ETERNAL CITY, CHRONIC TROUBLE
by Bill Bonner
A visitor to the Eternal City, even if he has been many times before, feels his jaw drop and his pulse rise. The city is still a magnificent ruin...a vast memento mori recalling every absurdity and corruption known to man. Here we begin ab ovo, as the Romans used to say – with the egg.
At the far end of the Largo di Torre Argentina, for example, is the spot where Julius Caesar’s body was ventilated. Poor Julius. His wife warned him. His soothsayer warned him. Even his friends warned him that something was up. Still, the man who had conquered Gaul and brought Vercingetorix back to Rome in chains, and then triumphed in the civil war against one of Rome’s greatest generals, Pompey, dismissed his guards and walked into a cheap ambush by politicians, one of whom was probably his own son. “Tu quoque, fili mi,” [you too, my son] he said to Brutus as he was going down, after the unkindest cut of all. But that is the amazing thing about the Romans and modern man too; even when the traps are as obvious as bailouts and Baghdad, they sashay right in.
And over there...at the Domus Aurea, was Nero’s golden palace; a place that saw such debauches as to make Britain’s royals – perhaps with the exception of that ancient Edward – seem like archangels. Nero’s mother was Caligula’s sister, with whom she an “inappropriate relationship.” She plotted against Caligula, and when he was out of the way, married her uncle, Claudius. She poisoned Claudius...and his son, Britannicus, too, so that her own son from a previous marriage – Nero – could become Emperor. Then, fearing that she was losing her grip on her son, she seduced him. But by that time, he was so deep into carnality with slaves, senators’ wives and castrated boys, that her motherly charms couldn’t hold him. So, she tried to kill him. He beat her to the punch, sending his soldiers to skewer her. Tacitus reports that she died in a theatrical way; “strike my womb,” she told them.
Our beat is money, not history. But today we pick through Rome’s huge trash pile to try to learn something.
Everything started to go wrong in the time of Marcus Aurelius, say most historians. Soldiers returning from the Parthian war brought the first major plague epidemic with them. There was a revolt in Egypt. And Germanic tribes pushed across the Danube and the Rhine.
But the real problem began much, much earlier, practically ab ovo. From the very beginning, the Romans picked fights with the neighbors. The small colony had a shortage of females, so the Romans carried off the women of a nearby tribe. “They was sobbin’, sobbin’, sobbin’...fit to be tied,” as the song puts it. From there, one local tribe after another was subdued. And each successful campaign elevated the power and wealth of Rome and led, like antipasto to primo platti, to the next campaign.
As a business model, Rome’s strategy was obviously flawed; like a credit bubble, it required constant expansion. Still it was nice in the beginning. The early days of the Roman Empire were like the early days of the British Empire or the American Hegemony. Expansion opened up new markets and brought in new supplies of raw materials at better prices. Not only was there booty; there were also slaves.
Nothing fails like success. The slaves had an effect on the domestic labor market of the time not unlike Chinese and Indian peasants on today’s labor rates. The price of free labor fell. Another familiar consequence was an increase in speculation and what we would call ‘financialization’ of the economy. Instead, of farming themselves, ambitious Romans outsourced, setting up huge agricultural estates all over the empire, which were operated by slaves. This had a further effect of lowering prices on farm products. Small, independent landowners couldn’t compete. They went to the cities. Or, they joined the army.
Eventually, Roman expansion reached its limits under Trajan. Then, the military machine gradually changed from a profit-making institution manned by Romans, to an expensive peace keeping force staffed largely by barbarians. Worse, the clattering of chains was no more to be heard in the Delian slave market. Now the problems really began. The government had begun distributing free bread, in order to keep the urban mobs quiet, a program similar to today’s Tax Rebate checks. Already, under Augustus, one in five people in Rome depended on the “dole.” Then, Rome’s balance of trade grew increasingly negative. This gave rise to something else that will be familiar to us: inflation. Nero took 10% of the silver out of the denarius. Then, under Marcus Aurelius, it was down to 75%. Finally, by the third century, the denarius was made of brass, with a silver coating. Consumer prices soared. Diocletian’s solution was very similar to what Richard Nixon would do many years later – The Edict of Prices, a system of price controls.
With no more slaves shuffling into the city, Rome turned to its remaining small farmers. First, it subsidized the farmers – with the ‘alimenta’ – like our own crop support programs. Then, desperate for food, it requisitioned grain and cattle from them directly...and forced the farmers to stay with their land, like serfs. The farmers’ situation became so miserable, they began to sell themselves into slavery. This traffic became so heavy that the government banned the practice in 368AD.
Modern politicians and central bankers have nothing on their ancient forebears. Bailouts...monetary stimulus...subsidies...giveaways – the Romans had a solution for every problem. And every solution brought new problems...until the weight of them crushed the whole empire.
