Quick Take: the Fake Roman Financial Panic

A wonderfully weird story of collaborative scholarship via Reddit

To subscribe, just click here; if you want access to the paywalled History of Mankind but the price is a little too steep for you right now, just email me (respond to this email) and we’ll sort something out.

Some time ago when I was researching the reign of Roman emperor Tiberius, at the very start of the Christian era, I came across some weird stuff, not for the first time. So I embarked in what turned out to be the weirdest historical investigation of my career.

This is the 21st century and at the time I was still a corporate employee at a major bank with a pretty demanding, full-time desk job, so this story is not about digging in dusty archives or secret chambers. My investigation started in, of all places, Reddit.

I chose Reddit because I’m a long-time, if frustrated, user (u/aussiesta) and I knew there are plenty of obsessives with time on their hands there and I was very suspicious about what appeared to be a very neat tale about Tiberius and a Roman financial panic in 33 AD. So I put up a call for help (notice the typo in the headline, that Reddit won’t allow correction for):

The moderators in the r/badhistory Reddit promptly banned my post (you can see it only with the direct link) as being in breach of the arcane and pretty senseless r/badhistory rules, preventing posts framed as questions.

I also put up a similar question in the Roman Reddit forum, which nobody took up, because r/ancientrome, sadly, is filled with undergraduates searching for other people to write their essays for them, and asking each other who the most awesome Roman emperor was, and what your top 10 Roman generals of all time are; still, I did try:

Let’s step back for a minute, and explain why this is important. The thing with the story about the Roman financial panic of 33 AD is that the story has been cited, quite often, in one of my fields of professional, non-historical expertise: macroeconomics.

I was a macro reporter for the Wall Street Journal and Bloomberg News for a decade, and every once in a while I came across vague references to that event, as being the first recorded use of “quantitative easing” (to simplify: government purchase of private debt) in history. That really is the reason why I finally became intrigued enough about it and came across the dubious narrations and unbelievable characters that I describe above.

There was a surprisingly neat ending to this story. Just I was conducting my own research in my spare time, an user in r/badhistory, who saw my post just before the moderators took it down, narrowly beat me to the historical truth. And he published it in another post, the very next day:

This user, Tiako, explained that sometimes historians will rely on “a bit of creative writing to open up the material, narrating the events with historical fiction to make it clear that the people under discussion are real humans and what happened impacted real lives,” something I disagree with. That’s what novels are for. Whenever I speculate, I always let the reader know that I’m speculating. And that’s how we ended with the problem in the first place.

Moving on, Tiako also wrote, “it is always pretty clear in context that it is a bit of creative writing so there is no real danger of it getting misinterpreted as real, or if there was, it surely would only be by some overworked, long forgotten newspaper writer and not by the authors of a book series that is a classic in popular history, reprinted continuously for decades while it became an obligatory bookshelf piece of everyone who wanted to show they are intellectually sophisticated and well read?” What he means is that a lot of people fucked up for a long time because they trusted a bunch of stuff that sounded unbelievably detailed, because it was unbelievable:

The object under consideration is this article, which in turn comes from a financial news website, although from my memory that particular story was pretty commonly passed around at the time and still pops up every now and then today. You can see why: what a wonderfully vivid story, what a great illustration of how history repeats, at bottom, they really were just like us back then! Really like us. Suspiciously like us, in fact, in things like the concerns of market reporting, the naming of corporations, and the existence of financial reporters. Just crazy how exactly like us the Romans were, particularly is the "us" in question was in early twentieth century New York.

I am sure the sharp readers here will know where this is going or at least guess that the first paragraph has a point. In 1910 the popular historian William Stearns Davis opened up his book The Influence of Wealth in Imperial Rome by taking a minor episode in Tacitus Annales--an economic crisis in 33 CE--and retelling it as if it were a Wall Street Panic like the one in 1907. There are all sorts of colorful details like the "purple house" Malchus and Company declaring bankruptcy due to struggling with striking Phoenician dockworkers, breathless crowds reading the dispatches of the "Ada Diurna", the Brothers Pettii being forced to shut the doors of their bank because their investments in Northern Gaul were disrupted by revolt, etc. It is a pretty fun read and I think taken altogether it is pretty clear what he is doing, and he ends with a bit of ironic understatement that it was "a little expanded" from the account of Tacitus and it was a story with "verisimilitude". Arguably he could have simply outright stated that his story about the banking house of "Maximus & Vibo" was a fabrication, but he surely did not intend it to deceive people.

