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Around AD 200, the Roman economy took a drastic turn from which it was never able to recover. Around that time, there was a recession that ravaged much of the Roman Empire in a way that modern scholars are just now beginning to understand. <ref> Matthews, p. 450</ref> The recession was compounded by the so-called “Antonine plague,” which was brought back from the eastern provinces by Roman soldiers. Since the plague led to the widespread decimation of the Roman population, wages increased rapidly – much too rapidly. <ref> Temin, p. 140</ref> The result was a drastic increase on the prices of goods that had never before been witnessed in Rome: inflation was only one percent in the first two centuries AD, but prices doubled after the plague. <ref>Temin, p. 149</ref> The immediate after effects of the plague should have been a wakeup call to Roman leaders, but instead the problems continued to increase.
Another factor that contributed to inflation in the Roman Empire was the transition to a more cash based economy. Before AD 200, real-estate was actually a more popular form of currency among wealthy Romans than coins were, but after the plague, Rome quickly transitioned into a more cash based economy due to the growing expenses of government. The growth of territory meant more people were added to the empire and projects such as bridges and acqueduct were needed to sustain the growing population, so more cash was needed. The Roman military industrial complex also grew exponentially, which meant that more coins were needed to pay the soldiers. Finally, there was an increased use in cash for anything from large business deals by the elites to day to day transactions by ordinary people. <ref> Malchow, Joseph and P. Thiel. “The Quantitative Easing (and Fall) of the Roman Empire.” <i>Sovereignty, Technology, and Global Change.</i> Winter (2011) p. 7</ref> Roman leaders quickly learned that with so many coins already in circulation, they were having a difficult time paying for their public works projects, not to mention their soldiers. They attempted to rectify the situation by devaluing their currency.
Although the Romans kept few records that were directly related to their devaluing of the denarius, the records they did keep, combined with examinations of coins from the period tell the story of a deliberate attempt to stretch the silver they had as far as they could. Similar to the situation in Ptolemaic Egypt, the Romans began adding impurities to their silver coins so that more could be added to circulation. The process had two results: there were too many coins in circulation and the new coins that were being added were comprised more of other metals than silver. It is estimated that the inflation rate reached an astronomical rate of 15,000% between AD 200 and 300! In terms of a tangible example, one Roman pound of gold was valued at 72,000 denarii in AD 301, which would be nearly impossible for any Roman to have that many coins on his or her person. <ref> Malchow and Thiel, p. 23</ref> Finally, the Emperor Diocletian (ruled AD 284-306) realized that drastic measures had to be taken if he were to save the Roman economy and quite possibly Rome itself.
