Augustus, Roman emperor from 30 b.c. to a.d. 14—the first emperor after the fall of the Roman Republic, established a monetary system that provided a degree of monetary order to the Romans for two centuries. The system gradually gave ground to currency debasement and inflation, which grew to unbearable proportions during the third century a.d., when the emperors Aurelian, Diocletian, and Constantine instituted major reforms of the Roman currency.

The early Roman Republic adopted a bronze monetary standard, but wars brought in larger supplies of silver, making it the dominant monetary metal in last 150 years of the Republic. Bronze became only token money and under Julius Caesar Rome regularly minted gold coins.

Under the Augustus system, the gold aureus was equal to one-forty-second of a pound of gold, down a bit from the standard of the Republic that put an aureus at one-fortieth of a pound of gold. The system continued the later Republican standard for the silver denarius, fixing its weight at one-eighty-fourth of a pound of silver. By government decree, 1 aureus equaled 25 denarii, making the Augustan system a bimetallic monetary standard. The ratio by weight between gold and silver was 1:12.5. Like all bimetallic standards the system had difficulty maintaining a fixed ratio between two metals, the values of which were free to fluctuate in open markets.

Augustus also minted a gold quinarius worth one-half of an aureus, and a silver quinarius, equaling one-half of a denarius. He minted two bronze coins, the sestertius and the dupondius, the latter worth half as much as the former. A sestertius was equal to about one-half of a silver quinarius. Further down the scale of coins was the copper aes, equaling one-quarter of a sestertius, and a copper quadrans, equal to one-half of an aes. The bronze and copper coinage belong in the category of token coinage, and was mostly sold to the moneychangers who found buyers in need of small change. The gold and silver coins were almost pure in precious metal content and were used to pay for government expenditures, including the wages of the soldiers.

Augustus followed the example of Julius Caesar in having an effigy of himself struck on one side of the coins. After his death coins appeared with an image of Augustus and referred to him as a deity. The idea that coins were struck and issued by deities may have encouraged later Romans to think that coins had value independent of their precious metal content. Toward the end of the first century the emperor Domitan put the words “Dominus et Deus” on coins bearing his image.

The emperor Nero reduced the weight of the aureus to one-forty-fifth of a pound of gold, and the denarius to one-ninety-eighth pound of silver. The relative values of the two coins stayed fixed at 1 aureus to 25 denarii. Also the silver was alloyed 10 percent with another metal. As government expenditures outpaced tax revenues, Roman emperors turned to the practice of secretly debasing silver coins. Under the philosophic emperor Marcus Aurelius, the silver content of silver coins fell to 75 percent, and by the second decade of the third century the silver content had fallen to 50 percent. Then the debasement and inflation became a much more frenzied affair until the silver content of coins fell to 4 percent by a.d. 270.

With the monetary reforms of Aurelian, Diocletian, and Constantine the Romans would learn to live with inflation and perhaps slow it down slightly before it took off again in the fourth century a.d. The problem of currency debasement and inflation became one of the subplots of the decline and fall of the Roman Empire.