A fun piece of history investigation on the substack of the appropriately named David Roman, who is a macroeconomist. The sub-title summarises the tale: A wonderfully weird story of collaborative scholarship via Reddit.

Which is to say that it’s a study of two histories, a story from Ancient Rome and also how that story has been used and abused since the 19th century to make points about our modern financial system. He even titles his piece, The Fake Roman Financial Panic, but it’s still a good story and the original comes fro the famous Roman historian, Tacitus, in his Annales. The full quote is at the link but here are the key bits.

Meanwhile, an army of accusers broke loose on the persons who habitually increased their riches by usury, in contravention of a law of the dictator Caesar,….he praetor Gracchus, to whose jurisdiction the case had fallen, was forced by the numbers implicated to refer it to the senate; and the Fathers in trepidation — for not one member was clear from such a charge — asked an indulgence from the prince. It was granted; and the next eighteen months were assigned as a term of grace within which all accounts were to be adjusted in accordance with the prescriptions of the law.

Pay no interest on your debts for eighteen months? Deal! Unfortunately there were consequences, side effects, fallout, whatever you wish to call it, but entirely predictable: the ones holding the debt stopped lending and tried to recover all their debts in one fell swoop. Money vanished.

The politicians then panicked and began passing laws demanding that creditors invest their money in Italian land, which – combined with debtors selling their land to pay their debts – resulted in a glut in the market, a massive fall in land prices, and more punishment for debtors, not less. Eventually the boss stepped in:

Financial ruin brought down in its train both rank and reputation, till the Caesar came to the rescue by distributing a hundred million sesterces among various counting-houses,​ and facilities were provided for borrowing free of interest for three years, if the borrower had given security to the state to double the value in landed property. Credit was thus revived, and by degrees private lenders also began to be found.

You can see how tempting it is to compare this to the financial crashes of 1929, 1987 and 2008-9. Poor decisions by government leading to credit collapse, with the government then stepping in to prop up the whole system with new credit.

But there were similar collapses long before The Slump (as my parents called it). In fact the depression of the 1880’s, which badly hit Western nations, especially the USA and Britain, was called “The Great Depression” until the 1930’s: it’s now called The Long Depression, and it’s effects were not as bitter.

There were also financial panics that didn’t necessarily lead to recessions: in the USA they happened in 1837, 1873, 1893 and 1907 – that last one leading to the creation of the US central bank, the Federal Reserve, to prevent them (history laughs) – and of course elsewhere there were things like the Tulip Bubble (Holland, 1637) and the South Sea Bubble (Britain, 1720): the folks at Wikiepedia have quite the list.

So in 1910 a popular historian, William Stearns Davis, opened up his book The Influence of Wealth in Imperial Rome, by referring to this story and adding lots of gloss like striking Phoenician dockworkers, breathless crowds reading the dispatches of the “Ada Diurna”, the Brothers Pettii being forced to shut the doors of their bank because their investments in Northern Gaul were disrupted by revolt, and so on and so forth. There have been other books as well and so the story sometimes pop ups when our current system is looking shaky – although I never saw this in 1987 or 2008.

You have been warned – but it’s still fun anyway.