Credit crunch in Rome, 88 B.C. but no solutions.

This is another bit of class-con from today’s Guardian.

Politicians searching for
historical precedents for the current financial turmoil should start
looking a bit further back after an Oxford University historian
discovered what he believes is the world’s first credit crunch in 88BC.

The
good news is that Philip Kay knows how the Romans got themselves into
financial bother. The bad news is no one knows how they got themselves
out of it.

“The essential similarity between what happened 21
centuries ago and what is happening in today’s UK economy is that a
massive increase in monetary liquidity culminated with problems in
another country causing a credit crisis at home. In both cases distance
and over-optimism obscured the risk,” said Kay, a supernumerary fellow
at Wolfson College.

The monetary historian is giving a lecture
today in which he will reveal how Cicero, the Roman orator, gave a
speech in 66BC in which he alluded to the credit crunch. Cicero was
arguing that Pompey the Great should be given military command against
Mithridates VI, king of Pontus on the Black sea coast of what is now
Turkey. He reminded his audience of events in 88BC, when the same
Mithridates invaded the Roman province of Asia, on the western coast of
Turkey. Cicero claimed the invasion caused the loss of so much Roman
money that credit was destroyed in Rome itself.

The orator told
his audience: “Defend the republic from this danger and believe me when
I tell you – what you see for yourselves – that this system of monies,
which operates at Rome in the Forum, is bound up in, and is linked
with, those Asian monies; the loss of one inevitably undermines the
other and causes its collapse.”

Kay said the words were
“remarkable” for their contemporary tone. “Substitute US sub-prime for
‘the Asian monies’ and the UK banking system for ‘the system of monies
which operates in the Roman Forum’ and it could have been written about
the current credit crisis,” said Kay.

“In second-century and
early first-century BC Rome, increased inflows of bullion combined with
an expansion in the availability of credit to produce a massive growth
in Rome’s money supply. This increase in the supply and availability of
money in turn resulted both in a major increase in Roman economic
activity and, eventually, in the credit crisis which Cicero describes.”

So
how did they get themselves out of such a pickle? “There’s very little
information about what happened over the next 20 years I’m afraid,”
said Kay. “We just don’t know.”

Certainly historians know that
Sulla became dictator of the Roman republic after the credit crunch,
but Kay said the two events were unrelated.

Kay, who has a
background in investment banking and fund management, will deliver his
lecture in Oxford. The lecture is organised by the Oxford Roman Economy
Project.

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