- By Thomas E. RicksThomas E. Ricks covered the U.S. military for the Washington Post from 2000 through 2008.
The latest round of massive corporate layoffs reminds of the financial crisis the Roman Empire suffered in 33 A.D.
It all began when Emperor Tiberius enforced a ceiling on interest rates, which caused a severe credit crunch, Tacitus relates in The Annals (book VI, 16-17). “Hence followed a scarcity of money, a great shock being given to all credit, the current coin too.” This was of course followed by deflation of the sort we are seeing now in housing — “a fall of prices, and the deeper a man was in debt, the more reluctantly did he part with his property, and many were utterly ruined.” This is what business nowadays terms “distressed sales.”
The Roman equivalent of the Fed then pumped tons of money into the financial system, and also cut interest rates to zero, which is about where we are now in our own mess. As Tacitus puts it:
The destruction of private wealth precipitated the fall of rank and reputation, till at last the emperor interposed his aid by distributing throughout the banks a hundred million sesterces, and allowing freedom to borrow without interest for three years, provided the borrower gave security to the State in land to double the amount. Credit was thus restored, and gradually private lenders were found.”
Tiberius also raised funds by accusing Sextus Marius, the richest man in Spain, of incest — almost certainly a trumped-up charge — and then having him thrown headlong from the Tarpeian Rock (see below), a cliff at the edge of Rome’s Capitoline Hill. “Tiberius kept his gold mines for himself,” Tacitus notes. It makes me think that Wall Street is getting off easy.
Should Barnabas Francus hold the next hearing of his House banking committee atop this cliff?
photo from Wikicommons