64 ad rome burns in the preceding years caligula and

Info icon This preview shows pages 14–17. Sign up to view the full content.

View Full Document Right Arrow Icon
64 A.D. Rome burns. In the preceding years, Caligula and Nero had spent excessively because of the high value of coins due to deflation. As the rulers became more greedy, Nero began to reduce the silver content of coins. Over time, rulers begin to reduce the silver content of the Denarius, from 100% to eventually 5%. This leads to catastrophic inflation. 200 A.D. By this time, there has been so much inflation due to silver dilution of coinage that all faith in the Roman monetary system is lost. The former Roman empire returns to a barter system and the weighing of gold and silver. The Dark Ages ensue. 618 A.D. Chinese are the first to use paper money 1000 A.D. Without money and effective commerce, Europe is stuck in a feudalist system known as the Dark Ages. People must work the land to pay tribute to the lord (or landowner). Without money as a dominant means of exchange, it was difficult 37
Image of page 14

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Econ 350 U.S. Financial Systems, Markets and Institutions Class 4 for a merchant class to develop, or for people to have the time to develop arts and sciences. 1200s A.D. Rumblings of modern money. European countries begin to mint coins. 1400s A.D. First developments of paper currency or fiat money in the West. In Italian provinces, such as Venice, bankers begin to issue bank notes redeemable for a certain amount of specie (gold or silver). As these circulate, they function as paper money. The bankers (such as the Medicis) also made loans and charged interest. With the development of a banking system, the Renaissance was able to flourish. In Amsterdam, goldsmiths become important as a means of weighing, assaying, and storing gold nuggets used for transactions. Deposits slips of the goldsmiths become a form of paper currency. Fractional reserve banking begins as the goldsmiths make loans with some of the gold held in deposit. 1558 A.D. Elizabeth I becomes Queen of England. The Henry’s before her had debased the coins by reducing silver content, and the populace “clipped” the coins by filing them down. In an attempt to improve the coinage, the Queen mints new coins. They disappear from circulation as people spend the old coins and hoard the new coins, as predicted by the queen’s financial advisor, Thomas Gresham. Gresham becomes famous through “Gresham’s Law”, the idea that “bad money drives out good money.” If two coins are circulating at the same time, one of high quality and one of low quality, then people will spend the low quality coins and hoard the high quality coins. Examples in the United States include silver quarters (those minted before 1964) and Delaware quarters. Why don’t we see any quarters before 1964? Why do we still see so many quarters from 1965 and 1966? 38
Image of page 15
Econ 350 U.S. Financial Systems, Markets and Institutions Class 4 English Crown (1689 – 1691) source: Federal Reserve Bank of Richmond 1700s Europe strengthens and standardizes its coinage system.
Image of page 16

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 17
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern