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Author Topic: Romans also tried bailouts  (Read 2278 times)

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Romans also tried bailouts
« on: December 04, 2008, 09:56:14 AM »
I had no idea that the Romans also tried economic bailout packages using taxpayer monies to prop-up privately owned corporations to prevent a national economic collapse. But as the bible says, "there is nothing new under the sun." :madgrin:

Check out this interesting article:

Quote from: John Walker
None Dare Call It Reason

Give your grandkids a hundred billion dollars for Christmas

December 1, 2008

Mortgage Bailout, Roman Style

There is but scant innovation in human folly. Every generation convinces itself that it's living in a “new era”, where “all the rules have changed”, and consequently stumbles into the same potholes which swallowed countless ancestors. Knowing some history (rare today) and paying serious attention to its lessons (rare in any age) is an excellent way to avoid all-too-predictable calamities. Take the current woes in the credit markets, triggered in part by government meddling in the mortgage market. Certainly, this must be an unforeseen consequence of our twenty-first century fibre-optic globally connected financial system, with computer-modeled financial derivatives, risk management strategies, and all the rest of the hooey cooked up by all those bright fellows on Wall Street—how could they have possibly anticipated the mess they were getting us into?

Well, by reading Tacitus, for one thing. In Book VI of The Annals, Tacitus describes how runaway mortgage lending, combined with government meddling with interest rates and loan terms resulted in a credit crunch and an eventual collapse in real estate prices. All of this happened in A.D. 32 during the reign of the Roman Emperor Tiberius.
    Translated from the Latin by Alfred John Church and William Jackson Brodribb:

    Meanwhile a powerful host of accusers fell with sudden fury on the class which systematically increased its wealth by usury in defiance of a law passed by Caesar the Dictator defining the terms of lending money and of holding estates in Italy, a law long obsolete because the public good is sacrificed to private interest. The curse of usury was indeed of old standing in Rome and a most frequent cause of sedition and discord, and it was therefore repressed even in the early days of a less corrupt morality. First, the Twelve Tables prohibited any one from exacting more than 10 per cent., when, previously, the rate had depended on the caprice of the wealthy. Subsequently, by a bill brought in by the tribunes, interest was reduced to half that amount, and finally compound interest was wholly forbidden. A check too was put by several enactments of the people on evasions which, though continually put down, still, through strange artifices, reappeared. On this occasion, however, Gracchus, the praetor, to whose jurisdiction the inquiry had fallen, felt himself compelled by the number of persons endangered to refer the matter to the Senate. In their dismay the senators, not one of whom was free from similar guilt, threw themselves on the emperor's indulgence. He yielded, and a year and six months were granted, within which every one was to settle his private accounts conformably to the requirements of the law.

    Hence followed a scarcity of money, a great shock being given to all credit, the current coin too, in consequence of the conviction of so many persons and the sale of their property, being locked up in the imperial treasury or the public exchequer. To meet this, the Senate had directed that every creditor should have two-thirds his capital secured on estates in Italy. Creditors however were suing for payment in full, and it was not respectable for persons when sued to break faith. So, at first, there were clamorous meetings and importunate entreaties; then noisy applications to the praetor's court. And the very device intended as a remedy, the sale and purchase of estates, proved the contrary, as the usurers had hoarded up all their money for buying land. The facilities for selling were followed by a fall of prices, and the deeper a man was in debt, the more reluctantly did he part with his property, and many were utterly ruined. The destruction of private wealth precipitated the fall of rank and reputation, till at last the emperor interposed his aid by distributing throughout the banks a hundred million sesterces, and allowing freedom to borrow without interest for three years, provided the borrower gave security to the State in land to double the amount. Credit was thus restored, and gradually private lenders were found. The purchase too of estates was not carried out according to the letter of the Senate's decree, rigour at the outset, as usual with such matters, becoming negligence in the end. [/list]Note that even “evasions” and “strange artifices” (credit default swaps, anybody?) played their part when this whole sordid mess blew up more than twenty centuries ago, and also that the form of the “bailout”—injecting liquidity into the banking system—employed by Emperor Tiberius was precisely the same as that cobbled together by the geniuses in charge of things today.
    Article Source

    The Americans aren't the first to do this in the 21st Century!!! :brick:
    "So then, stand firm and hold to the traditions :o which you were taught by us, either by word of mouth or by letter" (2 Thessalonians 2:15).

    Offline me again

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    Is this the [financial] end of America?
    « Reply #1 on: March 22, 2009, 09:34:44 AM »
    :nervous: Here's an apt follow-up story:
    Quote from: Terence Corcoran, National Post Editor
    Ben Bernanke’s Federal Reserve is dropping trillions of fresh paper dollars on the world economy, the President of the United States is cracking jokes on late night comedy shows, his treasury secretary is dithering over a banking reform program and a monumentally dysfunctional U.S. Congress is launching another public jihad against corporations and bankers.

    As an aghast world — from China to Chicago and Chihuahua — watches, the circus-like U.S. political system seems to be declining into near chaos. Through it all, stock and financial markets are paralyzed. The more the policy regime does, the worse the outlook gets. The multi-ringed spectacle raises a disturbing question in many minds: Is this the [financial] end of America?

    Probably not, if only because there are good reasons for optimism. The U.S. economy has pulled out of self-destructive political spirals in the past, spurred on by its business class and corporate leaders, the profit-making and market-creating people who rose above the political turmoil to once again lift the world out of financial crisis. It’s happened many times before, except for once, when it took 20 years to rise out of the Great Depression.

    Past success, however, is no guarantee of future recovery, especially now when there are daily disasters and new indicators of political breakdown. Reform of health care, environmental policy, education, energy, banking, regulation — every nook and cranny of the U.S. economy has been put on alert for major change. Expansion of government spending, plunging the U.S. into unprecedented deficits, is without parallel. In economic policy, through regulation and control of energy output, financial services and monetary expansion, the U.S. government has embarked on a fundamental reshaping of America. It is designed, in short, to bring on the end of America.

    The spillover effect of all this on the rest of the world promises to be dramatically disruptive. The greatest global risk is in monetary and currency policy. Below is a chart that graphically demonstrates the sharp deviation in monetary policy from past norms. Under the chairmanship of Ben Bernanke, the Federal Reserve is in the midst of a giant economic experiment, flooding the world with U.S. dollars, hoping that flood will stimulate economic activity.

    Mr. Bernanke is sometimes known as “Helicopter Ben” because he once in an academic paper referred to the use of “helicopters” full of money to rescue an economy from deflation. In comments Wednesday to explain the Fed’s new policy of buying $300-billion in U.S. treasury bills, Mr. Bernanke noted that the Fed is now more worried about inflation being too low than about it getting too high in the future.

    For the rest of the world, however, the worry is that America is at risk of becoming the fountainhead of a new inflationary outburst. The U.S. dollar is now in decline, gold is moving sharply higher, and new global currency turmoil is on the horizon.

    A paper just published by the Federal Reserve Bank of St. Louis, source of the chart above, says that the Fed will have to be prepared to absorb all the excess money it has poured into the U.S. economy.
    Click here for the full story.
    "So then, stand firm and hold to the traditions :o which you were taught by us, either by word of mouth or by letter" (2 Thessalonians 2:15).

     

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