For today's #retroFridays series, I will explore some methods used to devaluate money in the past and in modern times. Now and then, various methods have been used throughout history to devalue coins.
Why coin devaluation was and is being used?
The process is known as money debasement - is primarily a means of manipulating currency values or addressing economic challenges. Here are examples of old money debasement methods used in the past and some modern methods employed today:
Old Money Debasement Methods:
Metal Debasement:
In Ancient Rome, one of the earliest debasement methods involved reducing the precious metal content of coins. In those times emperors would decrease the silver or gold content of coins, effectively creating more currency without the corresponding intrinsic value. Used methods were:
Clipping and Shaving
Medieval Europe: Individuals would physically clip small amounts of precious metal from coins, accumulating these clippings over time and leaving the coin with less metal content than its face value suggested.
Alloying:
Similar to metal debasement, alloying was all about adding cheaper metals to precious metals, an activity that reduced the overall value of the coin, and governments could produce more coins with the same amount of precious metal.
I also read about other methods like: stirring - a method by which coins were placed in a bag and moved a lot, stirred while the remaining metal resulting was reused to make other coins. Also, cutting coins in two and removing a small part of the precious metal to be then reused in other coins - this method was also a way for leaders to reduce the value of coins (the middle was replaced by cheaper metal or alloy), to increase money in circulation by not affecting the people. At least, not evidently.
Modern Money Devaluation Methods
Governments can increase the money supply, often by printing more banknotes.
While this doesn't reduce the face value of existing currency, it can lead to inflation, reducing the purchasing power of money over time.
Interest Rates
Adjusting interest rates is a tool used by central banks to influence the money supply, because by lowering interest rates can encourage borrowing and spending, but it may also contribute to inflation. As a side note, just the year following the pandemic in my country - all was sunshine and rainbows: everybody was buying houses, and new cars.
I did not realize how - but found the people had access to very low interest rates. One year later, energy, housing and food costs skyrocketed to almost triple. That is happening throughout the world and in some places much worse. I call it also a result of our greed but also a defect in the system - maybe one idea to help is that people should pay back debts not with money, but with actual working products.
A world where everyone consumes and almost no one produces is heading to self-destruction
Continuing, other rmethods are:
Quantitative Easing
Asset Purchases: In times of economic crisis, central banks may engage in quantitative easing, where they purchase financial assets (such as government bonds) to increase the money supply and stimulate economic activity. While this can be necessary during crises, it carries the risk of inflation.
Currency Pegging
Some countries peg their currency to another stronger currency. If the pegged currency weakens, the central bank may intervene to buy or sell currency to maintain the peg. This can influence the value of the currency in circulation.
Digital Currency Manipulation
In the world of digital currencies and Bitcoin, their values can be highly volatile. Governments or large investors could potentially manipulate the market to affect the value of these currencies.
whales will always need an Ocean
So, while the methods have evolved and changed throughout times, the central goal of debasement remains similar:
to gain short-term economic advantages or address financial challenges, often at the expense of the currency's stability or purchasing power.
I also believe that digital currency manipulation will continue as long as is tied to fiat money which are so prone to devaluation and debasement.
But for now, one without the other cannot exist so maybe in the future, a kind of common sense/consensus between both should take place.
Until next time,
All the best
(images are from Wikipedia, designs created by me in Canva with the free elements)
here you can read previous RetroFridays Publsih0x episode
