From the Sources
Friday, 09 September 2011 19:59

Going for the Gold

By Eliezer Segal

For the Jewish Free Press

The value of the official currency has been severely undermined by inflation and depreciation brought on by concerns about the economy’s health. This situation impelled many people to forsake the official legal tender and place their trust in a more stable standard, that of gold.

Such indeed was the mood in the Roman empire during the third and fourth centuries C. E., a situation that is reflected in the important works of rabbinic law that were produced at that time. The volatility of the economy and the questionable status of various currencies had a palpable impact on the teachings of the Jewish sages as they related to several practical questions of civil and ritual law.


In order to properly understand the ancient sources, we must recall that paper money did not exist in those days, and that all currency was in the form of coins - usually silver (the denarius), and occasionally copper, or gold (the aureus). Furthermore, the relationships between the different denominations were not constant or uniform. Though Talmudic texts speak of a silver-gold ratio of 25:1 or 24:1, a coin’s actual value was based on the amount of metal that it contained, and this value was subject to broad fluctuations. Therefore, notwithstanding the attempts at fiscal reform by several emperors, the relative values of gold, silver or copper coins could not be reduced to a fixed ratio. 

The Talmuds relate that the Babylonian sage Rav submitted an inquiry about how he should pay back a loan that he had taken in gold coins and the market value of gold (calculated in terms of silver denarii) had risen in the meantime. The answer involved a ruling on whether gold was to be regarded as the “coin” that defined the fixed value, or as a commodity whose price was measured in units of silver denars. The answer to this question would determine whether or not the repayment involved the taking of interest, which is forbidden by the Torah.

According to the conventions of rabbinic law, purchases of movables do not become fully binding when the seller receives the payment, but only when the merchandise is physically transferred to the buyer. Questions therefore arose as to how to define "merchandise" and "money" in certain types of transactions. This kind of question arose, for example, where two different types of coins were being exchanged. When gold coins are traded for silver, which of them is considered the merchandise (whose conveyance effects the sale) and which is the currency?

The Talmudic sources record that there existed two opposing textual traditions for the passage from the Mishnah that deals with exchanges of silver for gold. One version stated that “silver acquires gold” and the other that “gold acquires silver.” As noted, the metal that does the acquiring (whose conveyance finalizes the sale) is considered the commodity, whereas the one that is acquired is the currency. The Talmuds explains that Rabbi Judah Ha-Nasi, the Mishnah’s compiler, changed his mind about this matter over the course of his lifetime: in his younger years he had ruled that silver acquires gold, but later he reversed his position. Other authorities from that generation and the following one seemed to concur that “silver acquires gold,” such that Rabbi Judah ha-Nasi’s later espousing of the contrary view emerges as an isolated and temporary exception.

Scholars have sought historical explanations for this shift in the rabbinic attitudes toward gold and silver. Rabbi Judah ha-Nasi’s later position was formulated during the closing years of the first century. Indeed, this period was marked by a temporary decrease in the weights of the principal denomination of imperial gold coinage, the aureus, that began during the reign of Caracella and was not restored until the time of Elagalabus (around 219).

During the period in question, the value of silver coins was not usually calculated according to their metallic content, but rather as a fixed fraction of the reigning gold coin. It is therefore understandable how the perception arose that the economy was based on a kind of gold standard, as the aureus was the de facto currency of the empire. To be sure, by the second half of the third century unspecified references to denars in the Talmud were assumed to refer to gold coins rather than silver.

At the time that the older Rabbi Judah ha-Nasi was insisting that silver was the primary currency, his view was consistent with what we know from the numismatic evidence — as some 529 different silver coins were minted over the four-year period between 193 and 196, while gold coins were being issued only infrequently.

All this coincided with the process that historians refer to as “the crisis of the third century,” characterized by widespread inflation as the public lost confidence in the real value of the abundant silver currency. The crisis has been imputed to a various causes including costly military adventures and fiscal mismanagement. It is possible that this state of affairs was the reason why Rabbi Judah’s own son Simeon opposed his father and insisted that silver not be treated as currency, but as a commodity subject to price variations. The denarius, fixed by Augustus at 95% real silver, was redefined by Caracella at 50% — and the fiction of its silver content would eventually be abandoned. Consumer prices rose at that time by almost a thousand percent; and Diocletian’s comprehensive fiscal reforms were able to slow the inflationary process down to a mere 100%.

Gold thus replaced the silver denarius as the real coin of the realm. However, the stability of gold was also impaired after 106 C. E. when Rome came into possession of new gold mines in Dacia. There was widespread awareness that the official exchange rates amounted to an artificial overvaluing of silver that was intended to retard the rampant depreciation of the silver denarius. In the popular view, it was gold that was functioning as the real monetary standard — and even the imperial government refused to accept taxes that were paid in its own silver coins. This skepticism toward the official silver currency underlay several legal rulings in the Talmud.

The erosion of silver’s value led several prominent Jewish authorities to adopt the view that gold’s relative stability entitled it to be perceived as the true monetary standard. In fact, rabbinic traditions from this time mention discoveries of troves of gold coins, indicating that people were hoarding gold and stashing it inside walls or burying it in fields.

The perceived advantages of gold over silver were vividly expressed in the mid-second century in a parable of Rabbi Meir. His point was to stress the crucial importance of mastering the underlying logic of Torah teachings. If a student does no more than memorize the lists of unconnected rules without appreciating the reasoning on which they are based, then the enterprise will prove unmanageable.

Rabbi Meir illustrated his point by comparing the intellectual coherence of Torah study to gold denarii, and the individual laws to silver tetradrachms. Accordingly, “...a person who goes to Beit Ilanim [a well-known market town] and is in need of ten or twenty thousand denarii for expenses - if he carries the sum in single tetradrachms they will weigh him down and he will not know what to do with them all.

“Instead, he should consolidate them into gold denarii, which he may then change into small denominations that he can spend at his convenience.”

Now I am probably the last person you should approach for advice on investments — but I do claim to know a thing or two about educational values. If Rabbi Meir’s financial insights are as well founded as his astute pedagogic outlook, then you should probably give serious thought to acquiring some bullion.






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