Two crises in the currency separated by two thousand years. Modern Venezuela and the Roman Empire have more in common than you might think. Both are well aware of the risk of high inflation and a fall in investor confidence. But only one has a cryptocurrency on its side.
Venezuela’s official currency, the bolivar, has been suffering from hyperinflation for half a century due to frequent devaluations, minimum wage increases and massive increases in public spending.
Over the centuries, the Roman Empire enjoyed the enormous commercial and commercial benefits associated with the world’s first paper currency, as described in my book Pugnare: Economic Success and Failure. The Roman coin consisted of three coins: gold (aureus), silver (denarius) and copper or brass coins (sestertius and dupondium). It is important to note that despite fluctuations in the value of the base metal, the exchange rate between them was established by imperial decree.
This seemingly simple economic innovation brought innumerable wealth and business opportunities to the inhabitants of the Roman Empire, leading to the transition of ancient Rome from an empire based primarily on the spoils of war and imperialist conquest to an empire based on trade, commerce and freedom. company.
As with modern currencies, it relied on a sophisticated banking system that allowed goods to be bought and sold without moving tons of the precious metal. Most of their money was the same as ours: they were created out of thin air by the banks when they gave loans. As in the modern economy, most of Rome’s money was kept in bank deposits instead of in circulating cash. Although modern electronic transactions are faster, whether you use a video card or a horse-drawn carriage, the process is largely the same.
As in Venezuela today, irresponsible public spending and the devaluation of the empire’s currency led to a massive increase in inflation, a collapse of investor confidence and a loss of consumer confidence that led to exchange rate innovations. But if the Romans, like the people of Venezuela today, replaced their auras with ether (ETH), or if the government introduced the “digital diamond”, could the empire survive?
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Centuries later, Rome and Caracas faced the same threat: hyperinflation.
Since the reign of Emperor Philip the Arab (244-249 AD), the established system of exchange has collapsed. With each passing day, the business becomes more difficult due to the fluctuations in the exchange rate. The same effect would be if ten one-dollar bills were equal to one ten-dollar bill one day and one five-dollar bill tomorrow. People no longer know the value of their money. decline in economic activity.
This was the dramatic fall of the world’s first state – controlled currency, which was used to pay for goods from Britain to serve Judea and Africa.
Unlike their Roman predecessors, digital currencies provided Venezuelans with an innovative solution. They can circumvent the bolivar by accepting cryptocurrencies such as Bitcoin (BTC), ether, Dash and EOS (EOS), to the extent that the government introduced its Petro in 2018. Iran hopes to use the profits. from the booming crypto-mining sector to support their economy while still subject to US sanctions.
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The allure of cryptocurrency, despite many technological and social developments, was inaccessible to the Romans. Instead, the collapse of the Roman currency stagnated economic activity, brought economic hardship to once prosperous regions, and led to a long, slow economic downturn that he never recovered from.
The Romans could have created a cryptocurrency
Cryptocurrencies would also save the Romans from having to maintain a coin. Over time, it became increasingly difficult for the Romans to extract gold and silver to make new coins, so the authorities cheated by increasing the amount of base metals. This led to inflation, which eventually led to people losing faith in their money.
The collapse of confidence was exacerbated by the Civil War in 193 AD, which led to major monetary reforms that removed central control over the currency. When this control was lost, production and trade fell.
As in Venezuela, high inflation, loss of confidence in the government and civil unrest led to the collapse of the banking system and ultimately to a systemic economic collapse. But, unlike the Romans, the demise of the central currency provides a possible way out of Vienna’s economic downturn.