Inflation has been with us a long time. If you know your history you'll know that the devastating consequences are an old story, retold repeatedly. It is armies that allow rulers to rule and money provides the means to buy and maintain armies. If you have enough guns (or swords, spears, etc) to rule a society you have enough to take control of the money supply. After that, inflation follows like night after day. The Roman Empire offers a fine illustration.

During the years between the rule of Augustus and Diocletian, Rome's troop numbers were in excess of doubling. They increased from 250,000 to 600,000. The extent such growth was inflation-funded is suggested by the fate of the denarius, the Roman currency, during this period. It suffered a debasement from the inflation of a long line of Roman rulers so extreme that upon Diocletian's taking power the once silver coin was a mere copper plated token. It fell to a mere one five-thousandth of its original value by A.D. 268. The economic results saw Roman trade start deteriorating into barter and the middle class eroding.

Diocletian recognized the heavy toll of centuries of inflation through the abuse of the fiat currency. In an effort to build up the Empire's coffers, he decreed payment of taxes be in goods. Furthermore, in an ill-conceived effort to address the effects rather than the cause of Rome's chronic economic malaise, all manner of price, wage, production and anti-hoarding regulations were imposed.

The most notorious and draconian of these measures was the famous A.D. 301 Edict. It decreed the death penalty for those who broke the law. Despite the resulting bloodshed, Rome's economic inflation-driven economic collapse continued. Inflation continued to run a muck. For example, in his A.D. 301 Edict, Diocletian set gold prices at 50,000 denarii per pound. However, by 337, the year of Constantine's death, a pound of gold was worth 20,000,000 denarii!

Over the subsequent century, the situation became so untenable that Romans abandoned the market entirely. Some fled. Others entered voluntary serfdom. Indeed, the feudal system, often depicted as a result of the fall of Rome, in reality, arose in the bosom of Rome, in response to a monetary economy crippled by a currency nearing worthlessness.

One always wants to avoid overly simple explanations for major historical events, but there can be no question that the fall of Rome has to be in some serious measure attributed to the centuries of economic malaise incurred by the debased fiat currency. Indeed, the common practice of portraying the barbarian invasions as a conquest is a bit misleading. For the majority of the Roman lower class - a category into which much of the middle class had fallen - the sackers of Rome were not conquers, but liberators: bringing liberation from the denarius.

Those seeking insights for the contemporary world can find everything they need to know in this tale. A good generated out of the market for common benefit is corrupted by power and coercion . Coercive rulers (however serving of the people and the common good they claim themselves to be) transform the money from a market-valued currency into a coercively decreed value. This is what fiat means. The money is legally required to be treated as being worth something it simply is not. No less than in the story of the Emperor's new clothes, the people are required to pretend the patently false is unquestionably true, while the rulers skim off the actual value to pay the armies which allow them to run the whole scam from the start.

Predictably, rising prices escalate. After all, to survive in their businesses, producers and merchants must adjust their ledgers to the reality of a devalued currency that they are legally coerced to treat as possessing a make-believe value.

If wage, price, quota, etc., regulations are coercively imposed in an effort to suppress these natural market adjustments, as happened with Rome, the very collapse of the official monetary economy can follow. Black markets spring up everywhere and those simply trying to improve the quality of life for themselves and their families, through voluntary exchange, are forced to abandon the monetary economy in a variety of different ways.

In the good old days, though, when money was in the currency of coinage the creation of fiat currency involved elaborate and labor intensive efforts: e.g., re-minting coins with reduced precious metal content. Those days are gone, though. Once we arrive at the age of computerized money, when the Federal Reserve, and other such central banks, simply declare what the money supply is, inflation is too easy and tempting not to massively abuse the fiat and plunder the people.

Remember, though, money is just a commodity, equally as subject to forces of supply-and-demand as anything else. When the supply increases the per-unit demand falls. The purchasing power of the existing currency units thus fall.

It's a grave mistake to suppose that carrying your dollars in your wallet, or locking them in your home wall safe, secures them from theft. If you think that, you haven't yet been introduced to greatest thief of all: Inflation. When the central bank inflates the money supply the value of your dollars shrink. It doesn't matter where you keep them. Once you go to use them, you discover their lost value. When more dollars are circulating each is worth less. Because they're worth less, merchants require more of them to pay their business costs and so on down the line of their suppliers.

Rulers certainly are not prepared to admit their fault in this spiraling monetary catastrophe. Much easier and more convenient to blame rising prices on greedy bakers, bankers, merchants, businessmen, capitalists, corporations, Jews, or whoever is the scapegoat of choice at that time and place. All this merely obscures the fact that such businesses are merely trying to re-establish the market value of the debased money.

The more things change, the more they stay the same. The fiat currency-driven monetary systems of the United States and Europe look to be heading right down the Roman road to ruin. Have they learned nothing from history? It is a fair question, but probably the wrong one. It seems unlikely that the explanation lies in ignorance - more likely it lies in venality. The profits of inflation are too inviting to pass-up by the rulers. And, of course, they convince themselves it is for the common good. What human isn't susceptible to such self-serving myth making?

Our human predisposition toward vanity and self-serving delusion hardly seems anywhere near extinction. One wonders if submission to being bossed around and impoverished by maniacal rulers might, though, some day.