After this the story becomes a tad speculative, but because Davis straight up invented all the details if a reference to, say, "Seuthes and Son" pops up you know it ultimately comes from him. The article posted at the top cites The History of Business Depressions by Otto Lightner. That book does narrate the events and caps it off by saying "How similar was the business of the world in that year of the crucifixion of Christ to that of the present time!" which is very funny in context, kind of like if somebody watched A Knights Tale and was startled at how remarkably similar jousting was to modern sporting events. But I am skeptical of the citation because, frankly, who is this man. He seems to have been a hobby writer and dilettante in early twentieth century Chicago and it is possible somebody grabbed his book in a used book sale and got the story from there. But in my opinion a more likely source is Durant's The Complete Story of Civilization. If you aren't familiar with this series, if you have a grandparent or older parent who had aspirations to a sort of old fashioned bourgeois respectability and cultural sophistication they have it on their shelf (if you yourself are of distinguished age and aspirations, check your own shelf). It was also a common feature of the trend of people curating their bookshelves to look good on Zoom calls. It was and is phenomenally succesful, but it is also considered somewhat sloppy as an actual history source. Their repetition of the story is illustrative of this, as they cited Davis directly, meaning they read the bit about "the firm of Seuthes & Son of Alexandria" and thought "yep, that checks out" even though they had also cited Suetonius and Tacitus and were thus familiar with the base material.

It is worth noting that, much like with A Knight's Tale, there is a grain of truth here. I copied out the passage from Tacitus here and you can tell there is a really striking "modernity" to the event. A credit crisis leading to mass insolvency that is solved by a "liquidity injection" by the emperor is a pretty compelling story for economic history, certainly in times when there are similar debates about the use of government to aid in financial crisis. That is certainly why Davis used it. The problem comes when, rather than actually trying to understand the context of what they read, they just strip mine it for anecdata, and so a hundred years later you have financial professionals writing articles about the Brothers Pettius and the firm of Maximus and Vibo.

Like Tiako said, the financial panic existed, and it may be called the first complex financial crisis in history.

As described by Tacitus, the crisis had tangled roots. Wheat scarcity led to higher prices and public unrest in Rome less than two years after a political crisis triggered by an attempted coup against the emperor, with the populace calling for debt interest relief and a recall of the various ancient laws passed to contain usury. The senate, looking to placate the masses without losing tons of money (they, mostly, were the usurers), turned to Tiberius, who agreed to an 18-month grace period without interest payments on debt.

This caused an immediate credit crunch, as banking and merchant houses called their debts at the same time, looking to put their capital to better use. The senate set a limit on the collateral that could be grabbed by creditors, farmland, on two-thirds of the amount due; still, even as creditors pushed for full repayment, farmland fire-sales across Italy led to falling prices and further misery for borrowers, who had to sell more and more to raise enough cash to pay back even under the two-thirds limit.

At that point, amid the danger of mass insolvency, the emperor came up with a solution: the provision of a great deal of money, to be repaid with zero interest, that borrowers in dire straits could access in exchange for using their land as collateral without losing the land. Such a step stabilized the prices of farmland and at the same time increased liquidity across Rome, alleviating the crisis and avoiding major public agitation and the bankruptcy of important lenders.

It’s a sad reflection on posterity that Tiberius was so disliked in his own time, and later, that one rarely hears about this masterful example of policymaking. Regardless, you could say that this guy Tiako and your humble servant dispelled one of the greatest myths about Roman history. I’m really proud of it too. Make sure to link to this post the next time somebody raises the issue of Tiberius’ “quantitative easing.”