finem respice

Losing Confidence in the Widening Confidence Interval of Confidence

Submitted by ep on Sun, 11/27/2011 - 02:18
but is it sufficient tender for all debts, public and private?

Once the Roman Republic began to mint silver coinage,1 but prior to the reign of Julius Caesar, Roman currency was generally struck by the tresviri aere argento auro flando feriundo.2 These "moneyers" are often described as aspiring Senators and, given the import of consistent and reliable minting to The Empire and The Republic before it, the position required and established a measure of credibility and integrity. A moneyer had a modicum of control over the design and legend that appeared on "his" coinage and many used this precious advertising real estate to promote the fortunes of their patrons or, perhaps more commonly, themselves.

The appearance of hammered coins probably dates back to sixth century BC Lydia when the silver-gold alloy "electrum" was annealed and set between a pair of dies (most likely bronze) before the handle of the top die was struck, literally, with a hammer to impress design into the blank on both sides.

More expensive and complex screw presses eventually usurped hammered coins and, perhaps as a direct result of an increased ability to monopolize the minting process, what had started as a widely distributed process that continued into the middle ages increasingly became a highly centralized one. Queen Mary, for instance, finally concentrated all minting by the Royal Mint in the Tower of London (excepting the appearance of special "siege mints" for towns under- wait for it- siege and the like, particularly during the English Civil War).

Roman mints were, however (and if finem respice readers will perhaps permit us to coin a phrase) legion. While smaller denominations may have been minted locally, or to suit regional demand for small transaction coinage- in particular the bronze strikings that held limited value and were hammered either with or (more likely) without authorization from Rome- the larger gold and silver denominations with real intrinsic value (the Aureus, Solidus, Denarius, Tremissis, Antoninianus, etc.) were struck only by the official moneyers.

As the payments required of a large Republic (and later an expansionist Empire) were generally of much larger denomination, the state (and what would eventually become formalized mints) concerned itself mostly with the coinage used to pay the official obligations of its treasuries, foreign bribes, the regular expenses of a swelling geo-political influence and, of course, its many soldiers.

In the epochs after The Republic, when even the most important news still traveled slowly and without authority, many Capitoline-distant Roman citizens learned of the reign of a new emperor when large-denomination coinage bearing the dictator's laureate head finally rode the weary wings of intra-Roman commerce to the confines of their particular locale. In retrospect, it seems obvious that coinage would increasingly be used to convey the ideals, vision, and power (not least over commerce and taxes) of first The Republic and then The Empire. Unsurprisingly, as those ideals changed so did the symbology and legend of Roman coinage. Likewise, when those ideals became increasingly corrupted so did the use of coinage.

An example of Quadrigatus (about 1/40th of a Denarius) minted in Republican Rome c. 225-216 BC. Note the sparse features, the lack of a moneyer monogram and the impersonal or non-specific nature of the imagery. One is struck by the front depiction of the head of Janus while the reverse bears the more complex symbology in the likeness of a Jupiter driven Quadriga- from which the coin took its common name- with winged Victory behind. The reverse bears a simple legend consisting merely of "Roma."

With some 200 years to go before Caesar (or perhaps Octavian, depending on your orientation within the complex and cutthroat social strata of Ancient Roman scholarship) would sweep away the last remnants of the Old Republic, coinage of the period conveyed basic and cautiously non-dictatorial values. The era of "New Nobility" under which the coin above was struck, and that would persist until around 130 BC, is often said to be characterized by the power and dominance of the Senate and the virulently militaristic nature of Rome's foreign policy. The two-headed god of Janus looks in both directions, left to the past, right towards the future, presiding over beginnings (hence the first month of the year in the Roman calendar: "Januarius") while the reverse depicts the right (to the future) traveling, four-horsed Quadriga of victory and progress (concepts almost identical in the Roman ethos).

A silver Denarius minted in (still just barely) Republican Rome c. 67 BC. While the features are still sparse, the laureate head of Apollo, who by this time was recognized as representing the domination over colonists- and, one presumes, such uppity slaves as were possessed of the temerity to oppose the Senate and and People of Rome- adorns the front with cryptic letter behind. On the reverse the legend "C PISO LF FRY" (identifying the moneyer C. Calpurnius Piso L.f. L.n. Frugi who was active in 67 BC exclusively) is almost as prevalent as the horseman riding (palm branch in hand).

By 67 BC, Spartacus had been vanquished and Gnaeus Pompeius Magnus had put down the uprising in Spain- the mythos of which secured his political fortunes for many years to come and that, in its particularly way, paved smooth the dark path towards the end of The Republic.

The Catilinarian Conspiracy, which found its roots in this period, was a particularly rural discontent mounted by a cabal of deeply indebted aristocrats and intended to install a more populist form of government. A major thrust of its campaign was a tabulae novae (universal debt forgiveness) policy and the conspiracy and its putting down marked a landmark in an almost century-long journey of Senatorial decline.

