The harbinger of the sub prime crisis

While searching for something else I came across this on the celebrated international crisis took place in the otherwise unremarkable year of 33 a.d.

The financial crisis of 33AD is largely considered to be caused by policies that Tiberius took in order to limit the aristocrats’ wealth and land-ownership, and done in response to Augustus‘s massive private and public expenditures. Prior to 33AD, Augustus engaged in lavish spending in the public and private sector, while greatly encouraging land ownership and investment in real estate.[96][97] Augustus thought that all citizens should have access to land and money. As a result, he aggressively engaged in a massive extension of credit into the real estate and public sector, and engaged in riskier and riskier loans.[97] Due to his policies, land and real estate prices rose dramatically, benefitting his wealthy and noble land-owner friends who owned large amounts of property and invested heavily in real estate.[97] Tiberius noticed such collusion, and looked to curb the amount of land that the wealthy and elites owned, as well as control the rapidly inflating money supply. He engaged in heavy austerity policies such as ordering for all loans be paid off immediately, and began confiscating property from the wealthy land-owners.[97] By restricting loans for land purchasing, and the demand to pay loans in full, debtors were forced to sell off their property and real estate, which drastically dropped real estate and land prices.[96] Paired with Tiberius’ credit restriction policies and the Senate naively demanding that people continue to invest in land despite what was going on, massive deflation occurred which ultimately cause the market to collapse.

Previously I thought the crisis was attributable to a balance of payments issue since it originated in the new Roman colony of Carthage. But it appears to have the same antecedentry as that which brought about the international recession in 2007, namely an attempt by well-meaning people to ensure the lower orders have a stake in the nation by forcing a subsidy of housing, especially by lowering the prudential requirements and creating credit.  Augustus generally gets a good press and Wiki tends to blame the guy who came along to clean it up, but plus ca change …..

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11 Responses to The harbinger of the sub prime crisis

  1. stackja

    What could possibly go wrong?

  2. RobK

    I’ll have to check with Lizzie to see if Arthur is not to blame.

  3. Roberto

    Antecedentry? Is that a word?

  4. Bruce of Newcastle

    Money could be quite fatal for emperors. I linked this graph re the debasement of Roman coinage on the OT earlier. It’s quite fun.

    Chart: Deaths of Roman Emperors vs. Coinage Debasement

    Lenders have had similar problems, as the Templars could tell you, seeing that Philip IV foreclosed on their heads before they could foreclose on his loans.

  5. Entropy

    And to this day people ask “what have the romans ever done for us?”

  6. David Brewer

    The 33 crisis does indeed have parallels with 2007, including a sort of TARP programme at the end. But the Wikipedia account seems a bit garbled to me. For a start, Augustus died in 14 AD so Tiberius’ actions nineteen years later hardly constitute direct countermeasures. Also, the Senate had a much earlier, more complicated, and more self-interested role than is portrayed here. Tacitus gives the following account:

    Meanwhile a powerful host of accusers fell with sudden fury on the class which systematically increased its wealth by usury in defiance of a law passed by Caesar the Dictator defining the terms of lending money and of holding estates in Italy, a law long obsolete because the public good is sacrificed to private interest. The curse of usury was indeed of old standing in Rome and a most frequent cause of sedition and discord, and it was therefore repressed even in the early days of a less corrupt morality. First, the Twelve Tables prohibited any one from exacting more than 10 per cent., when, previously, the rate had depended on the caprice of the wealthy. Subsequently, by a bill brought in by the tribunes, interest was reduced to half that amount, and finally compound interest was wholly forbidden. A check too was put by several enactments of the people on evasions which, though continually put down, still, through strange artifices, reappeared. On this occasion, however, Gracchus, the praetor, to whose jurisdiction the inquiry had fallen, felt himself compelled by the number of persons endangered to refer the matter to the Senate. In their dismay the senators, not one of whom was free from similar guilt, threw themselves on the emperor’s indulgence. He yielded, and a year and six months were granted, within which every one was to settle his private accounts conformably to the requirements of the law.

