Thursday, January 14, 2016

The First Financial Crisis: Rome in 33 AD

A large part of the world has been in a financial crisis since 2008, therefore it is quite opportune to remember the events of what for many historians was the First Financial Crisis in our history. During the reign of the second Roman emperor Tiberius a big financial crisis shook the elites across the empire from its provinces in Asia and Africa to the financial center in Rome. At the time the Empire had an international economy where cereals, olive oil, preserved fish, and precious metals were constantly traded between Rome and its provinces. The financial center where many banks and companies opened their doors was in Rome’s Via Sacra, which was the Wall Street of the empire. Below I show an image of Rome’s Via Sacra.

This crisis followed a pattern very similar to our own: 1) austerity policies that reduced Government Expenditures and Money-Lending implied a reduction in the supply of money and in the liquidity and profitability of businesses, 2) bankers and business men reacted by paying off their loans too quickly and had to sell their properties at fire-sales, 3) the austerity, low money supply and fire-sales of real estate caused a massive deflation, 4) some big business men in Egypt, Lebanon and Turkey were reported to be in dire problems and their two banks in the Roman Via Sacra closed doors, and, finally, 5) due to the suspicion that many banks had interweaving credits among themselves these events led to a widespread contagion across the financial system. This wiki article plus this and this academic papers explain this financial crisis in detail, with ancient historian Tacitus as a main source.

To solve these problems Emperor Tiberius had to: 1) create large amounts of loans for bankers at a 0% interest rate against good real-estate collateral just like the FED and the ECB did in recent years with their 0% interest rates, balance sheet expansion and quantitative easing, and 2) the imperial loans did not charge any interest for three years, which is very much like the current maturity easing policies with the FED and ECB promising to keep interest rates low for as long as it takes for the economic recovery to start.

Here I show a Roman coin of Tiberius with his mother Livia, wife of the first emperor Augustus on the other side. It is worth noting that Tiberius was a son of Livia from a previous marriage and had been adopted by Augustus in the absence of male children of his own. You can see more coins of Tiberius reign in this link or here.


  1. So the First Financial Crisis is very old. At this time, I'm sure, that austerity isn't by FMI.

  2. looks like Bush or his son or ronald reagan? The muslims were south of Jeruselem, they had financial interests in Rome too, They battled the jews and won, by 70AD

  3. Nice blog.It is more accurate to talk for nowdays - present Turkey. Back then people living in Asia Minor were speakinhg mostly greek and there wasnt any word like turk