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Entry 68 of 240Economic

The Roman Credit Crisis

33 CE/Italy/Rome
Today Rome, ItalySpan Roman Empire · 27 BCE – 476 CE

Rome enforced an old law requiring senators to hold a share of their wealth in Italian land, and gave them eighteen months to comply. Everyone called in their loans at once to buy property; borrowers dumped assets to repay; land prices collapsed as the forced buying was swamped by forced selling. Credit froze. Tiberius ended it by putting 100 million sesterces of treasury money into banks to lend interest-free for three years, against land as security. A regulatory deadline triggered a liquidity crisis, and the state stopped it with an emergency injection into the banking system — in the reign of Tiberius.

◆ Worth knowingTacitus records the whole sequence: a scramble for cash, a collapse in land values, banks failing, and a state bailout of 100 million sesterces lent at zero interest against property. The mechanics would be recognizable to anyone who worked through 2008.
◆ The mechanismMania & panic

A speculative belief detaches asset prices from fundamentals; the belief breaks and prices collapse.

Also: Debt / credit cycle · Institutional sclerosis

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