The Edict of Diocletian: A Case Study in Price Controls and Inflation

By Murrary Rothbard

Citizens of the old Roman Empire distrusted paper currency and refused to accept anything but gold or silver coin as money. So the rulers found themselves barred from inflating the money supply by the unobtrusive method of printing additional currency.

But the Roman emperors soon discovered an ingenious device. They proceeded to call in the coins of the realm, ostensibly for repairs. Then, by various means, such as filing off small parts of the coins, or introducing cheaper alloys, they reduced the silver content of the money without changing its original face value. This devalution enabled them to add many more silver coins to the Roman money supply. The practice was started by Nero, and accelerated by his successors. By Diocletian’s time, the denarius (standard silver coin) had been reduced to one-tenth of its former value.

The result was a steep rise in prices throughout the vast Roman empire. As has happened throughout history, the public indignantly accused merchants and speculators of causing the rise in prices. It was generally agreed that the only remedy was stringent maximum price controls by the government.

Accordingly, Emperor Diocletian, a “friend of the people,” issued his famous Edict in 301 A.D. setting ceiling prices on all types of commodities, and maximum wages for all occupations. A few typical examples: Beans, crushed, 100 denarii; beans, uncrushed, 60 den.; beans, dried kidney, 100 den. Veterinary, for clipping hoofs, 6 den. per animal. Veterinary, for bleeding heads, 20 den. per animal. Writer, for best writing, 25 den. per 100 lines. Writer, for writing of the second quality, 20 den. per 100 lines.

Diocletian’s proclamation introducing the Edict bears marked resemblance to modern exhortations:

We must check the limitless and furious avarice which with no thought for mankind hastens to its own gain. This avarice, with no thought of the common need, is ravaging the wealth of those in extremes of need. We — the protectors of the human race — have agreed that justice should intervene as arbiter, so that the solution which mankind itself could not supply might, by the remedies of our foresight, be applied to the general betterment of all.

In the markets, immoderate prices are so widespread that the uncurbed passion for gain is not lessened by abundant supplies. Men whose aim it always is to profit, to restrain general prosperity, men who individually abounding in great riches which could completely satisfy whole nations, try to capture smaller fortunes and strive after ruinous percentages. Concern for humanity in general persuades us to set a limit to the avarice of such men. Profiteers, covertly attacking the public welfare, are extorting prices from merchandise such that in a single purchase a soldier is deprived of his bonus and salary.

Therefore, we have decreed that there be established a maximum so that when the violence of high prices appears anywhere, avarice might be checked by the limits of our statute. To ensure adequate enforcement, anyone who shall violate this statute shall be subject to a capital penalty. The same penalty shall apply to one who in the desire to buy shall have conspired against the statute with the greed of the seller. Also subject to the death penalty is he who believes he must withdraw his goods from the general market because of this regulation.

We urge upon the loyalty of all that a law constituted for the public good may be observed with obedience and care.

If anyone could force people to trade at the ceiling prices, Diocletian was the man. Yet the absolute emperor of the civilized world, a veteran general with myriads of secret police at his command, was soon forced to surrender. After a short interval almost nothing was offered for sale, and there was a great scarcity of all goods.

Diocletian was obliged to repeal the price-fixing Edict. Prices were finally stabilized in 307 A.D. when the government stopped diluting the money supply.

Inequality and the Gold Standard

By David Howden

Imagine that you earn $40,000 a year and your boss doubles you at $80,000 a year. Business was good to you both in 2013, and you received a 25 percent raise for your efforts. Not bad, and your boss gets to share in this good fortune too with an extra $25,000 (about 30 percent). You’re going to make $50,000 in 2014 and your boss will pull in $105,000.

Are you happy with this deal? Probably. But wait, income inequality just increased! Your boss originally outpaced you by 100 percent, but now his salary is 110 percent higher than yours.

In today’s progressive narrative, this situation is cause for alarm. Income inequality has increased and despite the fact that everyone is doing better than they once were, one group is doing relatively better.