By 63 BC debt was a very serious problem and a campaign of debt forgiveness was like to inspire any number of advocates among foreclosed farmers and legionary veterans. (Always sharp finem respice readers will, of course, be forgiven for recognizing a certain drab and discouraging congruence between this era and current events). Dozens of years of foreign military adventure had proved expensive, you understand- outflows of capital that mostly benefited the Senate, as the sponsoring body of such expeditions.

Still, and, while several more recent Senatorial military adventures had finally restored, at least in small measure, some remainder of status and repute to the ruling body, by the time Catiline began to rally rebels to his side The Republic was as seriously beset by personal and sovereign debt as in its history. A populist revolution was seen (and feared) as a real possibility.

Alas, the army of Marcus Tullius Cicero made quick work (in Roman timescale anyhow) of Catiline's rebel forces in the more rural expanses of the soon-to-be-an-Empire and the dreams of many a financially burdened member of the Roman middle class (such as it was) were ignominiously crushed.

Such was the poignancy of the fall of Catiline that his name became synonymous with exile and fall, before being resurrected in some circles as a noble agrarian reformer. Cesare Maccari's 1888 Fresco "Cicero Denounces Catiline" in Rome's Palazzo Madama presents the oration that drove Catiline (depicted alone in the foreground to the right) from the city in 63 BC and is only the most obvious surviving depiction that comes to mind.

Unfortunately, in empowering the state to deal with the conspiracy, the Senate's senatus consultum ultimum of October 21, 63 BC vested "imperium" power in the Consuls, effectively ceding any reputational or actual power they had restored to themselves via a literal state of martial law.

It will be seen that this period also revived a brewing reverence for the deeds of select elites "deserving" of expansive reverence in Rome, where heroes, rather than merely the state, slowly began to occupy the spotlight. Not only were Rome's new heroes (Cicero, Caesar) increasingly individuals (as opposed to legions or institutions), but so were her rivals (Catiline, Gaius Manlius).

Even with the successful elimination of several populist conspiracies (the threat of which were obviously quite real) one also begins to sense in Rome a severe, almost panicked fear of "the mob," exacerbated by the many bankrupted, rural plebeians who had migrated to the capital over the years and an equally dissatisfied and probably indebted cadre of Senators, Generals, Veterans and lesser statesmen who stood ready (with sufficient incentive) to patronize them. Certainty, taunting the plebs with debt relief only served to agitate the friction.

One cannot celebrate and elevate the state or anything like a representative democracy (much less a full-blown Republic) when the body politic begins to challenge the integrity and legitimacy of their rulers. If Rome's Senators knew anything they knew (having watched it turn with frightening speed and ferocity on the former hero and Praetor Catiline) that the state was a fickle ally.

The antidote became, of course, the concentration of power over the feckless mob within a cadre of the enlightened elite. By 61 BC Pompey was being awarded his third Triumph, a festival that went on for two solid days and was so reputed for decadence and luxury that contemporary observers as late as 1550 were moved to highlight the opulence of Henri II's arrivial into Rouen by comparison to "...the third triumph of Pompey."3 One also sees in this period a far rawer expression of political aspiration in the increasingly common self-promotion of moneyers on currency, minting having now become deeply and intimately associated with political power- an obvious development as levels of debt grew.

A silver Denarius minted in Rome c. 42 BC. Depicted on the face side is the laureate head of (the now deified) Gaius Julius Caesar with laurel branch behind and the spiraling snakes of a Caduceus (the staff of Hermes representing the guide of the dead as well as the protector of merchants- not to mention, perhaps or perhaps not so ironically, gamblers liars and thieves)4 to the front. On the reverse a rampant or charging bull (again, traveling left to right) and "L. Livineius Regulus" the now extremely prominent legend of the moneyer L. Livineius Regulus, active in 42 BC exclusively. Possibly a reference to a famous event in 49 BC wherein a hawk dropped a laurel branch in the midst of the Roman Forum causing such mystic shock and awe that a sacrificial bull purportedly worked its way free and escaped by swimming across a lake. The laurel branch may be visible below the bull's hind legs.

By 42 BC Rome was well on its way to embracing Empire. Caesar, who had in the interim made himself the source of all candidates for election and the source of all legislation on which the Senate was to vote, was now two years dead. The political transformation of Roman currency is nearly complete with both faces of coin now dedicated in some fashion to the politics of a singular ruler (the deification of Caesar, the first prototype for the familiar Roman dictator-emperor that would soon follow, and the promotion of the individual moneyer under whose authority the coin had been struck on the reverse) rather than the glory of The Republic or its ideals.

With the increasing concentration of political power in singular Emperors it would be only natural that various aspirants to political power would dedicate more of their resources towards the supplicantal pursuit of favor, much in the way various branches of the armed forces in the United States suffer their larger instruments of war to be named for particular states or, even, specific members of the executive branch. One strongly suspects that moneyers did not find themselves immune to these particular siren songs.

The very deification of Caesar itself (the first of a historical Roman figure as it happened) by the Second Triumvirate (composed of Antony, Octavian and Lepidus) was self-serving in that it permitted Octavian to later declare himself divi filius (literally "son of a god"), and while depictions of historical (or living) persons on Roman currency was not unique to this striking, it was only with Caesar that it began to see widespread use, and even then primarily posthumously.

