History time...
Understanding Forex before Forex: The Roman Empire

‍

“Pecunia non olet” said the emperor Vespasian.

Money is still money, it “doesn't smell” to be precise, no matter where it comes from or what you call it.

In an Empire at the height of its expansion, have you ever wondered what currency was used to keep everyone on the same page?

The civilizations of the past were the first in several fields. Even “financial management”, before we adopted this boring word.

We offer you a flashback to the history of their foreign exchange market, long before Forex.

‍

It’s not worth a penny!

Unlike today, the value of currency in the pre-modern world primarily derived from the metal it was made of. In this way, each coin had an "intrinsic value." It wasn’t an opinion; it was a fact.

The base currency of the Roman Empire was the Denarius, made of silver. However, over time and due to challenges, successive emperors debased the Denarius by incorporating less and less silver, until it became practically worthless as currency. This is essentially the root of inflation.

And yes, it may be hard to believe, but the inflation of two thousand years ago still explains the broad strokes of today’s inflation.

But that’s not all. Whether it was to escape the financial crises caused by the Romans, who were spendthrift and loved the good life, or to cheat on the rates and make a profit, the monetary heterogeneity of the Empire's conquered regions gave birth to a particular figure: the nummularius, or money changer.

The big picture

At its peak in 117 AD, the Roman Empire spanned 130 million people across 1.5 million square miles. Trade generated significant revenue for Rome, but Rome alone had 1 million inhabitants, and costs rose as the empire grew larger and larger. This was the main cause of the Empire's financial crisis.

The first to notice were the soldiers, who demanded much higher salaries from the Empire as a consequence of the declining quality of the coins.

With the surge in logistical, military, and administrative costs and the looting of precious metals by enemies, Roman citizens were subjected to ever-increasing taxes to support the Empire’s expenses.

Yes, we agree, "money is always money," but what good is it if it can’t buy anything anymore?

The currency market

This leads us to the next question: were there other currencies that maintained their value and stability in the different areas of the Empire? The answer is yes. Was Rome interested? Not particularly.

Rome established one of the first standardized monetary systems.

By striking uniform coinage across its vast territories, the Empire made trade and taxation highly efficient. This uniformity encouraged exchanges between regions that previously relied on bartering or other currencies.

But many were reluctant to give up their local currency, and regulations were necessary to manage the exchanges. Egypt, for example, maintained its own closed monetary system because local coinage was very common and widely used there. The same was true in Pergamum, in modern-day Turkey, where the Christophori remained the main currency and were much more prevalent than the Denarius or the Aureus.

Nevertheless, merchants often needed to convert local currency into Roman currency to carry out trade. This is how the money changers, known as the nummularii/a, emerged to facilitate these transactions. In practice, they were the ancestors of bankers—and of Keewe, if you want to draw a parallel.

They verified the authenticity of the coins, exchanged foreign currency, and sometimes provided banking services, marking the earliest form of foreign exchange activity.