate ⋮ And I know Elon's talked about this a lot, you know, it was birth rates and whatever it might be, and that's part of it, but it's not the only thing. It's not monocausal. In the 160s, you have something called the Antonine Plague where about 10% of the empire dies. You also have policies that had changed pre-empire and late republic into who could serve because they also had a military crisis then as well. As there were more slaves coming in and the individual farmers had lost their farms, There was a property requirement to serve, so there's trouble getting soldiers. So Marius is going to end up changing that, getting rid of the property requirements.

Jeremy Ryan Slate ⋮ Now he can bring the landless poor into the army. So they start— the army itself becomes really just the landless poor and even other non-Romans they could pull in. Even Julius Caesar had his German Guard that was pretty important to him. But as you get past this Antonine Plague in the 160s, there's now an issue of where do we get more soldiers from? And that's where they start bringing in initially troops into the legions, and then they create a policy in the late 3rd and 4th century called the foederati, and that's basically these barbarian tribes fighting under barbarian commanders, but under the flag of Rome.

Jeremy Ryan Slate ⋮ So when your money loses value and the people fighting for you are just for that money and the promises you can keep, because Rome had broken a lot of promises to these barbarians, well, when the jig is up, they're gonna turn on you, and I think when you look at the fall of Rome in 476, it's kind of not the, you know, down in flames and mashing of teeth. It's literally just a contract. The final emperor is a teenager named Romulus Augustulus, and Odoacer, who is the Visigothic commander at that point in time, basically retires him, sends him to Ravenna with a pension, and there's records of him living into the 6th century, and sends the imperial regalia back to Constantinople, says, we don't really need an emperor anymore.

Jeremy Ryan Slate ⋮ Emperor Zeno's kind of like, eh, whatever. I don't have time to deal with it. So it's kind of really interesting how money really is a core component of that, because if you had sound money, you could have survived a lot of those things.

Marty Bent [11:05] Yeah. Was it a frog's boiling in water situation over the course? What was the awareness of the Roman public or the army as the currency was being debased?

Jeremy Ryan Slate [11:16] Well, one of the interesting things is the military is going to become aware first. If you've heard of the word salary, which many people have to deal with on a yearly basis, it comes from the word salarium, which is the Latin word for salt. What happens in the 3rd century is soldiers aren't incredibly happy with the money, so now they're adding an amount of a salt ration that you're also given in addition to your money, and because salt has so much value, it could be used for so many different things. That's where the idea of being worth your salt is coming from. And you also see, I guess to describe the 3rd century crisis, because this is kind of a key part of it, you would have men claim to be emperor.

Jeremy Ryan Slate ⋮ Legion would raise them up, and they might find something purple to put them in, or take their legionary flags down, sew them together, and make that something purple to put on that man, and then that guy would go march on Rome. In that 26-year period from 235 to 284— a 50-year period, sorry— you had about 26 different men claim to be emperor. That's kind of a really key component showing you how the military felt about it. Well, if that guy becomes emperor, he can get me more than what I'm getting now, and they would fight for that promise. And if that promise didn't come through, well, it wouldn't have to be another commander killing that emperor because they would do it themselves.

Jeremy Ryan Slate ⋮ And there's numerous different awarenesses of that, but you also see as you're getting deep into this 3rd century crisis, so after 235, there's a strong black market that happens because initially in the marketplace, people are demanding more coins because they realize something's wrong with the coins they have. The silver is flaking off in their hands, so they're realizing something is wrong, so they raise prices. What ends up really happening is a black market because they're realizing that the only way to handle this is actually to trade goods. Diocletian, who's one of the famous reformers toward the end of the 3rd century, I think somewhere around 301, he's going to have his Edict of Maximum Prices where he's going to say, all right, this has gotten so bad.

Jeremy Ryan Slate ⋮ We're going to tell you how much you can charge, and there's lists you can look up like how much you could charge for legal services, all these different things where he thinks he can solve it with price controls. That actually just makes the black market go harder. because people are like, well, I'm not gonna be told how much I can make. So when you look at the average person, the military's gonna feel it first, but the average person's gonna start realizing, I'm not gonna pay that for that. I'm just gonna, will you take a sheep? Like, you know, what can I do to actually start trading in kind?

Marty Bent [13:38] Yeah. I mean, it's literally a story as old as time. If you have, and that's again, one of the things I've been saying on this show for years in the context of Bitcoin juxtaposed to the US dollar or any other fiat currency is like, if you have the ability to hit the button to print more money, push comes to shove, and you're in that position of power, you're going to hit it.

Jeremy Ryan Slate [13:58] Well, can we just call it something so people don't know what it's called? Like maybe QE, that'd be a great thing.

Marty Bent [14:02] Yeah.

Jeremy Ryan Slate [14:02] Quantitative easing. What does that mean? Oh, don't worry about it. It just means we're printing more money.

Marty Bent [14:06] Yeah. And that's, again, bringing this into the parallels between ancient Rome and today, I think we've reached a point, particularly post-COVID, where people are recognizing, hey, something's wrong with the money.