The blurring of the line between the mortal and divine, particularly on the face of Roman currency, was to cross an entirely different kind of Rubicon, a move which would prove for Rome just as unidirectional as for Caesar.

A gold Aureus minted in Rome c. 64 AD. Depicted obverse: the laureate head of Nero with prominent double chin and encircled by lettering "Nero Caesar". On reverse also Nero, now standing, clad with robes and holding laurel branch and depiction of Victory encircled with lettering "Augustus Germanicus". The combination of texts resulting in the Emperor's (almost) full name: "Nero [Claudius] Caesar | Augustus Germanicus"

By the time Nero began to grasp the reins of Roman mints both faces of coinage had been entirely usurped by not just political iconography, but self-promotion confined exclusively to the Imperial person. Where coinage had once been the near exclusive provenance of the divine, the quasi-divine now dominates, and such images of non-mortal divinity as are depicted are controlled and shown overtly as manipulated by the Emperor. Nero offers the figurine of Victory, almost as a gift to the viewer, a token his to bestow rather than a figurine behind the all-powerful Jupiter or a depiction as subtle as wings, deigning only hesitantly and fleetingly to gently urge forward the face of another deity. Conspicuous in its absence is any signature or mark of the moneyer. The lack of such signatures has the effect of complicating the dating of Roman coinage by the tenure of the associated moneyer after 31 BC or so when the practice of moneyer signature seems to have halted almost entirely. No more robbing the Deity-Emperor of his coinage real-estate by ambitious statesman.

In the years that follow the complete demise of The Old Republic it is important to sense a rather brusque shift in the supply chain of legitimacy. No longer is power and authority derived from the divine, channeled through the state and into the hands of its leaders, which then (purportedly) act in its name. In fact, it is only a short step after the intermediate stage of transforming and concentrating the power of the state into individual divinity (the posthumous elevation of Caesar to the divine, and by extension the elevation of Octavian to the status of a "son of the divine" demigod) that the divine is completely disintermediated and power now flows directly from the Emperor.

Certainly, this evolution also represents the culmination of the path taken when first someone decided to stamp currency with symbolism or legend. Strictly speaking, as a store of value or a medium of exchange, precious metal based currency requires no print. To the extent that the purity of a metal is readily (or nearly) tested, and that the value of the unit of currency is not expected to exceed the spot value of the precious metal it contains, there is very little value in taking the time and effort to mark or otherwise brand currency. The efficiency of that effort only begins to become worthwhile when it adds value to the currency beyond the pure weight of its precious metal content.

Clever finem respice readers, however, will quickly surmise that such branding not only imparts great value when properly exploited (in the form of seigniorage), but that an even more important part of the equation, legitimacy, comes into play. Moreover, legitimacy has a uniquely recursive and (at least temporarily) positive feedback loop.

It is the rare month that passes without at least one email from an acolyte of the Cult of the Goldbugs tainting the inboxes of finem respice. "If only," so goes the lament, "such-and-so sovereign would rebase their icky fiat currency against some precious metal, maybe not gold, but silver... yes silver... then all would be well!"

Of course, the expectation is that this shift will somehow rob the oppressive appendages of state of the ability to debase currency- a prospect that seems to give great solace to the high priests of the Temple of Au (and/or Ag?). And on reflection, finem respice must admit to a certain hesitant agnosticism when pressed to choose between the Chicago and Austrian schools, but, alas, some sects of the Cult of Au are sects of ignorance.

It is a measure of something, though perhaps it is not quite clear what, that any email issued in reply to such pleas which points out that even Roman Aureus (which for almost 500 years remained composed of gold with in excess of 99% purity) had a higher "face" value than the intrinsic value of its precious metal content generally goes unanswered.5 The Denarius in particular enjoyed face values of about $20.00 (between 150% and 250% of its silver content even in the days of the Old Republic and before "The Great Debasing" which enduring readers will find discussed further infra).

Certainly, the mere use of precious metal as a base is no guard against the "evils" of a fiat currency when the value of even silver coins of 40%-70% purity is more than half "fiat." One is left to speculate that the mere stamping of such coinage results in the surplus value with respect to precious metal content. And, having made this leap, it is not far at all to realize that the growth and stability expectations of the Old Republic (or indeed The Empire) must bolster this effect, as well as benefit from it. For surely the power to issue currency, and to emblazon it with one's values, symbolism, mythos and ethos, not only lends value to the currency, but also to the corpus of the Old Republic (or The Empire) which in turn... well you get the idea.

It is this feedback cycle that gives mints the power, not just to command and collect the wages of seignorage, but to lend legitimacy. This effect was not lost on the Emperors and quasi-Emperors of the day.

