Infographic: Currency and the Collapse of the Roman Empire
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Currency and the Collapse of the Roman Empire

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Currency and the Collapse of the Roman Empire

Currency and the Collapse of the Roman Empire

The Money Project is an ongoing collaboration between Visual Capitalist and Texas Precious Metals that seeks to use intuitive visualizations to explore the origins, nature, and use of money.

At its peak, the Roman Empire held up to 130 million people over a span of 1.5 million square miles.

Rome had conquered much of the known world. The Empire built 50,000 miles of roads, as well as many aqueducts, amphitheatres, and other works that are still in use today.

Our alphabet, calendar, languages, literature, and architecture borrow much from the Romans. Even concepts of Roman justice still stand tall, such as being “innocent until proven guilty”.

How could such a powerful empire collapse?

The Roman Economy

Trade was vital to Rome. It was trade that allowed a wide variety of goods to be imported into its borders: beef, grains, glassware, iron, lead, leather, marble, olive oil, perfumes, purple dye, silk, silver, spices, timber, tin and wine.

Trade generated vast wealth for the citizens of Rome. However, the city of Rome itself had only 1 million people, and costs kept rising as the empire became larger.

Administrative, logistical, and military costs kept adding up, and the Empire found creative new ways to pay for things.

Along with other factors, this led to hyperinflation, a fractured economy, localization of trade, heavy taxes, and a financial crisis that crippled Rome.

Roman Debasement

The major silver coin used during the first 220 years of the empire was the denarius.

This coin, between the size of a modern nickel and dime, was worth approximately a day’s wages for a skilled laborer or craftsman. During the first days of the Empire, these coins were of high purity, holding about 4.5 grams of pure silver.

However, with a finite supply of silver and gold entering the empire, Roman spending was limited by the amount of denarii that could be minted.

This made financing the pet-projects of emperors challenging. How was the newest war, thermae, palace, or circus to be paid for?

Roman officials found a way to work around this. By decreasing the purity of their coinage, they were able to make more “silver” coins with the same face value. With more coins in circulation, the government could spend more. And so, the content of silver dropped over the years.

By the time of Marcus Aurelius, the denarius was only about 75% silver. Caracalla tried a different method of debasement. He introduced the “double denarius”, which was worth 2x the denarius in face value. However, it had only the weight of 1.5 denarii. By the time of Gallienus, the coins had barely 5% silver. Each coin was a bronze core with a thin coating of silver. The shine quickly wore off to reveal the poor quality underneath.

The Consequences

The real effects of debasement took time to materialize.

Adding more coins of poorer quality into circulation did not help increase prosperity – it just transferred wealth away from the people, and it meant that more coins were needed to pay for goods and services.

At times, there was runaway inflation in the empire. For example, soldiers demanded far higher wages as the quality of coins diminished.

“Nobody should have any money but I, so that I may bestow it upon the soldiers.” – Caracalla, who raised soldiers pay by 50% near 210 AD.

By 265 AD, when there was only 0.5% silver left in a denarius, prices skyrocketed 1,000% across the Roman Empire.
Only barbarian mercenaries were to be paid in gold.

The Effects

With soaring logistical and admin costs and no precious metals left to plunder from enemies, the Romans levied more and more taxes against the people to sustain the Empire.

Hyperinflation, soaring taxes, and worthless money created a trifecta that dissolved much of Rome’s trade.
The economy was paralyzed.

By the end of the 3rd century, any trade that was left was mostly local, using inefficient barter methods instead of any meaningful medium of exchange.

The Collapse

During the crisis of the 3rd century (235-284 A.D), there may have been more than 50 emperors. Most of these were murdered, assassinated, or killed in battle.

The empire was in a free-for-all, and it split into three separate states.

Constant civil wars meant the Empire’s borders were vulnerable. Trade networks were disintegrated and such activities became too dangerous.

Barbarian invasions came in from every direction. Plague was rampant.

And so the Western Roman Empire would cease to exist by 476 A.D.

About the Money Project

The Money Project aims to use intuitive visualizations to explore ideas around the very concept of money itself. Founded in 2015 by Visual Capitalist and Texas Precious Metals, the Money Project will look at the evolving nature of money, and will try to answer the difficult questions that prevent us from truly understanding the role that money plays in finance, investments, and accumulating wealth.

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How Gold Royalties Outperform Gold and Mining Stocks

Gold royalty companies shield investors from inflation’s rising expenses, resulting in stronger returns than gold and gold mining companies.

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gold royalty company returns compared to gold and gold mining companies
The following content is sponsored by Gold Royalty
Infographic on gold royalty company returns

How Gold Royalties Outperform Gold and Mining Stocks

Gold and gold mining companies have long provided a diverse option for investors looking for gold-backed returns, however royalty companies have quietly been outperforming both.

While inflation’s recent surge has dampened profits for gold mining companies, royalty companies have remained immune thanks to their unique structure, offering stronger returns in both the short and long term.

After Part One of this series sponsored by Gold Royalty explained exactly how gold royalties avoid rising expenses caused by inflation, Part Two showcases the resulting stronger returns royalty companies can offer.

Comparing Returns

Since the pandemic lows in mid-March of 2020, gold royalty companies have greatly outperformed both gold and gold mining companies, shining especially bright in the past year’s highly inflationary environment.

