Diocletian was one of the most successful and talented emperors in the history of the Roman Empire. When he took over the empire at the end of the third century AD (284) this position was on the verge of disintegration. Decades of civil wars, external invasions, plagues, and economic crises led to the brink of disintegration. When Diocletian retired twenty years later to his palace, which still stands in Split, Croatia, he left behind a restored Ephraim. The emperor, who instituted far.reaching reforms in the fields of administration and the military, bought the empire another 170 years. But it was precisely his great failure that shaped Europe for the next thousand years.
By order of the first emperor Augustus.Octavius in 15 BC, Dinaros, the basic currency of the empire, had a fixed weight and contained 95% .98% (metal) money. But until the middle of the third century (250) the currency was still made of 50% money.The process of dilution accelerated greatly in the following years of crisis.When Diocletian came to power the dinosaur contained only 2% money, which allowed the production of a huge amount of coins. Hyper.inflation all over the empire.
Emperor Diocletian / Photo: From Wikipedia, the free encyclopedia
In an attempt to stop inflation, the new emperor issued a series of new currencies with a higher percentage of money. But the Romans could not understand that the heart of the problem was not in the amount of money in the currency but in the amount of coins in circulation.
When the emperor failed to collect and remove old coins from circulation, monetary reform failed and inflation, and with it the real erosion in soldiers’ wages, grew. The issuance of a “maximum prices” order on any product and service that included death sentences for violators did not change the situation.
The official stated, not “market forces”
When money lost its power, the emperor lost the ability to collect taxes. Thus the emperor and the bureaucrats turned to another solution: if there is no value in collecting taxes on coins, we will move to the method of collecting taxes on the products themselves, think, and do. To this end, a huge budget has been set for products that the army needs. At the same time, a listing was made of all the products that people could provide according to their field of business. The bureaucrats have now set up a “conversion table” of all the products and services into “tax units”. The tax unit was equal to that and so a pound of wheat, or so and so miles of transport, or so and so and so gallons of wine, and so on.
After careful registration of each estate and family, it is determined how many “tax units” each debtor will pay, in products according to his areas of expertise – the grape grower will pay the tax units imposed on him in wine, the baker in loaves of bread, etc.
The tax units have actually become units of measurement of value, but this is determined by state officials and not by market forces. The replacement of market forces in determining the value of things has led to the destruction of the most basic mechanism in the economy since in a free economy the price mechanism transmits to all players the desires and preferences of all the other players in the market. Depending on the players allocate their resources and decide what to engage, invest, produce and supply. This creates a balance between demand and supply.
But since money, the means of expression of the price mechanism, was corrupted again there was no effective way to create such a balance. The emperor did not understand all this theory, of course, but he understood that if too many sheep breeders decided to stop raising them, there would be a shortage of meat while the tax officials wanted to collect the tax units imposed on the sheep. The fear of such a disruption in the budget and collection, led the emperor to enact another law: an economic unit that pays the tax units in a particular product or service will have to continue to engage in the same service or product. That is, the farmer’s son will have to continue working in the same estate; The son of the shepherd will have to continue in the ways of his father and so with regard to everything else in the farm.
Roman dinosaur coin / Photo: Reuters, Ben Birchall
To ensure this, those workers were prohibited from displacing and leaving the place where they were engaged in growing and supplying the same products and services. The foundations for the feudal economy that will develop and rule in Europe after the fall of the empire and for a thousand years have been laid, and they will continue to develop over the years.
Banks want to switch to digital money
These days, many central banks around the world, including the Bank of Israel, are talking about switching to “Central Bank Digital Currency” (CBDC). It is a type of cryptocurrency that will be issued and controlled by the central bank and will be used as digital cash instead of the banknotes in circulation. As such it will be possible to transfer it between parties, not through the credit card tracks and the like.
All over the world, including developed economies, there is widespread use of cash. A study published by the Federal Reserve in July 2020 and referring to 2019 found that US consumers use cash in about a quarter of all commercial transactions and when it comes to amounts below $ 25 the number jumps to over 40%.
A study conducted by the European Central Bank and published in December 2020 found that in European market countries 73% of transactions and about 48% of all sums of money exchanged at the cash registers were made in cash. According to the study, in 2019 Europeans made about 109 billion cash payments worth 1.722 trillion euros, and 38 billion credit card and debit transactions worth 1.622 trillion euros. Between colleagues, 8 billion payments were made in cash, about 249 billion euros, and about 0.5 billion payments in various cards, about 34 billion euros.
There is no doubt, therefore, that the use of cash is widespread and popular. People trust cash, it costs the user zero, it cannot be easily stolen, it is easy to manage a budget with it, there are no reception and connection problems with it. Above all, it maintains user privacy. Credit cards are the complete opposite. Their cost to the business and sometimes to the user is extremely high. In transactions with small amounts, or profitability, the cost may reach a quarter or more of the profit on the transaction.