A literal flurry of mintings after the death of Caesar (who had himself paid his veterans with coins commemorating their many victories and Rome itself) sought to legitimize the various and shifting mantles of power that, on that particular month, held the reins of Roman legitimacy. It is thus that from the Second Triumvirate we come to find Aureus examples showing Octavian and Antony on either side (a pity for the poor Lepidus that coins of the day had only two sides) joined in eternal solidarity and brotherly love (at least until that whole Cleopatra incident). Still more telling are the few examples of Aurei minted by a traveling mint (probably in Macedonia) for the murderous Marcus Brutus in 42 BC (certainly he had to pay his armies as well, no?)

A gold Aureus minted in Asia or Macedonia 42 BC. Depicted on the front, the right facing (of course) head of Marcus Junius Brutus encircled by laurel wreath with text "Brutus" left and "Imp" right (i.e. "Brutus Imperator"). On reverse iconic depiction of spears, shields, swords, armor and helmet, representing the naval and land trophies attributed to Brutus and bordered left by text "Casca" and right by text "Longus" (i.e. the moneyer P. Servilius Casca Longus who was active 43-42 BC).

The always sharp finem respice reader will recognize the import of the minting date as the same year Brutus committed suicide in the wake of his defeat at the battle of Philippi. In fact, it seems likely that he was dead within months of striking this Aureus.

But we see, though still nearly shamelessly political, some sense of Old Republican modesty still resides in the depiction. At the very least the striking appeals to traditional Roman values, but most interestingly Brutus appears to have restrained himself from overt self-aggrandizement. Later, his contemporaries would be burdened by no such qualms. Brutus was, in fact, officially granted the title of Imperator in 44 BC and, despite what must have been substantial incentive and in the context of no small degree of desperation, did not attempt to use this minting, made in the face of a literal propaganda assault by Octavian and Antony, to do more than advertise his legitimate past accomplishments (though it seems clear that the prominent, curved dagger is not intended to include assassination by blade among them- but have yet some patience, dear readers).6

The message seems clear. The power to mint coinage, particularly in gold, suggests- or even commands- legitimacy (though in the case of Brutus the legitimacy of the mint was perhaps necessary, but not sufficient, to return political power dividends to him in the end). This was hardly Brutus' first flirtation with political aims in coinage.

A silver Denarius probably struck in Macedonia c. 42 BC. Obverse with the laureled head of Brutus and text "Brut Imp | L Plaet Cest" (Brutus Imperator and initials likely identifying the moneyer Lucius Plaetorius Cestianus who managed the mobile mint Brutus used while in Macedonia). On reverse a liberty cap between two downward facings daggers with text "Eid Mar" (The Eidibus Martiis or Ides of March).

It will be difficult to convey to the modern mind the degree of audacity and bravado required of a citizen of Ancient Rome not just to put his face on coinage struck by a moneyer, but to mark the occasion of the assassination of your rival for power. True, the presence of the liberty cap7 is likely intended to carry the message that the otherwise murderous act (and therefore the continued loyalty of the troops paid with this coinage) was a blow against tyranny and in furtherance of the liberty of the Citizens of Rome,8 but Brutus' issue remains notable for being the only striking to commemorate an assassination.

Several sources of vague provenance attribute a portion of Brutus' outrage with Caesar and therefore motivation for his assassination to Caesar's hubris in striking coins with his own visage, but, in fact, coinage had been slowly moving towards the representation of living statesmen for decades and any number of recently deceased Consul or other officials had already been marked on high denomination coinage. In fact, even had this not been the case, the Roman general and statesman Titus Quinctius Flamininus (229? BC-174 BC), best known perhaps for his military career during the Second Punic War, appeared rather prominently on gold Staters struck more than two decades before his death- and at his own behest.

A gold Stater struck c. 196. The obverse shows the head of Titus Quinctius Flamininus with the reverse depicting Nike (Victory) holding wreath and palm branch over her name (Victory).

Moreover, Brutus himself had been a moneyer (as had Gaius Cassius Longinus) in 54 BC. Given the forgoing it seems somewhat apocryphal to attribute much in the way of currency envy as motivation for the events that took place on the Ides of March in 44 BC, particularly as the conspirators were themselves meeting as early as 45 BC and the coinage in question was only first struck in the spring of 44 BC.9 Whatever the truth of this legend, Brutus' scruples obviously didn't prevent him from striking his own likeness for long.

Surprisingly, or, after some reflection, perhaps not so surprisingly, the decline of the Old Republic was matched by a consummate decline in the scruples of various Imperial minters.

One is prompted to observe cynically that despite an 1866 act by Congress, an increasingly number of living persons have been, through loophole or simple violation, depicted on US coinage and the like.10 Somehow the statute has failed to prevent Alabama Governor Thomas E. Kelby (1921), Calvin Coolidge (1926), Senator Joseph P. Robinson (1936), Senator Carter Glass (1936), several of the men who raised the flag on Mount Suribachi (Ira Hayes, Rene Gagnon and John Bradley), several participants of the moon landings, and Eunice Kennedy Shriver (1995), among others, from being able to look upon their own likenesses in their lifetimes.

And it is this particular nuance (the bi-directional flow of legitimacy and its decay), dear readers, that forms the thrust of the remainder of the instant text.