While gold is up by 9% since the lows, gold mining companies are down by almost 3% over the same time period. On the other hand, gold royalty companies have offered an impressive 33% return for investors.

In the graphic above, you can see how gold royalty and gold mining company returns were closely matched during 2020, but when inflation rose in 2021, royalty companies held strong while mining company returns fell downwards.

 Returns since the pandemic lows
(Mid-March 2020)
Returns of the past four months
(July 8-November 8, 2022)
Gold Royalty Companies33.8%1.7%
Gold9.1%-1.7%
Gold Mining Companies-3.0%-8.6%

Even over the last four months as gold’s price fell by 1.7%, royalty companies managed to squeeze out a positive 1.7% return while gold mining companies dropped by 8.6%.

Gold Royalty Dividends Compared to Gold Mining Companies

Along with more resilient returns, gold royalty companies also offer significantly more stability than gold mining companies when it comes to dividend payouts.

Gold mining companies have highly volatile dividend payouts that are significantly adjusted depending on gold’s price. While this has provided high dividend payouts when gold’s price increases, it also results in huge dividend cuts when gold’s price falls as seen in the chart below.

chart of gold royalty company dividends vs gold mining company dividends

Rather than following gold’s price, royalty companies seek to provide growing stability with their dividend payouts, adjusting them so that shareholders are consistently rewarded.

Over the last 10 years, dividend-paying royalty companies have steadily increased their payouts, offering stability even when gold prices fall.

Why Gold Royalty Companies Outperform During Inflation

Gold has provided investors with the stability of a hard monetary asset for centuries, with mining companies offering a riskier high volatility bet on gold-backed cash flows. However, when gold prices fall or inflation increases operational costs, gold mining companies fall significantly more than the precious metal.

Gold royalty companies manage to avoid inflation’s bite or falling gold prices’ crunch on profit margins as they have no exposure to rising operational expenses like wages and energy fuels while also having a much smaller headcount and lower G&A expenses as a result.

Along with avoiding rising expenses, gold royalty companies still retain exposure to mine expansions and exploration, offering just as much upside as mining companies when projects grow.

Gold Royalty offers inflation-resistant gold exposure with a portfolio of royalties on top-tier mines across the Americas. Click here to find out more about Gold Royalty.

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How Gold Royalties Offer Inflation-Resistant Gold Exposure

As inflation has impacted gold mining company profits, this graphic explains how royalty companies offer inflation-resistant gold exposure.

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The following content is sponsored by Gold Royalty

How Gold Royalties Offer Inflation-Resistant Gold Exposure

As rising inflation has increased the operational expenses of gold mining companies, gold royalty companies have emerged as an inflation-resistant alternative for investors seeking exposure to the precious metal. 

Without exposure to rising wages, fuel, and energy costs, gold royalty companies are able to maintain strong profit margins that are often more than double those of gold mining companies.

This infographic sponsored by Gold Royalty is the first in a two-part series and showcases exactly how royalty companies naturally avoid inflation, along with the superior profit margins that come as a result.

Inflation’s Dampening Effect on Gold Mining Profits

Since mid-2021, inflation has become a constant risk-factor for investors to keep in mind as they manage their portfolio. Every energy fuel has risen in price over the last year alongside wage increases around the world, greatly impacting the expenses of material production and refining.

Gold mining is no exception, and while operational costs have risen, gold’s price has actually decreased slightly over the same time period, further impacting gold mines’ profitability and margins.

CommodityPrice change since the start of 2021
Coal+372%
Gasoline+72%
Diesel+53%
Electricity+24%
Gold-13%

The impact of inflation can’t be understated when it comes to mining operations, which require large amounts of machinery, electricity, and people.

Along with massive haul trucks, bulldozers, and machinery like large-scale grinding units that require diesel and other fuels to operate, refinery operations also consume large amounts of electricity.

How Gold Royalty Companies Avoid Inflation

With no large fleets of vehicles to fuel, refining plants to power, along with significantly smaller headcounts and wage bills, royalty companies barely suffer from rising inflation. Compared to gold mining companies with tens of thousands of employees across the world, gold royalty companies rarely employ more than 50 people. 

Along with this, while royalty companies’ revenue comes from royalty and streaming agreements with mining companies, these agreements are structured to ensure royalty companies face none of the operational expenses (and inflation) that miners do.

This is because royalty agreements calculate royalties (which royalty companies receive) as a percentage of the mine’s top-line revenue rather than from the mine’s final profits after expenses, meaning royalty companies get their cut before operational costs and other expenses are deducted.

The Golden Profit Margins of Royalty Companies

With gold’s price having remained stagnant while inflation has pushed expenses up, gold mining company profit margins have been crunched from both sides while royalty companies have avoided the impact. 

Over the last four quarters, gold mining giant Newmont Goldcorp’s average profit margin declined to 6.6% when compared to the 22.9% average margins of the four quarters prior. On the other hand, royalty company Franco-Nevada’s profit margins increased from 54.8% to 57.3% over the same time periods. 

Without inflation impacting their bottom line, royalty companies have been able to maintain strong financials in a chaotic period for the economy.

In part 2 of this series, we’ll take a closer look at the returns of gold royalty companies, and how exactly they’ve outperformed both gold mining companies and the precious metal itself.

Gold Royalty offers inflation-resistant gold exposure with a portfolio of royalties on top-tier mines across the Americas. Click here to find out more about Gold Royalty.

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