Rome´s economy was mainly based on agriculture and commerce of agrarian products through its vast empire, all of it enforced by a set of rules and laws never seen before in the ancient world. During the Pax Romana (27 BC to 180 AD), the absence of conflicts within the empire (Rome was still extending its own territory, so most disturbances were on the borders) and investment on roads facilitated the transport of products and communication among cities. This resulted in an improvement of the conditions under which commerce was performed, generating long-lasting economic growth.

This bonanza also increased the number of people in the empire to more than 100 million according to some estimations. This era of prosperity had never been achieved previously by any civilization. However, as the empire extended its limits, the cost of maintaining it rose dramatically, both in terms of defense as well as bureaucracy. 

One of the methods used to finance those expenses was the debasement of the currency, the denarius. By reducing the silver content within each denarius, the government was able to increase the money supply because less silver was needed to produce one coin, but it also lost its intrinsic value. This procedure made prices skyrocket severely as the money supply grew without a corresponding increase in the supply of products. Both factors caused the Roman currency to become practically worthless.

The government also drew on taxation in order to fund its increasing war expenses in the margins of the empire, although it could not benefit from this method as much as it wanted, because people paid their taxes with the silver-reduced coins, hoarding the ones with more intrinsic value, that is, the ones with a high content of silver. The emperor Diocletian imposed a restriction on prices to stop inflation from rising, but it was a catastrophic failure.

Later, in order to feed his army, he enacted a law that taxes had to be paid in kind. However, it destroyed the very economic fabric of the empire: production declined, trade dwindled, and small farmers could not survive on their production and fled under the protection of great lords who were exempt of levies. They even withdrew from society and sold themselves as slaves, as the latter did not have to pay taxes. Towns were abandoned and great estates became increasingly important, more like independent walled castles; reducing the empire’s economy to a primitive state in which its base was shattered.

Shrinking revenues and virtually- worthless money caused the empire to collapse because there was no means to pay its entangled administrative system and the army. Germanic tribes, in their unstoppable advance, snatched away land from the Empire, further reducing its taxing capacity on farmers. Trade routes by land and sea grew dangerous and political turmoil ensued.  Therefore, by the end of the 4^th century, the Empire in the west was unable to meet its fiscal demands, and the barbarian incursions were the last strike in a set of economic blows that rendered the empire defenceless.