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Monetary Regimes and Inflation

History, Economic and Political Relationships

Peter Bernholz

This book explores the characteristics of inflations, comparing historical cases from Roman times up to the modern day. High and moderate inflations caused by the inflationary bias of political systems and economic relationships – and the importance of different monetary regimes in containing them – are analysed.
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Chapter 3: Inflation Under Metallic Monetary Regimes

Peter Bernholz


3.1 INFLATION CAUSED BY AN ADDITIONAL SUPPLY OF THE MONETARY METAL Inflation has probably been a characteristic of human history since money has been used as a means of payment. With money based on a metallic standard two possible reasons for a permanent or continuous rise in prices can be present. First, the supply of the metal on which a currency is based can increase. This can happen when new natural deposits, let us say of gold or silver, are detected; or else, when great treasures consisting mainly of gold and silver are taken as booty in a war and then put into circulation as money. Second, the metallic currency may be debased by lowering the content of silver or gold in coins by substituting copper or by reducing their weight without changing their nominal face value. Or, the face value of coins is increased without increasing the content of gold or silver in the same proportion. In this section we will discuss the first of these alternatives, which has only led to rather limited inflations. We know that general but limited price increases occurred several times in antiquity because captured foreign treasures were put into circulation. So it seems that a doubling of prices took place after Alexander the Great had coined the treasures won after the defeat of Persia (Heichelheim 1930, pp. 9, 40f., 1955, p. 503). It appears that the price level rose less after the booty from Gaul and Egypt reached Rome; this had been won...

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