Panic of 33: Roman Credit Crisis - Tiberius the Central Banker

by Geoff Gannon

Since I linked to a post about monetary policy as asset price policy, here’s an example.

In 33 A.D., there was a shortage of money in Rome. Richard Duncan-Jones, the Bill James of Roman economics, explains it well.

To fix this problem:

…the Senate…required that two-thirds of every loan should be invested in Italian land, and that two-thirds of every outstanding debt should be paid off.

In other words: two-thirds of every debt should be paid for with land.

I assume this meant two-thirds of every debt should be paid for with land at cost instead of market.

The disease was debt deflation. The planned cure was to let borrowers pay their debt in land as if land had never fallen in value.


…the loans were actually called…in full, and the property market became glutted with estates of debtors desperate to sell, to the point where land prices collapsed.

Lenders faced a forced conversion of debt into land. They were told 18 months ahead of time. If the market value of land was less than the value of the debt, any sane lender would call his loan before the conversion happened.

To fix this problem:

…(Tiberius) came to the rescue…the debtors having the privilege of borrowing for three years, without interest, on giving landed security to the state for twice the amount of the loan. Thus credit was restored, and gradually it was found possible to borrow from private persons also.

Tiberius used money to fight falling asset prices.