Ancient Rome’s Financial Crisis

Did you know that in 2008 they used 2000-year-old solution to save our economy!

It was in 33 AD that a financial crisis hit Ancient Rome and the solution Emperor Tiberius used was “quantitative easing”, a phrase yu may have recently, as this izs what they did in 2008.

It all happened because in 26 AD Emperor Tiberius was done with the politics of Rome, so moved to the Island of Capri, leaving left a power vacuum, which, of course, someone called Sejanus attempted to fill

In 31 AD Tiberius arrested Sejanus and executed him along with those senators who supported him, then he took all their land and sold it.  This had consequences as:

1. As he had executed the rich ones.
2. Result there was no money to buy the land.
3. This led to land prices falling.
4. Then the price of agricultural products fell.

This could have been lived with, however, Tiberius’s made it worse.

He ordered each senator to keep 1/3rd of their wealth in Italian Land, hoping they would buy the excess land, they couldn’t.  “Fine, he said, you have 18 months to comply or faced execution”. Creditors were then instructed that 2/3rds of every loan had to be in Italian land while 2/3rds of every loan had to be paid off.

Unfortunately, to add fuel to the fire, across the Mediterranean in Alexandria, merchants Seuthus & Sejanus were having a disastrous year and had to close, while a major copper mining firm went into bankruptcy.  Both with large loans to the Roman bank, Quintus Maximus,this  lead to:

1. A run on the bank.
2. It had loans with a larger bank, Brothers Pettius, which it couldn’t pay.
3. Brothers Pettius had most of their loans with noblemen in Northern Gaul.
4. Unfortunately, the barbarians were invading, which meant that the Brothers Pettius couldn’t recoup their losses.

Result, Quintus & Lucius closed, then the Brothers closed! Roman’s credit system was now in free fall.

Tiberius’s stepped in, fortunately, he had filled the Imperial Treasury, so gave interest-free loans of 100 million sesterces, that didn’t need to be paid back.  Therefore, they didn’t need to sell land at distressed prices, he bailed[td1]  them out.  It wasn’t completely altruistic, as Tiberius had now tightened his grip on power.

In today’s money he spent two billion dollars, an incredible amount bearing in mind that the GDP of the whole empire was, in today’s money, only twenty five billion dollars!

Tiberius stopped the crisis, with a bailout that wouldn’t be replicated for another two thousand years!

Isn’t history interesting?

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