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Updated September 4, 2017.
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The basic concept of inflation was essentially the same in the ancient world as it is today. In the simplest terms, it refers to the rising costs of commodities and the reduced value of the currency. There are many causes of inflation, but the presence of excessive amounts of currency in circulation tends to be the most common catalyst for an inflationary cycle. In modern economies, inflationary cycles often happen when a central bank prints too much money, thereby lowering the value of the currency and raising the prices on commodities. The situation was quite similar in the ancient world, but instead of printing money, kings and other leaders would add impurities to their minted coins. The result was often that not only were there too many coins in circulation, but the ones that were being used were of little value due to their impurities. A situation like this took place in Egypt hundreds of years before the damaging inflationary cycle hit Rome.
Around the year 210 BC, due to the economic problems caused by the Fourth Syrian War, the king of Egypt, Ptolemy IV (ruled 221-204 BC), devalued the currency in an attempt to recoup some of the costs of pursuing the war. Ptolemy VI IV changed the unit of currency in Egypt from the silver <i>drachma</i> to the copper drachma. The king hoped that by doing so he would be able to recover the silver coins that were currently in circulation, which he would then use to pay for the war debts. Instead, very little silver was recovered because it was no doubt horded when news of the economic plan became known, while more and more bronze coins were introduced into circulation, creating a classic inflationary cycle. Not understanding the nuances of inflation, other Ptolemaic kings allowed the cycle to continue for some time until King Ptolemy VI (reigned 180-145 BC) reintroduced silver drachmas back into circulation. The process happened again about 100 years later when Ptolemy XII (ruled 117-51 BC) devalued the currency by adding impurities to the coins. During the years 53 and 52 BC, the purity of silver coins dropped from ninety percent to thirty-three percent, which caused a major spike in the prices of goods. <ref> Chauveau, Michael. <i>Egypt in the Age of Cleopatra: History and Society under the Ptolemies.</i> Translated by David Lorton. (Ithaca, New York: Cornell University Press, 200), pgs. 85-86</ref>
===Inflation in the Roman Empire===
[[File: Diocletianbust.jpg|300px|thumbnail|left|Bust of the Emperor Diocletian]]
Any lesson that could have been learned by the Ptolemies’ fiscal policies was completely ignored by the Romans during the early Empire; but in retrospect they probably thought that their strong economy would continue forever. After the smoke of the Civil Wars cleared and Octavian/Augustus was declared emperor, Rome experienced nearly 200 years of solid economic growth. The gross domestic product of the early Roman Empire was similar to that of AD 1700’s Spain <ref>Temin, p. 135</ref> and the famed Roman roads, known as <i>vias</i>, evolved from being used primarily by the military to also link together far flung markets. <ref> Matthews, John. “Roman Life and Society.” In <i>The Oxford History of the Roman World.</i> Edited by John Boardman, Jasper Griffin, and Oswyn Murray. (Oxford, Oxford University Press, 2001), p. 394</ref>
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As the economy of the early Roman Empire grew, sound fiscal policies under Tiberius (reigned AD 14-37) and other early emperors helped keep inflation in check. The money supply increased proportionately with the increase in trade. Taxes were also kept low: each province only paid a one percent wealth tax and a flat tax on all adults. All of this helped keep prices low and the wheels of government moving effectively, but by the end of the second century AD things began to change.
[[Category: Economic History]][[Category:Roman History]][[Category:Wikis]]
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