Jeremy Ryan Slate [14:19] Yeah.

Marty Bent [14:20] Inflation going rampant. And I think it's setting off alarm bells in people's heads.

Jeremy Ryan Slate [14:24] Well, I think the struggle too, for most people, they just see prices going up and they just think things are getting more expensive, and they don't realize that it's actually the dollar in your pocket.

Marty Bent [14:33] It's the greedy corporations.

Jeremy Ryan Slate [14:34] No, it's the greedy corporations. You know, we're gonna eat the rich, whatever it might be. But they don't realize that it's the dollar in their pocket that every time new money is printed is now divided up and worth less. And for a lot of people, most of their dollars, I'm as guilty of this as anybody else, I hardly use cash anymore. You know, most of your dollars are digital anyway, So it's very easy to dilute them. So it's a lot more insidious because people go to the gas pump or they go to the grocery store. I'm in Northern New Jersey. It was like $9 for the good bacon last week. I'm like, that's insane. But you see these prices going up astronomically and you just really think things are getting more expensive when it's actually your dollar has been devalued to such a point. And then they try to fix it with different policies like You know, universal basic income hasn't happened yet, but that's been a big topic.

Marty Bent [15:21] But we had our COVID checks.

Jeremy Ryan Slate [15:22] We had our COVID checks, which once again drives inflation, makes the dollar in your pocket worth less, or there's been the latest thing of, if we win the election in November, Trump says he's gonna give everybody $5,000. Well, that's kind of concerning 'cause that would destroy the economy again and dilute the money further, make the inflation problem worse, and you even look at, I'm trying to think of what the thing I was going for here is, You look at kind of how money is diluted, and it becomes a real problem. It becomes a— because people just don't understand— oh, minimum wage is the thing I was looking for. States like California passing a $20 an hour minimum wage, or New Jersey, $15 an hour minimum wage. They don't realize that actually takes a problem way above the point where you can solve it and makes that problem worse, right, when it's actually a monetary problem.

Marty Bent [16:12] Yeah, and we talk about this a lot in Bitcoin, the Cantillon effect too, like the mechanism through which money is created. I'm sure you've heard the meme, the K-shaped economy. Obviously the wealth inequality's gone up, but the mechanism from dollars being created either via the commercial banking system, via new loans, or the Federal Reserve via just the overprinting of the currency via treasury buybacks, whatever, or quantitative easing, buying treasuries, printing money to buy those assets.

Jeremy Ryan Slate [16:38] Mm-hmm.

Marty Bent [16:38] mortgage-backed securities, whatever it may be, the people that get access to that money first benefit. They just take it and they buy assets, financial assets, typically real estate assets, hard assets that go up. And by the time that money matriculates down to the lower rungs of the economic ladder, the prices have already risen.

Jeremy Ryan Slate [16:56] Right.

Marty Bent [16:56] And the amount you're getting paid, maybe you get like a 2.5% to 5% income increase year on year. By the time you've That's manifested in your bank account, prices have gone up and you're already behind.

Jeremy Ryan Slate [17:09] Well, and I think the struggle too is I think even like the way the tax system is set up, you know, the people with the most money get the most benefit and the people with the least money get the most benefit. It's the people in the middle that actually are a lot of small business owners that are actually driving the economy, they get hit the hardest, right? With self-employment taxes and a lot of those different things as well. So it becomes hard for them to survive. So it's like the system continues to kind of just grind people out and there's not a ton of ways out.

Marty Bent [17:33] Yeah. And so bringing this back to parallels and going backward in time to ancient Rome, I mean, you mentioned Constantine. Based off of what you've studied in Rome and the debasement of their currency and the negative consequences that had on the Roman Empire, you mentioned Constantine. What did he do to fix the currency? What was the What was the benefit of that?

Jeremy Ryan Slate [17:59] So I guess to kind of go a little bit before him too is kind of important because emperors realized that currency was a problem, and there's a number of attempts to actually fix that. You know, I mentioned Caracalla before. 5 sizes of the denarius. And they're like, oh, it's so good, it's worth 2 of them. 5. And he's like, no, no, it's 2, it's 2. So, you have an attempt to fix currency there because people were losing faith in currency. You go down the road toward the end of the Third Century Crisis around 275, Aurelian, who's— the empire had broken up at that point in time where you have kind of the hollowed-out center.

Jeremy Ryan Slate ⋮ You have the West breaks off and forms what's called the Gallic Empire. The East breaks off and forms the Palmyrene Empire. In a 5-year period, he reconquers the West, reconquers the East, and he issues a new coin hoping that people will have faith in this coin. and he's assassinated sometime around that time period. So he doesn't have time to actually fully institute a monetary policy. You go further, and Diocletian's going to attempt to issue new gold and new silver coinage, and people just didn't have faith in it. There was a real crisis of confidence. So when you look at what Constantine did, the 2 prongs of it, even though there's other things you could put attention on he did, but the 2 prongs of actual monetary policy is pretty important because you have a crisis of confidence in kind of the central part of the Roman Empire, right, where people are pulling further away from being involved in the state because it's not really benefiting them.