Currency debasement (literally the removal ["de"] of the "base" metal) depends on a particular sort of asymmetric information advantage that should be familiar to the always astute finem respice reader: maturity period mismatch. Particularly in economic climates with very slow information propagation and high information costs, debasing a currency yields immediate gains with delayed costs. To the extent a sovereign can delay the costs even further by other means (for instance, shrewd manipulation of a history of legitimacy or a large reserve of "reputation capital" built up over years, decades, or even centuries) the returns to debasement are even further amplified. Unfortunately, like all such schemes, eventually matters accelerate beyond the ability of debasers to keep up.

The Roman system was already highly inflationary- purely as a matter of structure. Specifically, though taxes and tribute were generally payable only in weights of gold or silver, official mints were free to strike alloyed, or even fully bronze coins. In addition, Italy was possessed of very few natural sources of precious metal with which to mint new coinage. Instead, The Empire relied on the spoils of war and foreign taxes (along with the occasional melting down of old coinage) to supply its ravenous thirst for molten gold and silver.

In the face of such shortages for the raw material of coinage, the import of military conquest to Rome was not lost on its increasingly rapacious leaders. The consequent prominence of Victory and conquest as anthropomorphized depictions on Old Republic and early Empire coinage is rather easy to grasp when viewed through the lens of an Emperor with a precious-metal-challenged treasury.

Likewise, the tolerance that the Old Republic- and later The Empire- exhibited with respect to local such mints as were inclined to strike bronze coins is probably best understood as a sort of grudging acceptance of "the cost of doing business". Tolerating a "two tier" currency system to delay the "end-user" impact of inflation was essential to slow the corrosive effects of debasement and shrinkage. Local jurisdictions became responsible for providing coinage for the lowest value transactions while the large denominations could be subject to "official" inflation without an immediate effect on the average consumer or merchant.

True, perhaps, the value of official payments from the treasury was degraded by inflation and a touch of overall abuse, but local Prefects could compensate by striking bronze to their hearts content while keeping the exchange rate fixed.11

Add, however, the almost shocking level of debasement that took place at the senior levels of coinage in the later years of The Empire and it even becomes easy to critique the "Gold Standard" advocates that seem to plague the fringes of any fiscal responsibility movement. Nothing, in the end, is particularly sacred. Not even gold coinage.

In 215 Marcus Aurelius Severus Antoninus Augustus (the Emperor Caracalla) introduced the Antoninianus (named, of course, for himself), a large silver coin initially valued by diktat at two Denarii and bearing the visage of the Emperor himself (and later his Empress). Literally from the moment of its issuance the coin represented a debasing, and probably had only about one and a half times the base silver of the already half-fiat value Denarius.

Caracalla wasn't the first to debase Roman coinage. Nero had probably started the practice, albeit with a bit more subtlety, back in 64 AD after the devastating fire in Rome.12 Mark Antony apparently tried to compensate for his lack of funds during his fight with Octavian by minting the ubiquitous Denarius silver coins not only smaller in size than the original Denarii but also by composing them of significantly debased silver. He did, however, strike the name of the legions the coins were intended for on each of his mintings.

And in this particular effort we find some instructive detail. One expects that, at least for a time, the debasing of, for instance, silver will remain undetected by the masses. What civilian in 260 AD was equipped to measure the purity of a given Antoninianus? By way of contrast, one suspects both that the consumers of the gold Aureus (government officials or representatives of foreign sovereigns) were better equipped to assay the purity of such coins, and that the softness of gold gave anyone with teeth the ability to at least approximately gauge purity "in the field." This may go a long way towards explaining how, in just thirty years between 240 AD and 270 AD the Antoninianus slipped in silver purity from ~50% to no more than 5%.13

By 280 AD the typical Antoninianus in circulation not only looked cheap, but was obviously smaller and lighter than it had been only 15 years earlier. Of course, during this period the statutory exchange rates to smaller denomination coins and the many price caps and controls varied not a whit.14

Of course, Say's Law suggests that bad currency dominates circulation and presses good currency out of the economy owing to hoarding. And hoard Romans did, which is one reason most Roman currency finds today tend to consist of large caches of Danarii.

While debasement wasn't principally an issue for Aureus minting (given the more sophisticated currency audience it likely entertained), size and weight quickly became one. Though Caesar standardized the weight of the Aureus at one fortieth of a "Roman Pound" (about 8 grams) it was dropped to one forty fifth under Nero, one fiftieth by the time Caracalla came to power before being replaced entirely by the introduction of the gold Solidus struck at one sixtieth of a Roman Pound before that too found itself dropped to one seventy second of a Roman Pound (or about 4.5 grams). Even with this aggressive shrinkage the result was that by 360 AD or so, given the combined effect of Denarii debasement and general inflation (again we see the two tiered system characterized by a much more rapid debasement of those currencies traded en masse), even the reduced Solidus (which had replaced the first Aureus valued at 25 Denarii per coin) was now valued at over 5,000,000 Denarii.

