Learning from Imperial Rome

[kurious]

I just got bored of the Wall Observer thread and thought I would look around.

And found this.

Too much to read tonight, but I will have a good in depth look on Sunday - as a history nut who studied a little economics - it looks right up my street.

I hope it stacks up when I look closely and read through, I could do with a good read.

[1714303330]

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[Revolution]

Wow this is going to be interesting read hahaha, how many stims did you take?

[thaaanos]

What little I know of China's history suggests a balance between the administration, the peasants,
the army, and the Temples (banks).

As a very crude analogy, China played "Old Maid" where Rome and the west played "Monopoly".
When the Temples got too powerful, too rich, issued too much debt, the others ganged up on them
and rebalanced the system. That's my understanding, I have no research to back that up.

I think the point of interest is related to the collapse from 305Ad on, and what might have been
done short of a complete reorganisation to get, for example, the currency restored. The Byzantine
Emperors seemed to have managed to last 1000 years after 305Ad, and their position seemed
little different from that of Rome, though their currency was based on gold, not silver.

The theory seems to point to "confidence," and the extension of trust to the currency to enable
investment - the expectation of reward in the future to take place. I'm reluctant to use the word
confidence because that implies certain things that may not be present in this context.
 

China's problem it is said that was twofold
1. Administratrion sucked up all talent
2. they hit an energy wall

My take is simply that they lacked what Europe had, a criss cross of river ways, and Mediteranean
The energy efficiency of sea transportation allowed europe superior trade and communication.

Same pattern with the revitaliation of byzantine at the 9nth century, Seems that the eastern part had more access to markets and trade that the western part, and the opening of the Russian market around the 9th century gave them a breath of life. No wonder the the west recovered when they found trade opportunities like the italian cities at first, and the formation of the english empire later.

So for me it's not the "confidence" that drives an economy that is just the effect, but the "prospect" of trade as a cause.

[minor-transgression]

Some more thoughts on the precursors to the crash beginning in 305AD, beginning with some
links on how others view the history. I've added links to more recent markets and related
comments. The comments below are my own - and I make this stuff up as I go along, obviously ;-)

http://thetraderandhisshadow.files.wordpress.com/2014/01/long-term-charts.pdf

http://www.zerohedge.com/news/2014-02-08/long-term-charts-1-american-markets-independence
“Sometimes, perhaps all too often; investors, traders, economists, and mainstream media anchors
miss the forest and see only the trees (growing to the sky or crashing to the floor).
To provide some context on the markets, we present the first of three posts of long-term chart series
(and by long-term we mean more than a few decades of well-chosen trends) - stock, bond, gold, commodity,
and US Dollar prices for the last 240 years...”

http://www.zerohedge.com/news/2014-02-09/long-term-charts-2-western-markets-middle-ages
“We previously examined 240 years of US market history for a sense of 'trend' or sustainability but
some were not satisfied. In order to get a truly long-term perspective, we reach back 1000 years to
The Middle Ages and look at how stock prices, interest rates, commodity prices, and gold have changed
in a millennia (and most notably how the key historical events have shaped those price changes).”

http://www.zerohedge.com/news/2014-02-10/long-term-charts-3-markets-dawn-civilization
“We have looked at US markets since Independence and Western Markets since The Middle Ages;
but to really comprehend how far we have come, we need to press back to the dawn of civilization.
5000 years of interest-rates and commodity history and a trend is very clear as epochal events drive volatility.”

http://www.gold-eagle.com/article/ancient-prices
“Ancient price and wage data was collected to satisfy my own curiosity, and is presented for those readers
with a similar interest in the past. For the modern investor, this article contains two facts of relevance.”
“According to the Babylonian system of weights, 1 talent (30 kg) = 60 minas, one mina (504 grams) = 60 shekels,
and one shekel (8.4 grams) = 20 gerahs. True monetary systems did not exist until the development of
coinage c.700BC, however, and prices before 700BC refer to specific weights of metal.
Nb. One troy ounce = 31.1 grams. Prices in silver are as follows:”