Jeremy Ryan Slate ⋮ So Christianity is actually a really key part of that because now people are brought into kind of one worldview again, right, because Rome is interesting where you had your 12 traditional Roman gods, but you could bring in gods from different places. You might have Sol Invictus, which is a god that Aurelian worshipped and Constantine earlier in his life worshipped, which is from North Africa. You might worship Isis from Egypt or Apollo from Greece, and a lot of these things were acceptable. The only time real worship of Roman gods was enforced is when things weren't going well. They would try to restore what's called the peace of the gods or the Pax Deorum by forcing everyone to sacrifice to Roman gods.

Jeremy Ryan Slate ⋮ So that had been their way of trying to bring people, I guess, back on the same page, and it's not incredibly successful because there's a lot of persecutions of Christians, Jews, and other different religions in that time period because they would not sacrifice. And so Christianity is kind of a key point of giving people something to believe in again, and that's kind of pulling the doctrine and the theology and everything out of it and just seeing that it was important to have people on the same page. So that's one side of it.

Marty Bent [20:40] And Constantine was a driver of that within—

Jeremy Ryan Slate [20:42] He was a driver of that. He— it's not the official religion of the empire during his life. He's going to pass the Edict of Milan in 313, which basically takes Christianity and makes it no longer illegal, but it won't become the official religion of the empire until 380 under Theodosius. But that's one of the first core things he's doing is getting people, I guess you could say, on the same page. Now, if people are on the same page, it's going to be easier to introduce a monetary reform. So what he ends up doing now is since Christianity is being favored and a lot of pagan temples are closing, He's now taking in a lot of the gold from a lot of the places that— the different temples and things that are out there.

Jeremy Ryan Slate ⋮ So he starts bringing gold into the center. Around 314, he mints a few hundred gold coins. He's going to mint gold coins every single year until sometime in the late 320s. He dies in the 330s. So over that period, he's able to gradually put them on a gold standard. That gold coin that he puts them on, the solidus, is going to go until about the year, I think it's like 1054 or somewhere around there, without inflation. And I guess to understand as well, it doesn't mean that the denarius or that silver denomination disappears. It becomes kind of a two-tiered economy, where there's gold that's kind of keeping everything stable.

Jeremy Ryan Slate ⋮ Silver is still used quite a bit, but now there's gold that people have faith in because this currency is stable. So that's a really key thing that Constantine does. Interestingly enough, I don't think the monetary policy really gets any play out there. Everybody just talks about Christianity because it's such a dramatic change, and that is an important change, but the currency change is vital, and it's kind of coupled with a lot of the different things he does. He also— the Praetorian Guard had been responsible for killing somewhere around 17-ish different emperors, and he actually disbands them and actually closes down the Castra Praetoria, which is like their home base where they go to hang out.

Marty Bent [22:35] This is like the deep state of—

Jeremy Ryan Slate [22:37] You could say that in a lot of ways. The Praetorian Prefect, who's the person in charge of the Praetorian Guard, was very often seen as the most powerful man in Rome, and if you even look at the 2nd emperor, Tiberius, he's dealing with— he's a weird guy. He kind of doesn't want to be emperor, but he does want to be emperor, and later in life, he decides he just doesn't want to live in Rome anymore, so he goes and lives in the island of Capri, and there's still some of the ruins there too, and you can see his palace. It's kind of interesting to look at.

Jeremy Ryan Slate ⋮ But he makes this sex palace on Capri and kind of leaves alone Rome to his Praetorian Prefect, Sejanus. And he only comes back to Rome when he feels that Sejanus has gotten too powerful and his own life might be threatened, and has Sejanus put to death. So the prefect and the Praetorian Guard is, in terms of a power center, you could see it as kind of a power behind the power. So Constantine's going to realize this is a real problem. I've seen how many emperors they killed. I remember 100 years ago when they auctioned off the empire to Didius Julianus. That's something that needs to go.

Jeremy Ryan Slate ⋮ We need to believe in something and we need sound money. And if you look at the Eastern Roman Empire, you know, I think it's an oversimplification to say that it's just money and something to believe in that saves the East. It's also geography as well.

Marty Bent [23:52] Mm-hmm.

Jeremy Ryan Slate [23:53] They'd had some of the richer tax bases. Constantinople is insanely hard to attack because of where it's located. And in Rome, in the West, emperors had actually moved out of the city of Rome and were up in the kind of northeast in a place called Ravenna because it was surrounded by swamps and it was a little bit easier to defend. They couldn't really defend Rome anymore. So geography plays a big part in it, but I think without currency, without shared belief, you don't really have something to save.

Marty Bent [24:20] And when Constantine was slowly instilling a, or, Installing a gold standard, what were the externalities on the Roman economy? Did it lead to peacetime? Were people less perturbed than they were before? Did they recognize that the currency was actually—

Jeremy Ryan Slate [24:42] So that's hard to say. I don't know a lot about that part.