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Full Version: Learning from Rome: a speech by Jean-Claude Trichet
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Jean-Claude Trichet, the head of the European Central Bank, made some interesting comments about Rome and a Roman financial crisis in a speech a couple days ago.

Quote:Financial crises have been a recurrent feature of human history. Let me take you back over two millennia in Europe to see how the great historian Tacitus described the financial crisis that hit the Roman Empire in the year 33 AD. In the Annales, he wrote:

“The destruction of private wealth precipitated the fall of rank and reputation. 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.”

Replace “emperor” with “governments and central banks”, “sesterces” with “dollars” or “euro”, “security” with “collateral”: this two thousand year old quotation could sound surprisingly familiar.

Yet, even though two thousand years have passed, with many financial debacles in between, I think it is fair to say that we entered the current crisis less than ideally prepared...

I started with Tacitus’ example of bold policy action. I would like to end with Cicero’s fides. There was a famous controversy between Julius Caesar and Cicero 80 years before the crisis described by Tacitus. Rome, at that time, was struggling with a debt overhang. Caesar proposed partly to remit the debt. Cicero strongly opposed such action. He argued that debt forgiveness would shake the foundations of the Roman Republic and destroy one of its most important values: fides. Fides is trust, confidence, good faith.

In modern terms, Cicero was hinting at the moral hazard that can – but need not – be created by intervention in a crisis. The ‘lender of last resort’ responsibility of central banks – that Walter Bagehot advocated 1800 years after Cicero and Tacitus – should always be a dual responsibility. It should be crisis management and future crisis prevention at the same time. When these go hand in hand, the result is confidence in the medium and long term ( fides) which, ultimately, helps getting out of the short term crisis as well as contributes significantly to long-term growth and prosperity.

Thank you very much for your attention.

http://www.ecb.int/press/key/date/2010/ ... 12.en.html

With the current sovreign debt problem hanging over so many nations, it is interesting that he closed with Cicero's fides. Big Grin
Interesting speech.

Cicero had a horse in that race. If debt was forgiven then he would be one of the "losers," and most Senators were not in favor of that.

It is also interesting that Cicero saw debt forgiveness as shaking the foundations of the Republic, when he does not seem to see that the greed of his fellow Senators was doing just that.

The Gracchi brothers saw it, and meet an untimely end for their pains.
So too did Julius Caesar, and his end was just as violent.

What Cicero railed against and called a "plot against liberty" was in fact an assault on the "liberty" of the rich landowners to continue to hold and profit from the ager publicus at the expense of the people themselves. Their land grab had forced a major reorganization of the Roman Army (the Marian Reforms that allowed any citizen, regardless of wealth, to join the legions) and filled the city of Rome with the dispossessed.

Cicero was a remarkable orator, but he was no friend of the people.

:|

Narukami