In the 50 years prior to Aurelian, it is doubtful that interest rates offered price discovery.
Over those years barter became the normal method of trade, suggesting that the intermediation
of banks and money-changers was progressively reduced. It is hard to imagine how banking worked:
If Julius carried a satchel of silver plated copper coins into his local financial services
outlet, and asked for gold, I'd suppose he would expect a steep premium. Hmmm . . . maybe not
so difficult . . .  try today to buy a $50 gold coin or a £1 gold coin with anything less than
a large handful of fiat money and see what happens. But back to Aurelian.

I'd suggest that the dynamics of the situation were driven by trade with "barbarians". These
people would be disinclined to accept anything other than 99 percent gold in coinage, and
would give the debased roman silver coinange (2 percent silver) short shrift.

It seems likely that the roman economy would begin to disintegrate under this pressure with
maritime and international trade priced in gold, and local roman communities using either
barter or debased coinage. Whether banks and moneychangers would survive or thrive is an
interesting question. Hence I'm suggesting that from around 250AD onwards, markets in the
roman world were broken, and that interest rates quoted for that period should be viewed
with suspicion.

Note also that at the beginning of Imperial Rome, legionaries were paid in gold and with the
expectation of land when they retired. At some point, payment began to be made in silver.
Payment in debased silver coin would have caused problems for Legions on the move, but
for those guarding the frontier, not so much. See also Diocletian's edict doubling the
value of his "silver" coinage.

Perhaps it was not just the overhang of debt that brought down Imperial Rome, there
certainly was a collapse of confidence in the currency. The lesson here may be that once
financial services are removed, it may be very difficult to relace them.

It is interesting that China led the way on paper currency, crashed, and recovered. It may be that
the unity that China's geograpy brought also inhibited the competition that western Europe found
arising from their geography and the distribution of resources.

[thaaanos]

There is the issue of expansion also, as long as roman empire expanded all was good, but at some point they reached physical/political/energy/communication/technological barriers that constrained this expansion, and that was the tiping point.

It is propably very difficult to transform an expansive imperialistic culture to a self-contained sustainable culture, especially with all the inertia from the growth phase. US also follows the same path from the pioneering days, to the imperialistic days. The search of new markets, and new frontiers, Heck remember the dream of Space conquest? The final frontier? it is no accident.
Expansion is in the US DNA.
Internet gave enough room for expansion and stave off a crisis, when Space failed. I guess the new paradigm now will be "to create new scapes to expand into", a lot will depend on the ability of the west to play that trick.
This is why Innovation is so imperative to it's survival. Where would Rome be if they had figured out the steam engine? It was not out of reach: http://en.wikipedia.org/wiki/Hero_of_Alexandria ... it was only shortsightedness on the value of innovation.

[Adrian-x]

An amazing thread.. I actually spent most of the day looking for a 'history of money' before giving up and browsing the forums.

Here is a gold bugs summary of the history of money quite concise.
http://www.youtube.com/watch?v=DyV0OfU3-FU (5 episodes)

[BitDreams]

Lots of different coins and reasons for them -

http://armstrongeconomics.com/research/monetary-history-of-the-world/roman-empire/the-monetary-history-of-the-roman-republic/

[minor-transgression]

Thanks bitdreams, adrian-x, thaanos.

"There is the issue of expansion also, as long as roman empire expanded all was good,"

That was precisely the issue Augustus warned about, though it has as much to do with
financial gain as conquest. Clearly if the empire ended up poorer after the expansion,
that process could not continue indefinitely. And a larger empire could spend relatively
less defending its borders. Debasement began in earnest when the expansion slowed,
perhaps because debt is related to area (and therefore a a square law), and gains were
likely linear.

