KlassWar wrote:The effect of debasing and devaluing are somewhat different.
Let's say you print money. The money supply grows and inflation occurs for a while. If you don't print loads of money at once, you'll probably get to avoid a hyperinflation spiral. Perhaps the money-printers have their credit ratings suffer, that's all.
Hyperinflation is created by creating large amounts of money, whether you do this over 1 month or over 1 year doesnt matter that much, if you lets say triple the money supply then you will have hyperinflation coming and prices will rise roughly 200% or more (depending on whether people lose faith in a currency completely and expect more debasement). Inflation is a function of money supply growth, it can be controlled or not controlled and even if you print low amounts of money you will still have inflation since there will be more money in the economy compared to the goods being traded, it is a simple question of conversion ratios really.
KlassWar wrote:At every point in the process any dollar is equal to any other dollar.
Yes but a person that creates coins out of thin air is increasing his wealth and ability to pay others, he is essentially siphoning off the purchasing power that other non-money printers have in their notes or coins (if you have legal tender laws). This means it works like a tax because it takes away purchasing power from people in the private sector and gives it to the people in the government.
KlassWar wrote:Let's say you're stuck with commodity money but you're in the mood for some stimulus. You proceed to devalue the currency, and tell the money minters to mint denarii with half the silver. You have the gall to pretend they're worth as much as old denarii. Suddenly your units of money are not units of money at all, since one denarii and another denarii have different worth at the same time.
They are still money, the old denarii will just be worth aproximatly twice than the new denarii (ignoring the value of the filler metals).
KlassWar wrote:In addition to the usual ill effects of printing money, you get all sorts of weird shit:
-> Some merchants will stubbornly refuse to accept new coin.
Merchants will still accept the debased money if they are not forced to treat the 50% silver coin as a 100% silver coin, if merchants are allowed to simply say to you ''sorry but with those coins you will have to pay double prices'' then they wont refuse new coins because they will still be earning a profit on their business, it is when they are forced to accept 50% silver coins as 100% silver coins that trade breaks down since that means the trader in question is losing money doing his business and no person works in a job that costs them money.
KlassWar wrote:-> Unscrupulous traders will try and mix old and new money up. Previously smooth transactions become labor-intensive.
Well I am sure you can still check silver coins for their purity with various methods like weights and visual inspection, I am sure a coin with 50% copper in it has a different color than a 100% silver coin.
KlassWar wrote:-> Under commodity money, trusted currencies have added-value from the plain gold. Debasing messes with all that.
A tiny amount, not anything substantial, people can trade in raw gold or raw silver np, I doubt it was allowed in the later roman era though.
KlassWar wrote:-> Debase hard enough, and people will either hoard old money (wrecking demand) or melting it to get multiple new coins (destroying value).
Gresham's law (hoarding higher value money) only comes into effect if the government doing the debasement price fixes the monetary unit and forces merchants to accept the newly created money at old 100% silver prices instead of the 50% price that they are worth now, if the government simply prints money and does not engage in regulation of the value of each coin then the old 100% silver coins will still circulate in the economy, they will just be worth double of what the new coins are worth.
I also dont see how melting down a silver coin destroys value, the value is in the silver and the copper, it doesnt disappear just because you melt it down into a different form.
KlassWar wrote:With a (more or less honest) public exchange rate of old money for new money, these effects could be mitigated to the point where debasement resembles mere money-printing under fiat money... But if you try to pass off debased currency as legit, you got instant meltdown just add water.
Well if they are honest about exchange rates then there is no point in doing debasement since then you are just wasting your time splitting up 100% silver coins into 50% silver coins and getting half the price, the whole reason why debasement worked in the roman world is because they forced people to accept coins with low silver value at much higher prices than the metal in the coin was worth and if you did not follow their evil scheme and tried to exchange these corrupt coins at their true market value then you would be punished with the death penalty.