What about if we reverse the example, starting from the original salaries? Instead of having a great year, imagine things were very bad and salary cuts are going around. You get a 25 percent pay cut so that you will now be earning $30,000 a year, and because he has more responsibility about the direction of the business and its lack of success, your boss gets a larger pay cut of $25,000. (This situation is the mirror image of the first example.)

You are making much less than you did last year. Are you upset about this? Probably. But wait, apparently there is a silver lining. Your boss now “only” makes about 80 percent more money than you, versus the 100 percent salary differential that existed last year. Income inequality decreased!

Apparently you can take solace in knowing that the playing field has been leveled, even if your kids are going to have a tough Christmas morning one year from now.

This is admittedly a very simple example. What I am trying to show is that the income inequality debate is not as straight forward as it is commonly framed. It is not just a question of one group getting a larger piece of the pie, but of increasing the size of the pie so that everyone can benefit.

John Cassidy recently entered the melee with a very digestible look at American income inequality over time. In his “six charts” there is some of the same (the top 1 percent of earners have seen their share of the pie rise rapidly over the past decades) and also some surprises.

Relying on data from Berkeley economist Emmanuel Saez, Cassidy shares the following graph showing changes in real income growth over the past century.


First let’s look at the top 1 percent. There seem to be about three distinct periods their incomes have gone through. The first from 1913 to roughly 1973 is more or less flat. Real incomes for the top 1 percent were no higher in 1973 than they were around 1930. After 1973 however there is a sharp and mostly uninterrupted spike upwards which seems to stop around the year 2000. After 2000 their real incomes have ebbed and flowed, primarily in response to capital gains and losses on their stock portfolios. Even though the volatility of their income has increased, it still remains quite high relative to any time over the past 100 years.

Compare this with the bottom 99 percent. There seem to be about four distinct periods of real income growth. From 1913 until the end of the Great Depression, real income remained more or less constant. The 1940s, 50s and 60s saw a rapid increase in real income growth, far more rapid than what the 1 percent experienced. This came to a sudden end around 1973 and a stagnation until the early 1990s. Then from 1993 onwards we see the same final stage as the 1 percent. Increasing real incomes (though much slower than the 1 percent) but more volatility as well.

There are many things which are the same in these two trends, but the one year that probably pops out for people who think income inequality is a bad thing is 1973.This year marked the end of the steady advance for the 99 percent’s real income gains and set in motion the rapid advance of the 1 percent. In other words, the marked income inequality we see today is a product of the post-1973 world.

So what happened in 1973? Many things as it turns out. Decreased unionization was getting underway in the US economy around this time, as was the spike in the price of oil.

Russ Roberts at Café Hayek has a different explanation. He thinks it has to do with changes to the family unit. Large increases in the divorce rate and a steady increase in the number of households headed by women could be to blame for the sudden jump in income inequality.

Maybe, but although this could be a reason why, I doubt it is the primary reason.

Let’s try an informal test. What was the biggest event to occur in 1973?

Americans probably will answer Roe v. Wade, the completion of the World Trade Center as the world’s tallest building or the beginnings of the Watergate hearings. Maybe the start of withdrawal of troops from Vietnam or Britain joining the European Economic Community. Or for sports fans it could be Secretariat winning the Triple Crown and getting immortalized on the cover of Time.

Actually the most important thing to happen in 1973 actually happened in 1971, August 15th to be exact.

On that date Richard Nixon closed the gold window. The US dollar was convertible by foreign governments into gold under the then-existing Bretton Woods system at the great price of $35 per ounce. Continued redemption demands by some belligerent countries (primarily France) drained the US of its gold reserves until the breaking point when it became questionable how much longer this could continue for. In what could have been the most important day of the twentieth century, Richard Nixon decided to renege on the US’s promises to foreign governments and essentially default on its currency. No longer was the US dollar tied to gold and the US no longer had to worry about spending beyond its means.

Well, almost no longer. While there was no convertibility into gold after 1971 there was still that old bugaboo of fixity in the exchange rate. The US dollar still functioned on a fixed exchange rate standard relative to gold until 1973, even if there was no convertibility. This meant that the US was still not free to expand its money supply or incur ever increasing budget deficits at will. It had to target a dollar price of gold, which was reset a little higher in 1971 to $38/oz. Even though there was no redeemability, the US was legally obliged to target this gold price, something which tied its hands concerning the extent to which deficits could be run and expansionary of the money supply policies could be pursued.