[allaa]

Well i notice you look on problem... hmy, from rather diferent point of view then most of people. Even though it is intereting to read, I haven't heared about most fo this stuf stil im rather sure we can't just take random information, place it next to subject we are interested into and force any kind of conclusions. If they are or wrong we set aside and just continue our analyses without proper look back, since after awhile we might notice we are just weasting our time. Besides when it comes to currency i think Bisantium history is much more interesting. More intervention and more dynamic situations, not to mention there were actualy few possibility when it comes to usage of different coins.

[Adrian-x]

Besides when it comes to currency i think Bisantium history is much more interesting. More intervention and more dynamic situations, not to mention there were actualy few possibility when it comes to usage of different coins.

It's come up they had in effect no usury, 1:1 gold as currency 10% tax, and an anarchic market economy with sharia law, and were very successful.

I presume there empire collapsed because the market failed as fractional reserve banking in the west allowed for capital to build a better military at the onset of WW1.

[BitDreams]

A coin could have a defined purpose and life span. As an example: Five years of speculation, five years of dividend and then a retirement plan - maybe the retired blockchain seeds the next big project. The coin could support a project, a cause or a belief. This is what I dream about Bring all the ideas out, new and old and put them through the math grinder.

[thaaanos]

Thanks bitdreams, adrian-x, thaanos.

"There is the issue of expansion also, as long as roman empire expanded all was good,"

That was precisely the issue Augustus warned about, though it has as much to do with
financial gain as conquest. Clearly if the empire ended up poorer after the expansion,
that process could not continue indefinitely. And a larger empire could spend relatively
less defending its borders. Debasement began in earnest when the expansion slowed,
perhaps because debt is related to area (and therefore a a square law), and gains were
likely linear.

I think that was because the romans had as a main weapon to rule a conquered land is by displaying superior culture, that means roads, aqueducts, theaters, baths and everything that displayed the roman way of life. So to create infrastructure on the conquered lands and the gains were propably in par with the expenditures. In modern times it would be seen as an investment. It could be that Rome outreached, and collapsed before reaping the returns on their "Investment"
Overall though, Europe could be in better shape After, than Before Rome. And that is *not* reflected imo in the currency value.

[minor-transgression]

Once the Romans had defeated and destroyed the Carthaginians, there were no
armies large enough or sufficiently well equipped and trained to challenge them.

There were invasions and raids, but Imperial Rome itself was rarely under threat
from barbarians.

An interesting angle on all this is the system of taxation, and its reported misuse
under Diocletian:

http://www.unrv.com/economy/roman-taxes.php

"In the early days of the Roman Republic, public taxes consisted of modest assessments
on owned wealth and property. The tax rate under normal circumstances was 1% and sometimes
would climb as high as 3% in situations such as war. These modest taxes were levied against
land, homes and other real estate, slaves, animals, personal items and monetary wealth."

"These Publicani were also money lenders, or the bankers of the ancient world,
and would lend cash to hard-pressed provincials at the exorbitant rates of 4% per month or more."

"Diocletion's program, in theory, should have helped ease the burden on various classes of taxpayers,
but it didn't work that way in practice. As an example, additional taxes were levied on land owners
after the land tax had been paid because this was now a separate tax, instead of taking into account
that taxes had already been collected. The burden of paying the expected amounts was shifted from
communities and individuals within them, to the local senatorial class. The Senators who would then
be subject to complete ruin in the case of economic shortfall in a particular region."

I doubt that improvements in the system of taxation would have helped, assuming of course that
the imposition of debt via the banking system inevitably del to the downfall.

For more on that see this:
 http://www.thedailybell.com/exclusive-interviews/29044/Anthony-Wile-Larry-Parks-Everything-You-Ever-Wanted-to-Know-About-Money-Metals/
“The concept of legal tender morphs from a concept called forced tender. In the middle
of the 13th century, when Marco Polo went to China, one of the things he noticed and
remarked about was that the Chinese emperors had become fabulously rich issuing paper money.
When Marco Polo returned to Europe and told the Europeans about paper money,
they were disbelieving. Why, they asked, would anyone accept a piece of paper in exchange
for his goods and services? The answer was that if one did not accept the emperor's
money he would kill you. With legal tender you don't get killed, but if you don't accept
it in payment of a debt by law you are not entitled to be paid.”