The slow speed of such a change is, however, an important factor in its success. Even the most dramatic debasements generally compare favorably to (for instance) hyperinflation in the Weimar Republic. One must, however, look deeper to understand, for example, the brazen debasement and literal shrinkage of crisis-inspired efforts such as Mark Antony's strikings between 31 and 30 BC.

A legionary Denarius (total weight 3.55 grams at less than 30% fine silver) probably struck in 31 BC. The front depicts a Praetorian galley traveling (duh) left to right surmounted by the letters "ANT AVC | III VIR R P C" (III VIR R P C is likely a variant abbreviation for the tresviri ad pecuniam feriundum) with reverse depicting an eagle flying left to right between two legionary standards above the text "LEC VII" (the intended recipients most likely being soldiers of the 7th legion). An actual die from which Mark Antony's legionary coins were struck is depicted below:15

While the debasement of silver in such a striking may have actually gone unnoticed by hardened veterans under Antony (and finem respice doubts even this), it seems unlikely that such a dramatic size and weight reduction would have. It is this particular variance, the delta in value between one Denarius before and after Mark Antony's break from Rome, that illuminates the central feature moneyers and their patrons have sought (with varying degrees of brazenness) to exploit:


The willingness to accept a clearly debased (at least clearly debased with respect to size) token as a coin of much larger value depends at least in some sense- if not entirely- on the ability of the issuer to instill confidence. Confidence in victory. Confidence in some (universally ill-defined) future gains. In turn, the fact of the coin's minting in the first place, by virtue of a clear demonstration of the possession of large(ish) amounts of precious metal to do the minting, and the resources to undertake a striking, not to mention the wealth of signaling and symbology (and raw numerology) pouring from a pair of thumb-sized surfaces, is meant to serve as both a source and a distribution channel for expressions of legitimacy. The fact that any solider of even moderate intelligence can pull an old coin from his purse and compare it (perhaps even despairingly) with the latest minting should serve as a stark warning of the power of currency icons and their ability to almost (but never quite) indefinitely suspend disbelief in the relentless ploy to instill confidence.

One can imagine few toxins more caustic to military morale (particularly for a hunted army in exile on the heels of a serious naval defeat) than the erosion of confidence. And where confidence (or silver) is lacking, it must be bolstered with whatever artifice is at hand, be that the vanity of a legion- exploited by having its number stuck to a few thousand coins- the Imperial symbolism of the Emperor's visage, or the larger ethos of a culture as expressed by a deity, or, simply, a bit of judicious (or brazen) skimping on the silver.

Ultimately, as with all such recursions- and not unlike main sequence stars with solar masses of 0.23 or greater- this positive feedback system results first in a measured and then an uncontrolled period of expansion, a period that is inevitably capped by catastrophic collapse followed hard upon by a lingering, soul and light sucking death.

The flaw lies not with a particular system of currency, be it fully fiat, partially fiat or fully precious metal backed. The flaw lies in the propensity for such systems to grant both responsibility for, and title to the benefits flowing from systemic confidence to the same entity or entities. More directly, the same parties are responsible for vouching for confidence as benefit from it. The temptation to abuse this dichotomy is possessed of two distinct features that, when combined, prove extremely dangerous. Firstly, continued abuses of positive confidence feedback systems have leverage-like impacts on returns. Secondly, also as with leverage, these returns are positively and geometrically related to the amount of abuse.

Taking as an example a coin of one ounce of pure silver, debasing the coin by one tenth of an ounce while leaving the gross weight the same (and assuming the same- probably statutorily enforced- exchange rate to other measures of value) returns 11.11% to the debaser. The next tenth of an ounce returns an incremental 13.89% compared to the first tenth pulled from the mint. The third returns an incremental 17.96%. But by the time one reaches the eighth tenth of an ounce of debasement the incremental return to the debaser is 166.67%. It quickly becomes obvious how the Antoninianus could find itself composed of more than 95% "some-metal-that-is-not-silver" barely a generation after it was introduced. Dropping the silver content in such a coin from 100% to 50% results in a "mere" 100% total gain to the debaser. Dropping the silver content from 10% to 5%, however, yields an incremental 1,000%. One is actually surprised it took only 30 years to finally vomit out tens or hundreds of thousands of worthless coins.

It is, of course, another feature of such a system that when it begins to turn against you, it does so with a vengeance, and any number of other actors, smelling blood, grab on and simply will not let go. In structural engineering it can sometimes be said that "the weakest member ends up taking all the load," an exaggerated litany meant to reference the fact that once a structural member begins to sag, the shift in balance means that it is forced to support more and more weight until it finally collapses. A sudden gap in confidence has a similar effect whereby just when a currency most desperately needs support it finds it has none. As with the roving and skimping mint that followed the doomed legions of Antony about, the sources of (and beneficiaries to) legitimacy and, of course, confidence, grow more and more desperate on such occasions. It is in such circumstances that the always astute finem respice reader begins to grow suspicious of any declaration, statement or action designed to "instill" or "restore" "confidence."

