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Rome's Riches to Rags: The Economic Ebb and Flow of an Empire
The Roman Republic was one of the first great civilizations.
As primarily an agricultural economy, the Romans focused on trading commodities like grain and wine. They established extensive trade routes and markets across their growing empire. You can see remnants of these routes throughout Europe today.
Its agricultural roots meant that feeding a booming population restricted economic growth to the amount of available farmland and food production.
Even at the height of its power when Rome ruled most of the known world, its GDP per capita never reached more than $530 in 2019 dollars.
That made the average Roman citizen poorer than one of South Sudan today - the poorest nation on Earth.
The Financial Hustle and Bustle of Via Sacra
Around 27 BC, the Republic transformed from Republic into the Roman Empire. This change gave those in power far greater control than beforehand.
Augustus took Rome's helm after Julius Caesar's assassination. He introduced reforms and stability, boosting the economy.
The use of money and coinage expanded rapidly. He ordered the minting of coins to fund building bridges, temples, and expanding armies.
The Romans also created an advanced banking system familiar to modern users. Romans could make large transfers of money without physical coins. This was an early form of fiat currency and fractional reserve banking. Soon, the main street of Rome had thriving markets, banks, and businesses.
Banking in Rome was so advanced that the heart of the city, Via Sacra, was lined with markets and banks. Rome became one of the wealthiest places on Earth.
With banking widespread, credit became available to buy land. Augustus expanded lending to help citizens purchase real estate.
Dreaming of wealth through land ownership, Augustus felt that every Roman should partake. So, he made borrowing for real estate investment easier.
He dubbed it 'the Roman ideal'—marriage, religion, and land. So, with easy money flooding in, land prices skyrocketed.
Tiberius: The Pragmatic Reformer
Enter Tiberius Caesar Augustus in 14 AD. Unlike the extravagant Augustus, Tiberius was a lone, sensible soul.
In 33 AD, he implemented policies to curb runaway real estate speculation. He mandated that senators invest one-third of their wealth in land. He also ordered immediate repayment of debts, confiscation of excess land, and restricted lending.
Selling outpaced buying, and loans dried up.
The result? Plunging land prices.
Financial Crisis and Bailout: Roman Style
But Rome's financial turmoil began when the affluent Publius Cornelius Lentulus Spinther wanted to withdraw 30 million Sestertii from Balbus & Ollius bank. The bank failed to oblige and went bankrupt. Rumors about other prominent banks on the brink of collapse swirled, creating chaos.
A run on banks ensued, spreading like wildfire. Spooked depositors demanded their money. Balbus & Ollius, Leucippus, and even the soundest banks in Carthage, Lyon, and Byzantium teetered on the brink. But with limited reserves and no buyers for assets, banks fell like dominos.
The crisis became so dire that Tiberius had to intervene. The Treasury injected 100 million sesterces into the banks. It slashed interest rates to zero so they could keep lending. But the panic was unstoppable. Hordes of creditors streamed into the praetor's court demanding liquidation of debtors' assets—homes, slaves, warehouses, and furnishings sold off at a fraction of their value.
Some of the wealthiest Romans lost everything.
The bubble bursting tipped the teetering Republic into complete collapse.
From Roman Ruins to Ottoman Blooms
While the Roman Empire eventually split and crumbled, new empires arose. The Middle East emerged as a critical trade route, paving the way for the Ottoman Empire's rise.
Sultan Suleyman, the First's obsession with tulips from Kazakhstan led to another financial crisis in 17th century Holland.
But let's save that delightful story for another day.