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World's First Credit Crunch Dates Back to 88 BC in Rome

by Hannah Punitha on December 2, 2008 at 1:09 PM
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 World's First Credit Crunch Dates Back to 88 BC in Rome

A historian has discovered what he believes is the world's first credit crunch, dating back to 88 BC in Rome, which might be the precedent for the current financial turmoil.

According to a report in the Guardian, the historian in question is Philip Kay from the University of Oxford.

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The essential similarity between what happened 21 centuries ago and what is happening in today's UK economy is that a massive increase in monetary liquidity culminated with problems in another country causing a credit crisis at home, said Kay.

In both cases, distance and over-optimism obscured the risk, he added.

Kay said that evidence for the world's first financial turmoil is visible in the speech that Cicero, the ancient Roman orator, gave in 66 BC, in which he alluded to the credit crunch.
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Cicero argued in his speech that Pompey the Great should be given military command against Mithridates VI, king of Pontus on the Black sea coast of what is now Turkey.

He reminded his audience of events in 88 BC, when the same Mithridates invaded the Roman province of Asia, on the western coast of Turkey.

Cicero claimed the invasion caused the loss of so much Roman money that credit was destroyed in Rome itself.

Defend the republic from this danger and believe me when I tell you what you see for yourselves that this system of monies, which operates at Rome in the Forum, is bound up in, and is linked with, those Asian monies; the loss of one inevitably undermines the other and causes its collapse, the orator had told his audience.

Kay said that the words were remarkable for their contemporary tone.

Substitute US sub-prime for 'the Asian monies' and the UK banking system for 'the system of monies which operates in the Roman Forum', and it could have been written about the current credit crisis, he said.

According to Kay, In second-century and early first-century BC Rome, increased inflows of bullion combined with an expansion in the availability of credit to produce a massive growth in Rome's money supply.

This increase in the supply and availability of money in turn resulted both in a major increase in Roman economic activity and, eventually, in the credit crisis which Cicero describes,he added.

As to how did the Roman republic solved the credit crisis, Kay said, There's very little information about what happened over the next 20 years. We just don't know.

Source: ANI
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