Ultimately, confidence is a lie. A system is least dependent on confidence when it needs it least and, on the other extreme, confidence serves no purpose unless it bolsters a system already and fatally beset by fundamental flaws. In modern usage its abuse is essentially in the service of the same goals that debasement and inspiring imagery reached for Mark Antony. Buy for time in a last round problem where the alternatives are the binary distribution of: unimagined glory or frenzied suicide as a renegade exile in the throne room with your Egyptian queen-lover. Unfortunately, the rational will see that "confidence" in these moments is more akin to "faith," and therefore, by definition, divorced from rationality.

In the larger scheme of things this analysis is not particularly complex. Even members of Garrison Keillor populations have probably had sufficient exposure to the likes of "It's a Wonderful Life" to understand the intrinsic importance (and falsehood) of modern notions of "confidence," though perhaps these experiences have been bleached in the rosewater of the sort of leftist utopian thought where every noble venture succeeds and (non-debased) Krugerrand defecating unicorns- that can, of course, only be captured by capitalist virgins- blissfully graze in the green, solar-cell covered fields that were once the most barren of California deserts.

It is in the nature of "confidence" that it harnesses endless "ends justify the means" rationales, both ex ante and ex post.

And it is the discussion of this last detail, dear readers, that shall comprise the third and final act of the present tragedy.

As a modern plague, confidence takes many forms- all of them based on deeply systemic lies. In this connection, one can find more severe lies outside of the Federal Reserve System of the United States, but it takes a bit of work. Consider the Federal Reserve's own commentary about its "dual mandate":

The independence of the Federal Reserve in conducting monetary policy is critical to guaranteeing that monetary policy decisions are free from political influence and focused exclusively on achieving the Federal Reserve's dual mandate. For example, a problem experienced in many countries without an independent central bank is that elected officials have put pressure on monetary policymakers to follow policies that boost the economy in the short run even if doing so would result in high levels of inflation later on.16

Compare this with the mission of the Federal Deposit Insurance Corporation:

The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Congress to maintain stability and public confidence in the nation's financial system by: insuring deposits, examining and supervising financial institutions for safety and soundness and consumer protection, and managing receiverships.17

It should surprise exactly none of finem respice's typically well-informed readers that different agencies or quasi-government entities have different and therefore potentially conflicting roles. What may be cause, however, for something approaching urgent alarm is the speed and ease with which the most storied and credentialed institutions abandon even the pretense of solidarity to their stated goals when the question of "confidence" presents itself. As such, those with even a passing claim to rationality should find upsetting the events of September and October of 2008 when then President of the Federal Reserve Bank of New York, one Timothy Geithner, derailed the FDIC's seizure and sale process in order to make sure that the failing Wachovia would, despite being hopelessly insolvent, open its doors the following Monday. "We just went to Congress for $700 billion. The policy of the U.S. Government is that there will be no more WaMu's."18 (Washington Mutual had failed somewhat spectacularly in the weeks prior). In a crisis of confidence, you see, neither the independence of the Federal Reserve, or the mission of the FDIC is of any real import.

It is the nature of sacrifice to the myriad gods of confidence that truth must first be bled on their altar. Any number of fictions are brazenly perpetrated in the name of "investor confidence" such as...

  1. The enforcement of inconsistent, convoluted, and inefficient insider trading laws to perpetuate the fiction that various markets represent "level playing fields" for the average retail investor, and that larger, better resourced players (or merely players who spend a few hours longer picking stocks than they do their lunch order) actually possess no intrinsic advantage. Retail investor confidence, and the impression of a level playing field, you see, are essential to the nation's progress.
  2. The promise that exchange rules are eternal and inviolate and apply equally to anyone and everyone (unless you are the Hunt Brothers on the verge of demonstrating that the exchange cannot possibly meet its physical delivery commitments and has, in fact, been fibbing just a little bit about how much silver it can actually lay its hands on when asked to).
  3. The suggestion that short sellers are evil, unpatriotic, conspiratorial criminals.
  4. That social security funds are sequestered somewhere in a segregated "lock box"19 just waiting to be tapped (with interest!) by a patient and trusting electorate. Thank you, President Mark Antony!
  5. That there is "no risk" of a downgrade of the United States.
  6. Fox Business: Is there a risk that the United States could lose its triple A credit rating, yes or no?
    Timothy Geither: No risk of that.
    Fox Business: No risk?
    Timothy Geither: No risk.20

