Sparta - Gold prohibition in a collapsing economy

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From the Archives : Originally published March 01st, 2009
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Category : History of Gold





This coinage was famous enough to have a classical joke made about it much later by Plutarch (in about AD 100). Assuming that its representative value ought to be its true value Plutarch believed it would require a horse and cart to transfer an amount appropriate for even the most modest transaction. The joke lasted longer than the money, perhaps because it paints an absurd picture, but only a fool would imagine the Spartans conducting their grocery transactions with armfuls of iron currency, for 300 years.

In fact throughout that time the Spartan iron coinage was perfectly operable on a notional value both enforced by law, which declared its status as legal tender, and underwritten by state integrity. It was only the eventual breakdown of Spartan political strength which finished the money, not the over-issuance of the coinage. As Athens grew to culturally dominate Sparta in the 50 years after the apparent victory of the Spartans in the Peloponnese war Spartan merchants’ confidence in their iron coinage started to wane, and they steadily preferred to use gold and/or silver which was creeping into the system.

As the situation deteriorated the state decreed that "no coin of gold or silver should be admitted into Sparta," and that they should "use the money that had long obtained". The decree did not pass into practice because the choice was a bleak one - no goods, or goods traded in gold.

The Spartans either left (which they did in droves, leading to the end of Spartan power) or used gold.

The Spartan system shows the dependence of a representative money system on the power and continuing integrity of the state.

 


Paul Sustain

Director and Founder

Bullionvault.com







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