That also contains some interesting views on gold as a money, and on the current state of the
US and related economies.

[BitDreams]

This is the dawn of proof of deeds.

[semaforo]

    Glad to see discussion continues to be interesting and informative here...

   your comments got me looking up this graph again. Anyway, you know my perspective is biased, but in the scientific tradition, I am open to falsification as long as it is backed by some evidence.

    
     I remember reading somewhere that around 1000 CE, 90% of Germany was covered in virgin forest. While the centralized Roman empire was never able to penetrate into the German wilderness, the decentralized Roman Catholic Church had more success. The wholesale deforestation, construction of mills, and development of metallurgy began around this time. Another crucial event at this time was the Crusades (pun intended). To answer why Europe came to be the global hegemon and China didn't has to be related to these events.

     So at the time when Europe begins its rise to prominence, the urbanization of Northern Europe is taking place. Guilds are rising in influence. The first real hegemon in medieval Europe was Venice, with colonies all around the mediterranean, a powerful navy, and tightly guarded trade secrets. Venetian craftsman specialized in the production of luxury goods, like mirrors. Mirrors enabled more sophisticated forms of consciousness due to increased self-awareness on the part of the wealthy, allowing for the development of more elaborate social hierarchies. The greater the disparity in a social hierarchy, the more the impetus for the lower members of society to attempt to rise- this is also where the innovations in etiquette by the court of Louis the 14th came in, as a trendsetter for the nobility of all of Europe.

      Some point to the Venetian republic as the birthplace of capitalism because there is documentation of wealthy merchants purchasing shares, or pooling resources, for trade ventures. This technique was later adopted in the Netherlands and England with the East India Company. This technique was already widely practiced in the Islamic world under the title musharakah, before it was adopted by the Venetians- and it was from the trade through the middle east the European elites were developing their taste for spices. The Islamic expansion united lands from China to India to Spain, and I know there are some people here who know more about Austrian economics than I do, but my limited understanding is that there is considerable mathematical evidence that free trade results in greater efficiency and wealth generation than borders and tariffs- and Islamic law required the taxing of wealth, rather than the taxing of income or trade as with Roman law, and redistributing this, which perhaps allowed for a bit more cohesion and freedom of trade through peace since resources may have been more evenly distributed.
         Multilingual, mutlireligious communities were established in Southern Italy and Spain where Jewish, Christian, and Muslim thinkers collaborated, and had access to the widest range of texts in history- which led to a great number of advances- particularly in the fields of mathematics and astronomy, partly due to the need of Muslims to calculate the most accurate qible direction, or the direction to pray towards the Kaaba in Mecca.
 
      The Middle East is obviously a very strategically important location in terms of the trade routes linking Africa, Europe, China, and India, and is of huge importance to followers of Christianity, Judaism, and Islam. So the ideological as well as the economic incentive for an invasion is clear. While the Crusades were generally unsuccessful, they did  relieve some overpopulation issues, and along with the Mongol invasion diverted the attention of the Muslims enough to allow the reconquest of Spain, including the population of multilingual scholars who began to disperse the knowledge that had been gathered and advanced in the centuries of prosperity and relative tolerance under Muslim rule. I'm sure you'll remember that the year of Columbus' expedition, most certainly a key date in Europe's rise to prominence, coincides with the date that Spain became a one religion state, which was later consolidated by the Inquisition.

      The demand for spices in Europe and the failure of the Crusades to access those trade routes, combined with the increased understanding of geography, astronomy, and navigation that the spread of knowledge associated with Arabic as a trade language, enabling scholars in Spain to access texts written in Persia and Turkestan, which included much more of the scholarship of China and India than the Greek and Latin texts that were previously available to Christian scholars, gave both the means and the motivation for the expedition to the West.