The effect on the deficit is easy to understand in light of this.


Since the late 1880s (and before) the US government ran a somewhat balanced budget. Minor blips appeared during the two World Wars, but by-and-large the deficit hovered very close to the zero line. In the late 1960s we can witness the a growing deficit, partly in response to the cost of the Vietnam War but even that is relatively mild to what would come later. Likewise, 1971 also witnessed a growing deficit but the year which defines the point of no return is clearly 1973. At that point the US deficit went into free fall and besides a few surplus years in the late 1990s it has never recovered.

The effect was also pronounced on prices.


Prices were indeed climbing throughout the 1960s, but 1973 was also the year that set off the most inflationary episode in America´s history. Being unhinged from that relic of gold, the Federal Reserve could increase the money supply and monetize the Federal government’s budget as it wanted. This culminated with 15 percent annual inflation in 1980 something which took a very strong-minded Federal Reserve chairman by the name of Paul Volker to tame by putting the breaks on money supply growth.

Inflation looks tame today, though the experience following the 1973 decoupling showed what happens when you let the government spend at will without any restraint. Gold provided restraint, just as political gridlock should today. But in the period of the mid to late 1970s there was no such luck.

All this takes us back to the original question: why did income inequality increase so much after 1973? We can look to two factors both related to the loss of the gold exchange standard in 1971 and the arrival of flexible exchange rates two years later.

First, as the US government no longer had to worry about redeeming US debt held overseas in gold, it was able to spend without restraint. Of course, this created a large budget deficit quickly, something which needed a solution. This brings us to the second point. By monetizing the US budget deficits, the Federal Reserve set off a period of high price inflation.

The reason why there is growing income inequality since 1973 is a direct result of this monetary mayhem. All this new money needs an entry point into the economy. Someone has to get it first and spend it. When they spend this newly created money they do so at the existing set of prices, but in the course of making these expenditures prices will rise. Those who get the money first “win” in the sense that they get a free lunch – they have a greater income and can spend it before prices rise. Those who get the money last are the “losers” – they get access to this money eventually as it is spent (trickles down?) but by the time that occurs, prices have already risen. They are no better off.

The 99 percent that have become relatively poorer over the past 40 years are those who get access to this new money last. (Remember however that these people are still, thankfully, wealthier than they were 40 years ago.)

Who are the remaining 1 percent, then? Well, who gets the money first?

Government officials and contractors, to the extent that they gets the proceeds of all the newly created money are the first and primary beneficiaries. Big banks and financial institutions also win as they are the enablers who help this newly created money enter the economy. Incidentally, 99 times out of 100, when we think of someone in the 1 percent who is getting ahead of the rest of us, they probably either work for the higher echelons of the government or are involved in the financial industry.

Coincidence? I doubt it, and you just have to go back in time to 1973 to understand why.

The Bitcoin Standard

After reading “The Bitcoin Standard” by Saifedean Ammous, I am convinced that Bitcoin is here to stay. Dr. Ammous, in this book, does a brief history of the origins of money, and he also touches on the societal impact of when sound money is used, as compared to fiat currency.

In addition to the historical primer on money, he provides a critique of the current economic model used by most economists: The Keynsian economic model. His critique rips apart the model to the point of total submission by anyone who stands by this model. (yes, there is some hyperbole used here, but its okay…)

Dr. Ammous furthers his argument by presenting how money is used across time. A fancy word for this is: “inter-temporal utility”. The “harder” the money is–if the money unit is more difficult to expand–it creates an environment that economic actors in the economy save their money for future consumption. Per Dr. Ammous, societies that have used this “harder” currency have flourished in all aspects of its civilization.

In my opinion, its best feature is its ability to store value inter-temporally…similar to Gold and Silver. As the world’s central banks print more currency, and Governments engage in deficit spending, sound investors will implement a strategy that will include Gold, Silver and Bitcoin.

Featured below are several videos featuring Dr. Ammous discussing the benefits of Bitcoin. Feel free to check them out, and take copious notes if you are serious about learning more about the benefits of Bitcoin.

