Monday, March 17, 2008
The Roman Housing Boom and Crash 33 AD
During the time of the Emperor Tiberius, 33AD - from Tacitus' Annals
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'scourt. 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.
From what I have been reading I gather this was caused by the end of a long building boom under Augustus, the Banks loaning had been investing their gains in land and property, but the huge building program work had dried up under Tiberius reducing the velocity and supply of money. Then and there was a sudden event, the enforcement of an existing law that required "cash backing for real estate loans" - I think the senate enforced the banks to hold more cash on deposit for their outstanding loans, it is not entirely clear. Anyway how ever it happened there was a sudden credit crisis and many banks and private investors were forced to liquidate assets in order to comply with the requirements at first and then to pay off loans to other institutions as they were called in - the property market crashed. Tiberius was forced to provide liquidity to the credit markets - 100 million sestercies is about £1.5 billion if such comparisons are possible.
It must have been a major event. Tactius and Suetonius both record it over 50 years after it took place, and Cassius Dio nearly 200 years. It all seems rather familiar.
And there was I trying to write an essay on the Roman Economy for my History BA.