Tiberius and the Financial Crisis of 33 AD

[guy]

Given the current global fiscal crisis, people are searching for historical precedents.

Few of us remember the economic collapse of 33 AD during the reign of Tiberius.  

Despite his many faults, Tiberius and his advisors were able to navigate the banking crisis of 33 AD. The impact of the banking crisis seems to have been relieved by an early form of "quantitative easing."

 

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To quote Otto Lightner from his History of Business Depressions: “The important firm of Seuthes and Son, of Alexandria, was facing difficulties because of the loss of three richly laden ships in a Red Sea storm, followed by a fall in the value of ostrich feather and ivory. About the same time the great house of Malchus and Co. of Tyre with branches at Antioch and Ephesus, suddenly became bankrupt as a result of a strike among their Phoenician workmen and the embezzlements of a freedman manager. These failures affected the Roman banking house, Quintus Maximus and Lucious Vibo. A run commenced on their bank and spread to other banking houses that were said to be involved, particularly Brothers Pittius.

“The Via Sacra was the Wall Street of Rome and this thoroughfare was teeming with excited merchants. These two firms looked to other bankers for aid, as is done today. Unfortunately, rebellion had occurred among the semi civilized people of North Gaul, where a great deal of Roman capital had been invested, and a moratorium had been declared by the governments on account of the distributed conditions. Other bankers, fearing the suspended conditions, refused to aid the first two houses and this augmented the crisis.”

https://www.businessinsider.com/qe-in-the-financial-crisis-of-33-ad-2013-10

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A shortage of money from bank failures and the resulting contraction of credit threatened to bankrupt the leading families of Rome and destabilize the entire Empire by 33 AD.

The crisis began a few years before these bank failures, however, with the execution of the corrupt and nefarious praetorian prefect Sejanus and his allies in 31 AD.

After the arrest and execution of Sejanus and his allies, their illegally confiscated lands began to flood the market. This caused a deflationary pressure in land prices and a reduction of taxes. This, of course, began a deflationary cycle as prices collapsed and tax revenue decreased.  

Attempts where made to stabilize land prices by Tiberius. He forced all Senators to purchase land with one third of their total wealth in an attempt to prop up these falling land prices. Senators were forced to quickly make large withdraws of money from the banks for these purchases. The banks were forced to liquidate their own assets and call in their loans to cover these overwhelming withdraws.

As described in the quote above, the recent loss of ships holding a sizable amount of the banks' assets only made the situation worse. This panic caused a bank run and banks quickly began to fail. This failure of the banking system made the deflationary pressures worse. As tax revenues plummeted and the banking system collapsed, commerce and industry was disrupted. Without adequate funding as a result of decreased revenues, government and military institutions began to fail. Economic and political pressures threatened to destroy the Empire which was now at the brink of anarchy.

Tiberius adroitly staved off disaster, however.

In 33 AD, Tiberius offered reliable bankers interest free loans for three years. These banks were required to use land as collateral, thus stopping the deflationary spiral. These emergency measures of ancient "quantitative easing" brought calm to a broken credit system and saved the Empire.

 

https://en.wikisource.org/wiki/The_Influence_of_Wealth_in_Imperial_Rome/The_Business_Panic_of_33_A.D.

 

This is better explained in the video below (at about 14:37)

 

 

guy also known as gaius

Edited November 2, 2021 by guy