The 2008 housing crisis could possibly be the biggest financial disaster of the 21st century. $260 bn was spent by the US government in order to bail out banks in an attempt to return economic life to normality. In the UK, the impact of the following austerity can still be felt today. However, a lot of the symptoms of the 2008 housing crisis had been seen before. In fact they were seen as early as 33AD.
In 33AD the first ever financial crisis took place. During the reign of the Second Roman Emperor Tiberius, financial crisis struck across the Roman Empire, leaving no region unaffected. During this time period, the Roman Empire had an expansive international economy. Cereals, olive oil, fish and metals were traded between Rome and the areas that it controlled. In fact Rome had its very own version of Wall Street at this time. Rome’s Via Sacra was home to many banks and companies, serving as the epicentre of Rome’s economic empire.
However, as a result of poor policy making and panicking bankers, Rome fell into crisis. Firstly, the government reduced its expenditure and money lending. This meant that they followed austere policies which reduced the amount of money in the pockets of the aver-age Roman. Without money being spent in the economy, people had less money and businesses suffered.
In response to this, bankers and business owners paid off loans too quickly. They sold off their properties at low rates in order to gain cash. With everyone trying to sell their properties, and with people having less money to spend, the prices of property swiftly declined.
With everyone trying to withdraw their money when trading was failing, two key banks on Rome’s Via Sacra closed their doors, leading to price instability. The Roman Empire was left with less money and less means of receiving loans. In simple terms, people had no money to spend and limited sources of income. In addition, individuals found that their property was now worth a lot less as people could not afford the prices set before the crash.
So how did the Roman Empire solve this issue? By taking a very similar approach to that of policy-makers following the 2008 crisis. Large loans were made to bankers with zero per cent interest rates in order to provide people with money. Secondly, imperial loans did not charge any interest for three years. This lead to the beginning of a slow economic recovery.
These policies in fact reflect very closely what happened in 2008. The Roman policy of zero interest rate loans can be viewed as a simplified version of Quantative Easing. Furthermore the Imperial loans the Romans implemented reflect recent maturity easing policies which are designed to keep interest rates low until economic recovery has started.
Although the economic life of Roman times may seem a distant world compared to modern economics, the principles it espouses have similarities to Keynesian economics, as well as policies such as Quantitive easing. Perhaps the economic policies of the future will also have Roman roots.