  7. That the United States has never defaulted. And yet, woe to the holders of the $6 billion issued in the Fourth Liberty Loan. True, the terms of the instruments called for repayment of the face value in gold, and yes, those investors who valued gold denominated debt higher expecting (entirely correctly) the wholesale devaluation of the United States Dollar in a time of war (said dollar then having found itself sucked from almost $21 per troy ounce of gold to $35 per troy ounce) looked pretty damn smart, but the temptations of devaluation being what they are the Treasury decided to pay in dollars and not gold anyway, slapping bond holders with more than a 40% loss of principal which, while ruled unconstitutional ex post, was never recovered.
  8. On the flip side of the coin, so to speak, when the first issuance of $5 billion in Liberty Bonds in 1917 found limited enthusiasm and the instruments consistently traded below par (likely the only reason the issue actually sold out was owing to below par purchases on the initial offering) the Board of Governors of the New York Stock Exchange investigated firms that had sold the paper below par and bullied some into buying the bonds back at par (for a loss) in addition to donating large sums to war-effort related charities in compensation for their assault on the system's integrity. Confidence in the bond program was, you understand, at issue and a host of excuses ranging from German manipulation to unpatriotic bankers (with the usual salting of antisemitism to taste) were paraded out to explain the poor performance (which continued throughout the subsequent issuances irrespective of legal proceedings, both real and threatened, taken against market actors to prevent their "eroding confidence" in the issuances).
  9. That unemployment in the United States is around 9-10% (instead of the still low U6 figure of 16.2%).21
  10. That Greek bondholders will take no a small a 25% a 30% a 50% such haircuts as are required to assure fairness and confidence in the system.
  11. That a breakup of the Euro is unthinkable.

Considering all these illuminations together one finds that the essence of understanding the cult of confidence is threefold:

First, to understand the deeply unstable nature of systems where the guardians of integrity and the beneficiaries of confidence are the same.

Second, to realize that confidence and its distillates are highly leveraged when they are in crisis, and that in these moments the return distribution is last-round binary in nature.

Third, to realize that, as with all religious fanaticism, all manner of deeds and acts can be justified in its name.

Having derived these observations and their collective effect, finem respice now posits The Rule of Confidence Adjusted Valuation:

In a system with positive feedback effects to integrity the risk free rate used to compute discount rates shall be the normal risk free rate times the square of one plus the sum of the total count of the words "confidence" and "integrity" as uttered by the Secretary of the United States Treasury in the trailing 14 day period.

  1. 1. Thought to be around 269 BC.
  2. 2. The trio of men authorized, probably by appointment, to strike coins in gold, silver and bronze.
  3. 3. For an in-depth study of the Roman Triumph, See Generally: Beard, Mary "The Roman Triumph," Belknap Press of Harvard University Press (October 30, 2007).
  4. 4. Amusingly, the Caduceus has been used erroneously for years by various American medical organizations following its incorrect adoption as an insignia by the United States Army Medical Corps in 1902. The correct icon should be the Rod of Asclepius.
  5. 5. Interestingly this excess face value effect dominates 17th-20th century circulated gold coins as well, though most modern gold currency utilized much less pure alloys.
  6. 6. Perhaps as a measure of the importance of this observation it is interesting to note that one specimen of this particular class of Aurei sold at auction for just shy of $700,000.
  7. 7. Which would later appear in early coinage for the United States.
  8. 8. Notably, the conspirators called themselves the Liberatores ("Liberators").
  9. 9. It is worth noting that even Shakespeare did not bother to include what might otherwise have been an obvious plot device in his depiction of Julius Caesar.
  10. 10. Chapter XXVII Section 12: "Provided, that no portrait or likeness of any living person hereafter engraved, shall be placed upon any of the bonds, securities, notes, fractional or postal currency of the United States." (1866).
  11. 11. The Nazi's would later attempt, unsuccessfully, to implement a two-tiered currency system modeled on the Ancient Roman Prefects with "military script," a ploy to check the indescribable fiscal incompetence of Greece in the early years of World War II and insulate soldiers of the Reich from from the currency woes of the Greek civilians who labored under their occupation. One is immediately reminded of earlier periods in the Old Roman Republic where soldiers were paid in mostly pure silver Deranii, but everyday transactions were generally conducted with locally struck bronze coinage. See, Private, Equity "Great Moments in Professional Monetary Policy," finem respice (July 12, 2011).
  12. 12. Nero dropped the silver weight in his Denarii from 4 grams to about 3.8.
  13. 13. For an exceptional overview of Roman currency generally finem respice readers will want to See: Harl, Kenneth W., "Coinage and the Roman Economy 300 BC to AD 700," The Johns Hopkins University Press (June 19, 1996).
  14. 14. See: Dirty Old Coins.
  15. 15. From the author's private collection.
  16. 16. "About the Fed," The Board of Governors of the Federal Reserve System (August 2, 2011).
  17. 17. "FDIC Mission, Vision and Values," The Federal Deposit Insurance Corporation (May 4, 2009).
  18. 18. See Generally: Wessel, David "In Fed We Trust," Crown Business (August 4, 2009).
  19. 19. Though we are not quite sure exactly who thought using Al Gore as a confidence trickster was a brilliant idea.
  20. 20. Geithner, Timothy, Interview with Fox Business (April 2011).
  21. 21. See: Table A-15. Alternative measures of labor underutilization United States Department of Labor Bureau of Labor Statistics (2011).
[Art Credit: United States Bureau of Engraving and Printing "Federal Reserve Note," Paper (c. 2002), General Circulation. It is perhaps no accident that with paper money intrinsic value is zero and advertising real estate is much larger.]

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