   So there is a confluence- while China had already been "civilized" for centuries, northern Europe gained access to Chinese and Indian knowledge that had been accumulated over centuries, and at the same time access increased to Greek and Roman texts through translations to vernacular. So China had probably already bumped into glass ceilings of energy availability several times in their history, while northern Europe had abundant forest land to run furnaces for their new abilities in metallurgy. Most of this deforestation was probably happening around the time of the steep rise in western europe's gdp in the graph. The rise of water mills and wind mills also increased the availability of calories for fueling labor, thought, and ingenuity. Spain was already pretty well deforested, like most of the Roman empire, but they happened into the new world, whose plunder propelled them to superpower status- also, the amount of gold and silver looted from the America's inflated everyone else's stores of wealth, and set off the race between England, the Netherlands, France, and Spain- all of Westernmost Europe (that means they could block more easterly powers from trying to send expeditions to plunder the new world, but no one was there to stop them).

      Another key event in this graph is the British dominion of India. There is a clear relationship between the decline of India's position as a global power and the rise of Western Europe. It was only with the wealth being gained from the trans-Atlantic trade routes that England was poised to gain influence over India.

    I don't think it is excessive to restate the importance that European maritime technology had in all of these events- all of this hinges completely on naval superiority, which was achieved based on cartography and mapmaking advances that were absolutely a result of the contact with the Muslims, and the Jewish and Christian subjects of the Muslim empires, who had brought scholarship on earth to the highest level that it had yet reached.

  So I am not going to say that this is a comprehensive answer to the question, but I would at least venture three major contributing factors.

1- Access to Chinese, Indian, and some previously lost Greek texts through Arabic translations, not to mention original works.
2- Access to abundant energy and timber in the vast forests of northern Europe that had been spared Roman conquest.
3- Inability to gain access to the markets due to the strength of the Muslims and the failure of the Crusades resulting in westward expansion.

   In other words, it was the immaturity of Europe that really enabled them to come into their own- they had not had the guile to harvest their nature resources as China and India already had, and they were able to profit from the knowledge that China and India had developed through their own civilizational phases, but still had a pool of abundant energy to further develop the technological knowledge that they gained access to through the multilingual scholars of Spain and Italy. Their immaturity also helped their meteoric rise to power in terms of ethics and morality, because their pitiful understanding of theology allowed them to interact with the peoples of the new world in a way that makes the Nazi holocaust look mild by comparison. Now, sitting on this ill gotten wealth, the European powers can reflect on what they did and try to take the moral high ground and lecture about human rights to the people whose ancestors they robbed and abused to gain their prominent position. Anyway, what goes around comes around.

      

[thaaanos]

you forget the English coal mines used even in Roman times and Later (19 century) The German & Belgian Coal mines... europe never hit a real energy crisis as they had access to coal for metallurgy and the industrial revolution, combined with a criss-cross of riverways + mediterranean sea for almost free-energy transportation, communication and trade.
In China though coal is much deeper and only in modern times the energy gains pay off. I don't really know the efficiency of chinese trade at the time though.

[tjkurtisss]

A moment of philosophy! Well the first post in this thread doesn't mean to me anything but I must confess the title made me to think about learning from history

[TheEmperor]

So the AboveTopSecret crowd has finally made its way over

[BitDreams]

I read semaforo's post a couple of times and kept thinking how to reply. Great history lesson and focused on bitcoin relevant topics.

Bitcoin appears to have the ability to duplicate all the mistakes and all the successes throughout history in a very short time: history repeating on fast-forward. Alternate coins that don't succeed can be viewed as simulations. As a modernized testbed, bitcoin could eventually put to rest a number of contentions between economic theories. The results should have many surprises. This has got to be terrifying to many people, not me though.

[minor-transgression]

Debasement.

