Source
Oxford University researcher Philip Kay, a supernumerary Fellow at Wolfson College studying economic growth in second century BC Rome, has discovered what he believes could be the world’s first credit crunch, which took place in 88 BC. ... Monetary historian Philip Kay said: “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. ... “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.”
Oxford University researcher Philip Kay, a supernumerary Fellow at Wolfson College studying economic growth in second century BC Rome, has discovered what he believes could be the world’s first credit crunch, which took place in 88 BC.
...
Monetary historian Philip Kay said: “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.
“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.”
Anyone seen more info on that ancient credit crunch? I wonder if they had any fiat currency back then...
February 17 - 1600 - Giordano Bruno is burnt alive by the catholic church. Aquinas : "much more reason is there for heretics, as soon as they are convicted of heresy, to be not only excommunicated but even put to death."
Rome had a fiat currency in everyway. It's government decreed that it be the only currency of the land, and that no locality shall make it's own or go off the central weights and measures. The value of the Denarius was worth drastically more than the metals it composed (similar to how you could buy more paper with a dollar than is in the dollar).
At the start, the Roman Empire had a 95% silver coin, and bronze coins also contained high amounts of bronze. But because the value of the coin was decreed by law rather than the value of what it contained, it is essentially a fiat money.
It should also be noted that by the near end of the Roman Empire, the content of silver in the Denarius went from 95% to 0% in about 400 years (don't remember the exact length of time), but during none of this was it anything but fiat.
Thanks for the info, Patrick! Could you recomend any books/articles on the monetary history of the ancient Rome? One from the Austrian perspective would be very nice.
Juan:I guess that as soon as coinage was invented, coin debasement was invented too.
Actually Huerta de Soto, and another historian he cites, claim that extended loans out of reserves in fact came before (or was, at least, more prominent in earlier times) simply giving out excess banknotes. Also he claims that there were "credit crunches" in Greek times also.
"You don't need a weatherman to know which way the wind blows"
Bob Dylan
http://www.paralumun.com/romecurr.htm <-- Not from an Austrian Perspective, simply a history of the coinage itself.
I used to have a lot more, but lost a ton of my bookmarks a while back. :(
I'm not sure if this applies to you or not, but it seems that people who understand Fiat currency (which is a few in itself), have the idea that it's simply a money without a hard asset base. To better understand it, think of Fiat currency as something decreed by law and considered legal tender in courts, not necesarily as fake money.
other interesting facts about roman monetary history that I've seen in the era the article mentions are that the pillaging of greece especially and other foreign nations caused a massive influx of money into rome, as mentioned in livy. Also interest rates had always been set artificially low in rome since around 300BC. It's no secret that romans practiced currency debasement and during 88BC it happens that the massive Social War was breaking out in rome and so was the first civil war. So perhaps to fund these two titanic wars the roman gov. debased the currency? They did before during the macedonian wars.
GilesStratton: Juan: I guess that as soon as coinage was invented, coin debasement was invented too. Actually Huerta de Soto, and another historian he cites, claim that extended loans out of reserves in fact came before (or was, at least, more prominent in earlier times) simply giving out excess banknotes.
Juan: I guess that as soon as coinage was invented, coin debasement was invented too.
If you want a good summary of government economic meddling in Rome, check out The New Deal in Old Rome by HJ Haskell.
"Anyone who denies the law of non-contradiction should be beaten and burned until he admits that to be beaten is not the same as not to be beaten, and to be burned is not the same as not to be burned." - Avicenna
Juan:I wonder what those bank notes looked like ? Clay tablets in mesopotamia ? Were they easy to counterfeit (I'm guessing not, but how ) ?
That's an interest question actually.