emperors took turns in debasing the currency until it was all but worthless. Nero began this process in the first century AD, reducing the silver content and increasing the base metal content in the coins to 10%. Later in the same century, Emperor Trajan reduced the amount of silver in the Denarius still further. The process continued until, during the reign of Antoninianus, the amount of silver in the Denarius was down to just 5%. A century later under Gallienus, the silver content was further reduced, with the Denarius containing one five‐thousandth of the silver from Augustus’ reign. Unable to reduce the silver content in any meaningful way still further, Gallienus’ successor Aurelian increased the face value of new coins two and a half times. The result of this debasement was twofold. First, people kept hold of earlier coins, especially gold ones, as they knew the value of their replacements would decrease. Second, the Roman Empire suffered from sharp inflation. Just as Wang Mang's coin debasement had led to a rise in rice prices, so the Roman debasement saw a rise in wheat prices: rising 32 times in Egypt, for example, between the first and third century, then 44 times in the next 30 years and at an annual rate of 24% in the subsequent decade. Real wages fell, with soldiers increasingly paid in food and clothes, rather than cash. While not the only contributing factor, economic mismanagement was one of many reasons behind the inevitable collapse of the Roman Empire.
England's Debasement
Over a millennium later, the same mistakes were being made again, this time by Henry VIII, King of England between 1509 and 1547. In the latter part of his reign, financial problems led to the decision to debase the currency. The process began in Ireland in 1536, with silver coins minted with 90% of precious metal in comparison to earlier coins. This first debasement having passed relatively unnoticed, Henry and his successors tried the trick again – six times in total under Henry, six under his successor Edward VI, then two further mintings under Mary I and Elizabeth I, respectively. Between 1544 and 1551, under Henry and Edward, the process was the most advanced and became known as the Great Debasement. By the end of the process, the value of a silver coin had been reduced to just a quarter of its previous worth. Inflation, of course, continued to grow: in the 1530s and 1540s, it grew by about 29% in comparison to the 20 years before; in the two decades that followed, it grew to 91%. Once again, there is evidence of people holding on to their earlier non‐debased coins, as they knew they were of better value.
Shells and Money
Just as the Bank of England has the symbolic mulberry trees in its Garden Court, so the Museum of the National Bank of Belgium has its own artifact from the history of money: cowrie shells. The cowrie is, in fact, a sea snail which lives in the warm waters of the Indian and Pacific Oceans. Its shell is small, egg‐shaped, and relatively uniform in size and nature. Before paper money, before coins, it was the cowrie shell that was used as a form of early currency in China. In the late 1970s, during an excavation of the ancient ruins of Yin, the capital of the Shang civilization, which existed from 1766–1045 BC, archaeologist Zheng Zhenxiang uncovered the tomb of Fu Hao, a female general. The tomb was one of the most important finds in Chinese archaeology. The tomb consisted of a 20‐meter wooden chamber, the coffin of Fu Hao, and 16 human sacrifices. As well as this, the grave revealed hundreds of ceremonial bronze vessels, jades, and bone carvings, and more than 7,000 cowrie shells. The tomb of Fu Hao was not the only evidence that cowrie shells were used as currency. An inscription found on a bronze wine vessel from the following Zhou Dynasty included an inscription of how the maker was paid for producing this unique artifact: “I was given thirty strings of cowrie shells, and with this, I made for the Duke this precious vessel.” As well as this, the Chinese symbol for money from the Shang era is a pictographic representation of a shell. This “radical” – a rectangle with two internal horizontal lines and two feet – can be found today as the root for numerous Chinese words regarding money, including treasure, collateral, wealth, buy, and sell.
Although a seemingly primitive form of currency, in many respects cowrie shells were an extremely effective unit of trade. They were portable, non‐perishable, and regular in size. And unlike their successors in the form of coins and paper money, they weren't easily manipulated by those in charge: you couldn't debase a shell or print more when the financial going got rough. The shells found in the Shang tombs near Anyang came from thes Indian Ocean – a huge distance for the time. In the nearby basin of the Yellow River, cowrie shells were all but impossible to find. What this meant, basically, was that unlike the subsequent use of coins and paper money, the money supply was essentially fixed. The cowrie shells held their value as a unit of wealth.
The Shang civilization wasn't the only one to use shells as a form of currency: shell money was used in West Africa up until the mid‐nineteenth century. They were used in Orissa, India, until the British East India Company replaced them at the start of the nineteenth century. On the American Pacific coast, Native Americans used them. And on the South Pacific Islands, small shells were ground down to a required size to create shell bead currency. In early China, their use as a system eventually broke down as the size of the economy grew: there weren't enough shells to keep up with the pace of growth. Later, Shang graves revealed the existence of bronze pieces in the shape of cowries to replicate cowrie shells; in effect, becoming one of the world's first minted coinages.
Summary
As we can see, the history of inflation is closely linked with a history of debasement. And there we encounter a first problem when measuring inflation: If currencies are continually being debased by the governments who issue them how can we measure inflation in currency terms? Is it possible to create a form of money where the supply is fixed, and thus is able to hold its value? Can a currency be created that is beyond the whims of government needs and that people can trust absolutely as a source of wealth? One possible attempt to answer this question is via the creation of so‐called cryptocurrencies and, in particular, that of Bitcoin. But even with these instruments, the ability to produce new supply through the production of complex calculations, or other opaque operations, renders these new instruments highly suspect. The wild fluctuations of the cryptocurrencies in sovereign currency terms give a hint of their instability.
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