First credit crunch traced back to Roman republic

Politicians searching for historical precedents for the current financial turmoil should start looking a bit further back after an Oxford University historian discovered what he believes is the world's first credit crunch in 88BC.


"The essential similarity between what happened 21 centuries ago and what is happening in today's UK economy is that a massive increase in monetary liquidity culminated with problems in another country causing a credit crisis at home. In both cases distance and over-optimism obscured the risk," said Kay, a supernumerary fellow at Wolfson College.



Kay said the words were "remarkable" for their contemporary tone. "Substitute US sub-prime for 'the Asian monies' and the UK banking system for 'the system of monies which operates in the Roman Forum' and it could have been written about the current credit crisis," said Kay.

"In second-century and early first-century BC Rome, increased inflows of bullion combined with an expansion in the availability of credit to produce a massive growth in Rome's money supply. This increase in the supply and availability of money in turn resulted both in a major increase in Roman economic activity and, eventually, in the credit crisis which Cicero describes."

So how did they get themselves out of such a pickle? "There's very little information about what happened over the next 20 years I'm afraid," said Kay. "We just don't know."

Certainly historians know that Sulla became dictator of the Roman republic after the credit crunch, but Kay said the two events were unrelated.

Kay, who has a background in investment banking and fund management, will deliver his lecture in Oxford. The lecture is organised by the Oxford Roman Economy Project.