Why you should be worried about higher interest rates

One of the most intriguing investment books I have ever read is Forty centuries of wage and price controls: how not to fight inflation. You can download a free PDF copy of this highly recommended book here.

Forty centuries is a history of market rigging. As its title suggests, governments try their hand at this ruse on a pretty regular basis – and it never ultimately works.


Perhaps the most instructive historical example is that of the Edict of Diocletian. Shortly after this Roman Emperor ascended to the throne in AD 284, commodity prices and wages took off. The reasons for this inflation are attributed to, variously, a vast increase in his armed forces to repel barbarian hordes; a huge government building programme; an expansion in taxes and government officialdom; and the use of forced labour in his public works. Diocletian himself, in time-honoured manner, blamed the “avarice” of merchants and speculators instead.

The authors of Forty centuries, Robert Schuettinger and Eamonn Butler, put the blame for the inflation on something a little more prosaic: a massive increase in the money supply due to the debasement of the coinage. During the fifty years prior to AD 268, for example, the silver content of the Roman denarius coin fell to one five-thousandth of its original level. The monetary system duly fell into chaos and trade collapsed.

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