A visitor to the Eternal City, even if he has been many times before, feels his jaw drop and his pulse rise. The city is still a magnificent ruin...a vast memento mori recalling every absurdity and corruption known to man. Here we begin ab ovo, as the Romans used to say – with the egg.
At the far end of the Largo di Torre Argentina, for example, is the spot where Julius Caesar’s body was ventilated. Poor Julius. His wife warned him. His soothsayer warned him. Even his friends warned him that something was up. Still, the man who had conquered Gaul and brought Vercingetorix back to Rome in chains, and then triumphed in the civil war against one of Rome’s greatest generals, Pompey, dismissed his guards and walked into a cheap ambush by politicians, one of whom was probably his own son. “Tu quoque, fili mi,” [you too, my son] he said to Brutus as he was going down, after the unkindest cut of all. But that is the amazing thing about the Romans and modern man too; even when the traps are as obvious as bailouts and Baghdad, they sashay right in.
And over there...at the Domus Aurea, was Nero’s golden palace; a place that saw such debauches as to make Britain’s royals – perhaps with the exception of that ancient Edward – seem like archangels. Nero’s mother was Caligula’s sister, with whom she an “inappropriate relationship.” She plotted against Caligula, and when he was out of the way, married her uncle, Claudius. She poisoned Claudius...and his son, Britannicus, too, so that her own son from a previous marriage – Nero – could become Emperor. Then, fearing that she was losing her grip on her son, she seduced him. But by that time, he was so deep into carnality with slaves, senators’ wives and castrated boys, that her motherly charms couldn’t hold him. So, she tried to kill him. He beat her to the punch, sending his soldiers to skewer her. Tacitus reports that she died in a theatrical way; “strike my womb,” she told them.
Our beat is money, not history. But today we pick through Rome’s huge trash pile to try to learn something.
Everything started to go wrong in the time of Marcus Aurelius, say most historians. Soldiers returning from the Parthian war brought the first major plague epidemic with them. There was a revolt in Egypt. And Germanic tribes pushed across the Danube and the Rhine.
But the real problem began much, much earlier, practically ab ovo. From the very beginning, the Romans picked fights with the neighbors. The small colony had a shortage of females, so the Romans carried off the women of a nearby tribe. “They was sobbin’, sobbin’, sobbin’...fit to be tied,” as the song puts it. From there, one local tribe after another was subdued. And each successful campaign elevated the power and wealth of Rome and led, like antipasto to primo platti, to the next campaign.
As a business model, Rome’s strategy was obviously flawed; like a credit bubble, it required constant expansion. Still it was nice in the beginning. The early days of the Roman Empire were like the early days of the British Empire or the American Hegemony. Expansion opened up new markets and brought in new supplies of raw materials at better prices. Not only was there booty; there were also slaves.
Nothing fails like success. The slaves had an effect on the domestic labor market of the time not unlike Chinese and Indian peasants on today’s labor rates. The price of free labor fell. Another familiar consequence was an increase in speculation and what we would call ‘financialization’ of the economy. Instead, of farming themselves, ambitious Romans outsourced, setting up huge agricultural estates all over the empire, which were operated by slaves. This had a further effect of lowering prices on farm products. Small, independent landowners couldn’t compete. They went to the cities. Or, they joined the army.
Eventually, Roman expansion reached its limits under Trajan. Then, the military machine gradually changed from a profit-making institution manned by Romans, to an expensive peace keeping force staffed largely by barbarians. Worse, the clattering of chains was no more to be heard in the Delian slave market. Now the problems really began. The government had begun distributing free bread, in order to keep the urban mobs quiet, a program similar to today’s Tax Rebate checks. Already, under Augustus, one in five people in Rome depended on the “dole.” Then, Rome’s balance of trade grew increasingly negative. This gave rise to something else that will be familiar to us: inflation. Nero took 10% of the silver out of the denarius. Then, under Marcus Aurelius, it was down to 75%. Finally, by the third century, the denarius was made of brass, with a silver coating. Consumer prices soared. Diocletian’s solution was very similar to what Richard Nixon would do many years later – The Edict of Prices, a system of price controls.
With no more slaves shuffling into the city, Rome turned to its remaining small farmers. First, it subsidized the farmers – with the ‘alimenta’ – like our own crop support programs. Then, desperate for food, it requisitioned grain and cattle from them directly...and forced the farmers to stay with their land, like serfs. The farmers’ situation became so miserable, they began to sell themselves into slavery. This traffic became so heavy that the government banned the practice in 368AD.
Modern politicians and central bankers have nothing on their ancient forebears. Bailouts...monetary stimulus...subsidies...giveaways – the Romans had a solution for every problem. And every solution brought new problems...until the weight of them crushed the whole empire.
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