Before the fall of Rome, Rome had sound money, and they were using silver coins called denarius with real silver in them. At the time, gold coins were also beginning to flow into the economy after first being minted in Greece. So now Rome's economy had coins with real gold and silver content. 

Throughout the years, different dictators would rule, but the coins stayed the same. When Julius Ceasar was assassinated, there was around 8g of gold in the gold coins, and economic stability reigned for 75 years after his death. 

Then Nero became Emperor of Rome and engaged in what they called "coin clipping," when they removed precious metal content from the coins and re-distributed them into the economy with less metal content. But how did Rome get here, and why did Nero decide to do this?

Well, Rome was very wealthy and had accelerating wealth because of all the land it conquered and kept conquering. They were so rich they set artificially low prices on staple goods like wheat so the population would be happier. This caused people from all around Italy to come to Rome, so farmers would abandon their farms to live a lavish city life with their savings. The army and government were very wealthy and had lavish expenses simultaneously. 

In fact, the army loved expensive things so much that after Rome ran out of land to conquer, the army started to become demoralized because they weren't making as much money. So to compensate, Nero took coins out of circulation, removed gold from them, and put them back into circulation. He used the gold and silver content he took out to fund the army. 

Since the government was paying the army more while not invading new lands, they had to cut their costs somewhere due to declining revenue. So they dropped their artificially low prices on staple consumer goods like wheat. 

At the same time, because of inflation caused by the debasement of the currency, the regular person was making less money, and the wealth gap increased, causing an influx of new peasants. 

During this debasement, the aureus coin went from 8 to 7.2g of gold, and the denarius silver coins went from 3.9 to 3.41g. It provided temporary relief, but as we know through our experiences, when governments devalue currencies, it only provides that—temporary relief.

Eventually, the coins were no longer silver or gold in appearance, and they would wear out quickly. The silver coin only had traces of silver on the outside but was made entirely of bronze. So the outside silver would disappear quickly. No one valued these coins any more, the mirage was over, and the denarius coin was done. As inflation intensified in the 3rd and 4th centuries, the emperors tried to hide inflation by bringing back the artificially low prices of staple goods like wheat again.

But now, since the coins had no real value and the government was keeping food prices low, it made no sense for producers to produce in Rome anymore. The money was worthless, and they weren't even being paid that much of it. The government was now running out of ways to make money since they couldn't devalue their currency further or take further advantage of the population. Once they started to raise taxes, there were countless riots, and now Rome was no longer a safe place to live. 

With money so unreliable and debased, speculation in commodities became far more attractive than producing them. In other words, bankers got rich, and everyone else got poor. Rome collapsed in 476 AD after complete economic, social and cultural deterioration. 

When Rome collapsed, the population burned the bankrupt emperors who couldn't afford to pay their soldiers anymore.

But just before the total collapse, an emperor named Constantine committed to maintaining the solidus at 4.5g of gold while banning coin clipping and debasing it. He minted his own batch of coins and used them to establish the Eastern Roman Empire. Since it was real money and he was using the collapse of the other coins as lessons, the coin lasted another 1,123 years in circulation, making it the longest-serving sound currency in human history. 

So while Rome collapsed, Constantinople's new empire, which was established with actual gold coins, prospered for many more centuries.

But, like today, they didn't remember their history lessons and started debasing the gold again. The debasement of these gold coins was believed to have taken place around 1042-1055, and the Ottomans overtook their empire by 1453. 

The fall of Constantinople only happened because the currency was devalued, which is the exact same reason why Rome collapsed.

Today, the Islamic dinar circulates widely in Islamic religions in the original weight and size specifications of the gold coins minted by Constantinople. 

Tomorrow I will go over the other types of money humans have used throughout more recent history, like the Gold Standard, and how we got to where we are now (using paper as money).