All Commentary
Saturday, August 1, 1981

Book Review: The Penniless Billionaires by Max Shapiro

(Times Books, 3 Park Avenue, New York, N.Y. 10016)
308 pages • $15.00 cloth

Inflation—the debasement of money—is almost as old as money itself. What civilization of the past has resisted the temptation to cheapen its money? What German Chancellor Erhard once called a “burning, destructive, unpardonable, mortal sin of modern society” dates back to the first time some profligate monarch seized control of his kingdom’s medium of exchange.

Coinage was invented in the ancient province of Lydia (in Asia Minor) around 650 B.C. It represented a substantial improvement over primitive media of exchange and greatly accelerated the economic progress of the ancient world.

It wasn’t long, however, before the Lydian kings discovered that they could reduce the precious metal content of their coins, manufacture great quantities of these debauched pieces, and spend the new money themselves before the unsuspecting public caught on. If prices rose, so what? More money could be manufactured. Weakened by inflation, Lydia was conquered by Cyrus the Great of Persia around 550 B.C.

The ancient Greeks, and the Romans after them, practiced the fine art of inflation, too. From Solon’s 27 percent devaluation of the mina in 594 B.C. to Diocletian’s Edict of A.D. 301, only brief periods of monetary stability interrupted centuries of State-fostered inflation.

The Chinese were the first to develop paper money, crudely designed slips of paper backed—at first—by precious metals. The government gradually removed the backing, inaugurating what we call today “fiat money.” The money became worth whatever the emperor said it was worth—at least in theory. The rest of the story is what any good historian might expect—rapid depreciation.

Four of the most interesting inflations of history are the subjects of a fascinating new book, The Penniless Billionaires, by Max Shapiro. For the non-specialist interested in an entertaining and instructive account of man’s inflation follies, this book more than makes the grade. It is chock full of facts and quotes which leave the reader in today’s inflationary times with a disturbing sense of déjà vu.

The four experiences discussed are those of 5th-century Imperial Rome, 18th-century Revolutionary France, 19th-century Civil War America, and 20th-century Weimar Republic Germany. When each inflation began, officials scoffed at the thought that things might someday get out of control. They argued that, in any event, the inflation was necessary to pay for foreign adventures, to build public projects, to fight poverty, to stimulate the economy, or to keep the government’s creditors at bay. Manufacturing money is a great way for politicians to raise revenue without visibly and directly raising taxes.

Imperial Rome

Shapiro’s narrative of the Roman experience begins with Augustus, who embarked upon a massive public works program (à la FDR’s WPA of the 1930s). To finance the huge expenditures, the volume of money Augustus “issued in the two decades between 27 B.C. and A.D. 6 was more than ten times the amount issued by his predecessors in the twenty years before his reign!” Recurrent periods of inflation during the next several centuries so weakened a once great civilization that 5th-century Rome fell an easy prey to the barbarian invaders.

Revolutionary France

Ignorance of history has doomed many nations to stupidly repeat the most inexcusable of errors. The French should have learned their lesson in 1720 after John Law’s paper money scheme fell apart and impoverished the nation. Some did learn, but that didn’t stop the ruinous inflation of the assignats later in the century.

On December 19, 1789, the French Assembly authorized the creation of the first of the paper assignats. The notes were to be “backed” by confiscated Catholic Church properties. Issue after issue poured forth as the Revolution gave way to the Reign of Terror. Prices soared and controls were imposed, to no avail. Blood flowed in the streets amid riots, pillaging, and the monstrous appetite of the guillotine.

When Napoleon came to power in the coup d’état of November 10, 1799, he found the assignats worthless, the economy in shambles, and the people demanding a strongman to bring order out of chaos. “While I live,” he proclaimed, “I will never resort to irredeemable paper.” The promise was in vain.

Civil War America

Salmon P. Chase was the man entrusted by the newly-elected president, Abraham Lincoln, to be Secretary of the Treasury in 1861. With war preparations underway, Chase looked for a way to pay the bills. Unwilling to bear the responsibility of proposing new taxes, he inched the administration in the direction of issuing unbacked paper money.

With the budget deficit zooming and banks suspending specie payments at the encouragement of the government, President Lincoln signed the bill creating the “greenbacks” on February 25, 1862.

What followed was a threefold rise of the money supply in the North by the end of the war. A hyperinflation and the complete destruction of the currency was prevented by the war’s end and the subsequent restoration of hard money—one of the few inflations in history which stopped short of the abyss.

Weimar Republic Germany

The world saw its first modern-day quadrillionaire with the incredible inflation of Weimar Republic Germany. Starting with the outbreak of war in 1914, the printing press gathered steam until money “slammed out . . . in lunatic fury, prices roared upward in mad, quantum leaps.” In November 1923, the wholesale price index stood at almost one trillion four hundred twenty-three billion times its 1913 level, resulting in the silent, cruel, and demoralizing impoverishment of a whole people. The countless personal tragedies engendered by this financial debacle are the sum and substance of the book’s title, The Penniless Billionaires.

Max Shapiro, a research partner in a securities firm, does more in this book than supply facts, figures, and dates. He ties events, centuries apart, together in a coherent thesis. The reader is moved by the ominous parallels which emerge.

One such common thread, he maintains, is the existence during inflations of a class of people who actually promote and profit from the process. These may be certain government officials or private entrepreneurs. They amass fortunes because they understand the phenomenon of inflation and use this knowledge in all their financial operations. This observation brings to mind the words of a 20th-century architect of inflation, John Maynard Keynes:

Lenin is said to have declared that the best way to destroy the Capitalist System was to debauch the currency. By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security, but at confidence in the equity of the existing distribution of wealth. Those to whom the system brings windfalls . . . become “profiteers,” who are the object of hatred of . . . those whom the inflationism has impoverished . . . . As the inflation proceeds . . . the process of wealth-getting degenerates into a gamble and a lottery.

Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose . . . . (The Economic Consequences of the Peace, 1920)

In the closing chapters of the book, Shapiro traces the course of the present U.S. inflation. The Federal Reserve, he charges, is the chief culprit in the dollar’s plight. Corporate executives, labor union leaders, politicians, bankers, and others among the general public who pressure the Fed to manufacture money are accomplices in the crime. Time, he says, is running out. Failure to put a stop to printing press madness soon will toss this country’s currency on the same scrapheap with the denarius, the assignat, and the mark. “Nothing can replace the dollar,” some wit remarked, “and it almost has!”

  • Lawrence W. Reed is FEE's President Emeritus, having previously served for nearly 11 years as FEE’s president (2008-2019). He is also FEE's Humphreys Family Senior Fellow and Ron Manners Global Ambassador for Liberty. His Facebook page is here and his personal website is