Cases of fraud and theft by consumers, business owners, and third parties are very common and in particular in online transactions. American Express for example reports that 77% of online businesses have reported being the victim of some kind of fraudulent attempt through the use of credit and debit cards. Transactions company estimates that between 2019 and 2023 ecommerce players worldwide will lose $ 75 billion for such fraud, and according to a report by the US Federal Trade Agency, in 2020 consumers reported a loss of $ 3.3 billion due to credit card fraud, an increase of Almost 85% from the previous year.
But even the popular use of cash, which is impossible in online commerce, has costs. These include the cost of cash distribution by the banking system. The cost of maintaining and maintaining businesses, and their losses are cool. Yes there are costs that fall on the central bank.
A 2014 study at Harvard University estimated that cash thefts cost US businesses about $ 40 billion a year. Another study from the UK from 2020 estimated that the cost of using cash costs small businesses around £ 2.5 billion a year. The Canadian central bank estimated in 2017 the cost of maintaining cash for the Canadian economy at about $ 8 billion, and Canada is relatively a country with low cash use.
Oops, the world of “unintended results”
Digital cash can solve many of these problems. It can bring to the world a means of payment that has all the power of digital with all the benefits of cash. Including in terms of security, cost and efficiency. Digital cash would also be ideal for many types of online transactions. But to her and a thorn in her side. The central bank’s digital cash program has little room for one central feature of cash, privacy. For example, in a memorandum of the Bank of Israel’s Steering Committee for the possible issuance of a digital shekel from May 2021: ” “.
The explanation for this is the war on black capital, which automatically entitles the policy to great popularity in the public and in the media. But as with any significant and strategic decision, it is worth trying to look beyond the moment, to goodwill or propaganda, to so.called “unintended results.” These are often dangerous from any observable result.
None of Israel’s leaders in June 1982 estimated that the 40.kilometer, 96.hour Oranim program in Lebanon would not only last 18 years and cost at least 1,500 casualties, but would also replace the PLO’s primitive Katyusha system with a sophisticated Iranian system of over 100,000 missiles – many of them accurate and aimed at Tel Aviv.
The exchange of cash in digital currencies of the central bank, such as those without a shred of privacy, would have far.reaching consequences, no less than the exchange of money in the “tax units” of Diocletian. With all due respect to the sovereign’s desire to easily collect taxes, the control and central registration of any financial transaction could easily open the gates of hell and lead to results that are hard to imagine today.
Suddenly the state will know where every citizen has spent, and with whom. What bought, when, and how much. To whom he donated his money and how much he consumed from each product and service. Anyone who can access, legally or not, this database will share all the most personal secrets of every citizen. Such control, for example, would allow the state to know who buys non.kosher food, or who buys products on Shabbat in violation of the latest coalition law. Who contributes to the wrong political party, who supports “treacherous” organizations, and who wants to have an abortion in violation of Texas state laws.
Amir Yaron, Governor of the Bank of Israel / Photo: Yonatan Blum
The central bank’s digital money will therefore cast a long shadow over freedom of expression and association, it will also encourage self.censorship (to contribute to the “Eastern Rainbow”? Why should I get involved). The monopoly of digital money will also make it very easy to deprive a person of his most basic rights by disconnecting him in one from any economic activity, credit or trade.
Far.reaching effects that are hard to imagine
But not only the individual will be fatally harmed, so will social progress. In over 20 states in the US smoking marijuana is legal. But under federal law this is still prohibited. What would this social development have looked like if there had been no way to pay in cash for this commodity over the last 20 years? The easy implementation of destructive economic ideas like negative interest rates at significant rates.
Moreover, this money, if managed according to the dreams of governments and central banks, will fundamentally destroy key parts of the essence of money and the role it plays in the economy and society. With the destruction of the fundamental essence of money, preferred alternative means of payment, such as gold, silver, or bitcoin, will begin to emerge. Then the government will be forced to take increasing repression and enforcement measures to ensure the use of its discounted money.
This process of destroying real and pure money, the amount of which is limited by the power of nature or the software protocol, and the very use of which is free from coercion and surveillance, will have far.reaching social effects and “unintended consequences” that are difficult to predict.
The ongoing process of printing, and the inflation that followed, along with the exchange of money in “tax units” and the laws of fixation of occupation and movement, made a real contribution to the destruction of Roman society. This destruction was one of the causes of the collapse of the Western Roman Empire and the rise of the feudal system that ruled Europe for a thousand years. History therefore has an instructive lesson to teach us as we once again seek, casually, to play with the essence of money, the sensitive and central mechanism in human life.
The writer is a lawyer by education who deals with and is involved in technology. Manages an investment fund in cryptocurrencies, and lives in Silicon Valley. Author of the book “A Brief History of Money” and recorder of the KanAmerica.Com podcast