In these days of no history, where everything is apparently unprecedented and has never happened before throughout humanity’s countless years on this planet, where we have reached peak morality as a species and can pronounce on the past with a lofty distain, it’s worth plucking out some embers from the smouldering fires of our collective history. Who knows? Might be instructive!

Over-leveraged financial houses, external shocks, a run on banks, shortage of credit; the financial crisis of 33AD - which shook the Roman world - had them all. Throw in a first century version of quantitive easing and the picture is complete.

The Emperor Tiberius (14-37 AD) is popularly remembered as a miserly old pervert whose one redeeming feature was that, whilst far worse than his predecessor Augustus, he was inestimably better than his successor, Caligula.

Tiberius, wearying of the stresses of Rome’s day-to-day administration, went off to live in Capri leaving his Praetorian enforcer Sejanus in charge back in the capital. Ambitious and unscrupulous, Sejanus arrogated so much power during his master’s absence that Tiberius had him and his allies executed. Once executed, these rich persons’ estates reverted to the Imperial Treasury. This had the concomitant affect of withdrawing large sums of money from the economy. Money was already circulating at a low level in the economy as, fiscally, Tiberius tended towards hoarding and not spending. For example, he cut back on Augustus’ lavish public building policy and avoided, if possible, costly military campaigns. He withdrew from Germania even after the revenge-spanking of Arminius at the battles of Idistaviso and Angrivarian Wall.1

But these savings came at a price. The Roman economy was pretty much a cash economy “thus, when the state ran a budget surplus (as it did under Tiberius) it caused a direct contraction of the money supply.” 2

But now we come to the proximate causes of the credit crunch…

An Egyptian banking house - Seuthe and Son- invested in some ships carrying cargoes of spices which - unfortunately for them - sank during a hurricane in the Red Sea. Think Lehman Brothers. The interconnectedness of the Roman finance world was proven back on Rome’s Via Sacra** - which was equivalent to the the ancient world’s Wall Street (with added temples and hookers). Financial houses in the capital now went bust as a result of lending to Seuthe and Son. One by one they closed up, calling in loans which caused more and more pressure on liquidity.

Timing is all in a financial crash. Two other factors - perhaps small in themselves - ratcheted up the pressure.

Firstly, this was just the moment when a longstanding edict of Tiberius’ came into force: all senators had to invest a third of their wealth in Italian land. They needed money to purchase property and so created a rush on the stricken financial houses (3) and debtors who either couldn’t or wouldn’t pay up the required capital. Secondly, a rebellion amongst the Belgae in Northern Gaul, out on the fringes of the empire, had meant those investing in that high risk but high reward area had lost their money. In the modern world, think of Argentina reneging on her debts and dragging down those eager-for-profit institutions who had lent them the money.

Demand for liquidity far exceeded supply. Rumours of instability exacerbated the fast growing crisis. Banks wouldn’t trust each other. Money was hoarded. The empire’s financial and trade worlds froze. A classic (and classical) credit crunch! Oh shit!

The relevant quaester (essentially finance minister) passed the problem onto the Senate who, long used to being ineffective, passed the problem onto Tiberius over in Capri. Taking time out from his paranoia and perversions however, Tiberius acted quickly. His response was emphatic; the liquidity crisis was to be met by a massive injection of imperial funds into the Roman financial world. Yes, quantitive easing in a toga! One hundred million sestertii from the imperial treasury was released into the banking system at zero percent rate of interest. Additionally, collateral for these loans was accepted at twice market rates which stabilised the property market and brought confidence back to the credit market.

Tiberius’ swift response - creating both liquidity and shoring up confidence in the finance markets - meant that the crisis worked itself through quickly. He was dead within four years and bequeathed his successor Caligula, a full Treasury. Caligula, did not have a problem spending money but that is another story!

The parallels with financial crashes that we may be familiar with are striking but the underlying factors - unpredictable events, state fiscal and monetary policy, financial contagion, and confidence in the system - are also well known to us. The crash of 33 AD however, is not.

I suppose that it is at this point that you would expect me to deliver a worthy homily about history repeating itself or that it rhymes or that it’s all been done before. I could but I won’t. That would be too easy and - in its way - overly trite.

What is more interesting is not the repetitive nature of history but that each age tends to believe it is unique. Each individual is of course unique and unless you believe in reincarnation, a belief in uniqueness is a forgivable fault. But still a fault when history is weighed in the aggregate. As I’ve tried to demonstrate with the crash of 33 AD, give or take a few togas and a lack of internet, the crisis wasn’t too different from our recent credit crunch of 2007/2009.

It’s not the forgetfulness that gets you, it’s the unknowing arrogance. From wars to diseases, from monetary crisis to the venality of politicians, ‘now’ is - perhaps inevitably - judged to be the only time in history these things have ever happened and so we blunder around marvelling at the wheel we’ve just reinvented. Sadly the past is not only a different country, but an increasingly forgotten place. I would argue - and do - that a little humility goes a long way and brings that rarest of all qualities - perspective.

Perspective adds depth and moderates over-reaction. From our own personal experience, we all know this to be true.

When we were young - and knew nothing and had experienced less - we carried the twin curses of ignorance and certainty. We didn’t know anything but - by God! - were we sure of our opinion. But we gradually matured as individuals, adding experience to assessment, judgement to decision. It’s part of life’s journey.

I wish we matured as a society in a similar way but, each generation is ever reborn as a teenager. Certain. Ignorant. Fated to be more wrong than right.

Next week I’ll carry this thought process into a ham-fisted look at Justinian’s reconquering of the Italian peninsula and how it was stymied by the plague. Masks are most definitely optional!

NOTES

1) Following the massacre of three legions in the Tueoburg Forest in 9 AD, the battles of Idistaviso and Angrivarian Wall by Tiberius’ nephew Germanicus, did much to restore Roman pride. Tiberius still pulled the troops back to the near side of the Rhine.

2) How Excess Government Killed Ancient Rome - Bruce Bartlett. The Cato Institute 1994

3) Ancient Rome did have a primitive banking system - though ‘banks’ and ‘banking’ is not a term they’d have recognised (though for convenience I may use these terms - the latin is argentarii). Depositors placed their money with reputable firms who, in turn, lent it out to those needing capital, principally to finance goods being shipped around the empire. The interest was set by the state (12% being the norm). These financial firms were clustered around the Forum along the Via Sacra which has been described as Rome’s Wall Street. It was also the site of many temples - temples being in ancient times often linked to banking (people deposited money there for safekeeping). To facilitate trade across the empire, banking centres were present in many other major cities across the Empire which foreshadows a modern sense of interconnectedness.