US National Debt Passes $28 Trillion, +$4.7 Trillion in 13 Months. General Treasury Account Down by $480 Billion in 2 Months, $620 Billion to Go

What does it mean for the markets that the government now spends the proceeds from debt sales last spring that the Fed had monetized back then?

By Wolf Richter for WOLF STREET.

It finally happened, that glorious moment, when, after teetering on the verge for weeks – for reasons we’ll get into shortly – the incredibly spiking US gross national debt, after kissing the line a couple of times for a moment, finally, and suddenly by a big leap, jumped over the $28-trillion mark, with a $143-billion leap in one day on Wednesday, March 31, following some big Treasury sales. It gave some of that up on Thursday as some bonds matured. And it now amounts to $28.08 trillion, as per US Treasury Department on Friday.

The US gross national debt has now spiked by $4.7 trillion in 13 months since the end of February 2020, in the days before this show started.

The flat spots in the chart are the visual depictions of a charade unique to American politics, the periods when the debt bounced into the Debt Ceiling. Those were the days when everyone in Congress was still trying to hijack the Debt Ceiling law to get their favorite spending priorities!

If it looks like the trillions have been whizzing by a little less fast in recent months, that the growth of the debt has somehow slowed, that is correct.

The chart below magnifies the daily debt levels since December. On March 3, the debt level touched $28 trillion but only barely and just for one day, before backing off, and then kissed it again on March 17, only to back off again and remain tantalizingly close, but no cigar, until Wednesday, when it did the deed with one huge $148-billion leap:

The reason for this slowdown in borrowing is that the government sold a gigantic amount of debt last spring, adding $3 trillion to its debt in a few months, and then didn’t spend all of it, but kept the unspent amounts in its checking account – the General Treasury Account or GTA — which ballooned to $1.8 trillion by July, from the pre-crisis range between $100 billion and $400 billion.

During the final months of the Mnuchin Treasury, it was decided to start spending down the balance in the checking account by borrowing a little less, and by early January, the GTA had dropped to $1.6 trillion.

Early on in the Yellen Treasury, the drawdown was formalized. In early February, a schedule was announced: the balance would be brought down by $1.1 trillion to $500 billion by June. And they’re now well into it.

The drawdown has the effect that the government spends money it doesn’t have to borrow at the moment because it already borrowed it last spring when the Fed was still monetizing essentially all of the borrowing. This has some implications for the markets.

The government’s TGA is at the Federal Reserve Bank of New York and is reported weekly on the Fed’s balance sheet as a liability (banks report deposit accounts as liabilities) because this is money the Fed owes the government.

In the two months since early February, the balance has plunged by $480 billion to $1.12 trillion. Over the next three months, it will plunge by another $620 billion:

During the six months through June, the government will spend $1.1 trillion that it doesn’t have to borrow because it already borrowed it a year ago and that the Fed monetized at the time. But this ends in June.

What does this mean?

Not having to borrow this $1.1 trillion of spending during the first half of 2021 is taking pressure off the Treasury market. And yet, despite that relief, the 10-year Treasury yield has surged to 1.72%.

By June, this pressure valve will close, and the government will borrow more, and the market will have to digest it, and there is a huge amount of new borrowing being lined up to fund the added spending. This will put further upward pressure on long-term yields.

The fact that the government is now spending the proceeds from debt sales a year ago that the Fed monetized a year ago has been adding liquidity to the economy and the markets – liquidity that had been stuck in the TGA – possibly adding to the craziness of the markets in recent months. But that will end in June.

Types of Money

Robert Kioysaki discusses the different types of money, gold, silver and Bitcoin. He also mentions why individual savers are losing money by saving fiat currency in their bank account.

Many economists in the past have written about the ills of fiat currency. Robert’s points are supported by well respected economists such as, Murray Rothbard, Phd, Ludwig Von Mises, and many more. Both Rothbard and Mises(Mises was Rothbard’s mentor) wrote extensively regarding the social ills of the use of fiat currency.

This video covers some of the reasons why individuals should use Gold, Silver, and Bitcoin to save money for the future.