Debasement of the currency is, for all intents and purposes, a form of taxation. It is in the first
place an abrogation of the trust placed in government to maintain the qualitative and quantitative
standards published for the tokens commonly used as money by the people. It is also a form of
taxation, removing wealth from the holders of the currency and placing wealth into the hands of the
debaser. The debaser is often, but not always, the government.

To examine the how and why debasement began in Imperial Rome, some attention must be paid to events
prior to the reign of Nero.

The Empire came into existence as a relatively stable form of governance after Kingdoms and
Republics had been tried and found wanting. The Empire had suffered the extremes of Tiberius, and
Caligula, and then enjoyed the stability of Claudius before Nero became Emperor. Nero was popular,
especially with the people, and at first continued the policies of Claudius, at least until fire
consumed one third of the Empire's capital city, Rome in 64AD. There are conflicting reports of
taxation under Nero. As modelled, taxation is set at 2.5% (lower than under Claudius) throughout
his reign, with the debasement modelled as a short-term loan of 600M denarii at low interest rates
to the banks. To test an alternative to debasement, the model is altered to increase taxes to seven
percent, and government spending is increased to reduce the contents of the Treasury to that of the
earlier model, with the loan to the banks significantly reduced.

Comparative figures for the economy four years later at the end of Nero's reign in 68AD are as
follows [debasement]: Firms Debts 1843[1953] Firms Assets 1606[1715] Bank Vault 193[211]
Bank Capital 22[23] Government spending 478[329] Taxation 210[87]
Inflation (from 0.7 in 64AD) 1.88[1.87].

A narrative for all this? Suppose that the Roman Empire used a currency that was impossible to
debase - such as bitcoin. Thus when Nero found himself in crisis, he was willing to empty the Roman
Treasury and to expend his personal fortune to see Rome quickly rebuilt - perhaps expecting others
to follow his exuberant example. The Senate and the Wealthy, who weren't getting a fine new palace
sited on 125 hectares of downtown Manhattan, and who may have ceded some land to the Emperor, well,
if there were rumblings of discontent before the fire, some embers would have been fanned into
outright hostility.

Getting new taxes in quickly is guaranteed to cause trouble, even though the additional revenue is
a fraction of the overall expenditure. The disruption from the fire has already cut the economy back,
and there will be no shortage of reasons for not paying taxes on time. Before taxes are raised,
examples are made by placing prominent citizens on trial, and confiscating their estates.
Debasement and modest increases in taxation as an alternative would at least retain the affection
of the mob. As it was there were at least two plots to assassinate Nero before the third succeeded.
Preserving the purity of the silver coinage and increasing taxation to say, seven percent, would
have lost Nero all support, and hastened his assassination.

Some things to take away from this: a) this is just a fiction, feel free to disagree. b) If you are
planning to assassinate someone, character assassination is a good beginning. c) In its impact on
the economy, this debasement was little different than an alternate via increased taxation except
for its acceptibility to the Wealthy and the people. d) It is surprising that the rebuilding of a
great city could cause so much ill feeling in the Elite strata of Roman Society. e) Revenues do not
necessarily increase just because the tax rate is raised. f) "Only the little people pay taxes"
might be relevant in ancient Rome too.

################################################################

 http://www.atmos.umd.edu/~ekalnay/pubs/2014-03-18-handy1-paper-draft-safa-motesharrei-rivas-kalnay.pdf

The above paper models Elites and Commoners as an enhanced Predator-Prey system. While Imperial Rome is
mentioned as civilisation that collapsed, it is difficult to see how this model offers any additional
insight into dynamics of the collapse. The model is referenced here to show alternative points of view,
and it is perhaps more closely aligned to the scenario where the Elite (or Wealthy) are able to avoid,
evade or withold taxes thus increasing the burden on the common people. The exclusion of the Wealthy
from taxation in Imperial Rome post 167AD might, however, be more easily modelled in this Predator-Prey
system.