    Hence followed a scarcity of money, a great shock being given to all credit, the current coin too, in consequence of the conviction of so many persons and the sale of their property, being locked up in the imperial treasury or the public exchequer. To meet this, the Senate had directed that every creditor should have two-thirds his capital secured on estates in Italy. Creditors however were suing for payment in full, and it was not respectable for persons when sued to break faith. So, at first, there were clamorous meetings and importunate entreaties; then noisy applications to the praetor’s court. And the very device intended as a remedy, the sale and purchase of estates, proved the contrary, as the usurers had hoarded up all their money for buying land. The facilities for selling were followed by 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. 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. The purchase too of estates was not carried out according to the letter of the Senate’s decree, rigour at the outset, as usual with such matters, becoming negligence in the end.

  7. Beachcomber

    ……….. as that which brought about the international recession in 2007, namely an attempt by well-meaning people to ensure the lower orders have a stake in the nation by forcing a subsidy of housing…..

    They were not ‘well meaning people’. They were unaccountable deep-state insiders making themselves very wealthy through what was effectively money laundering of funds provided by an irresponsible and corrupt government.

  8. Tom

    A subsidiary story here — once again — is what a lost opportunity Wikipedia is. It could have been the online era’s Encyclopedia Britannica, a valuable source of knowledge. Instead it’s a warped account of the world by communist utopians — stupid people who know the price of everything and the value of nothing. Everything it publishes has to be second-guessed because it is loaded with ludicrous value judgements, starting with its childish rejection of the world’s dominant, proven business and trading system, capitalism, which, in the past half century has virtually abolished world poverty and human starvation, leaving social engineers to argue academically about what level of subsistence we should now groupthink 0f as dire straits.

  9. Elizabeth (Lizzie) Beare

    Yes, Tom, Wikipedia is good for some things, factual stuff that is not disputed, such as dates of Emperors and battles and names of various players, but the interpretations are often suss. Shame about that.

    The economic crises had repercussions in the colonies of Rome too. The Boudiccan rebellion was fundamentally a rejection of Roman power over males’ sword ownership, which was banned in conquered Britain, and Rome’s prohibition of the warrior cult in general (rejection of the ancient Father god by Right of First Sacrifice being claimed by the Roman State to its deified Emperor). Many swords were buried for later use. But it was also a wail of anger at the calling in of very large loans made to tribal chiefs by the Roman oligarchs in the period 43ad to 60ad due to currency troubles in Rome; loans they had to take out in order to pay for the Claudian temple in Camulodinum which they did not want in the first place. Plus rapacious taxation over this period, making the British colony (and no doubt others) pay to prop up the economy in Rome. It is probably a linked factor in the destruction of the Jooish temple around that time too in the major rebellion there and the beginning of the Jooish diaspora.

    The existence of monetary problems and a taxation burden (counting of populations of taxpayers) is not insignificant at this time in this place (can’t mention due to spaminator), causing a popular figure of rebellion to upturn tables of money-changers in the Joosh temple. He was sentenced and crucified circa 33ad, as alluded to in the post above.

    Bruce, I have bookmarked that chart; it is very revealing. Thanks.

  10. John A

    Elizabeth (Lizzie) Beare #3005509, posted on May 6, 2019 at 7:33 am

    It is probably a linked factor in the destruction of the Jooish temple around that time too in the major rebellion there and the beginning of the Jooish diaspora.

    OT but the diaspora was already in place before 70AD. There is Biblical evidence in Acts and letters by Peter and James (written before the fall of Jerusalenm.)

  11. alan moran

    One final thought. Lizzie talks of the crippling Imperial taxation but this is a relative concept. By today’s standards, the Roman Empire was very lightly governed in fiscal terms at least. Most authorities put the share of government at that time at 5 per cent of GDP, most of which was spent on the military

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