What Would the Emporer Do?
I saw this via dailykos, who saw it at foreignpolicy, where this is Tacitus's Annals, book VI.
" 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. "
So they decreed an artificially low interest rate. This caused problems. Credit was largely backed by property...
"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."
A credit crisis. The government seems to have seized a bunch of property and creditors with claims on this were not happy at getting 2/3rds of their claim.
"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."
Lack of credit (scarcity of money) means less money available for offers for land, and so property prices fall. Mortgages are under water, and people are ruined. Perhaps there was a real estate bubble, perhaps not, but the fallout is the same as now:
"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."
Give huge bailouts from the government to the banks - check.
Lower the official interest rate to zero - check.
Attempt to obtain some kind of property as collateral - check.
The collateral obtaining was mired in corruption and negligence (lack of government oversight) - check.
The good news: Tacitus thinks it worked out in the end.
And as Rick at foreignpolicy points out the above is followed by:
"Sextus Marius, the richest man in Spain, was next accused of incest with his daughter, and thrown headlong from the Tarpeian rock. To remove any doubt that the vastness of his wealth had proved the man's ruin, Tiberius kept his gold-mines for himself, though they were forfeited to the State."
Falsely (?) accusing a man named Sextus of being pedophile is not being very subtle.
I'll post this as public so I can send links to others.
" 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. "
So they decreed an artificially low interest rate. This caused problems. Credit was largely backed by property...
"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."
A credit crisis. The government seems to have seized a bunch of property and creditors with claims on this were not happy at getting 2/3rds of their claim.
"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."
Lack of credit (scarcity of money) means less money available for offers for land, and so property prices fall. Mortgages are under water, and people are ruined. Perhaps there was a real estate bubble, perhaps not, but the fallout is the same as now:
"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."
Give huge bailouts from the government to the banks - check.
Lower the official interest rate to zero - check.
Attempt to obtain some kind of property as collateral - check.
The collateral obtaining was mired in corruption and negligence (lack of government oversight) - check.
The good news: Tacitus thinks it worked out in the end.
And as Rick at foreignpolicy points out the above is followed by:
"Sextus Marius, the richest man in Spain, was next accused of incest with his daughter, and thrown headlong from the Tarpeian rock. To remove any doubt that the vastness of his wealth had proved the man's ruin, Tiberius kept his gold-mines for himself, though they were forfeited to the State."
Falsely (?) accusing a man named Sextus of being pedophile is not being very subtle.
I'll post this as public so I can send links to others.