What the Last Roman Emperor Would Tell President Obama Today
by Keith Fitz-Gerald
Over the course of 700 years, the ancient Roman Empire grew from a small republic to one that stretched from London to Baghdad at its peak. As one of the world's first true superpowers, the Empire's achievements included the world's first standing professional army, economic prowess, intellectual growth and governance principles that are commonly regarded as the basis for modern society. But it is also remembered for its spectacular collapse in less than a century under the weight of bad debt, an overextension of the Empire, a collapse of morals that led to a deluded and self-absorbed political elite and reckless public spending that far outweighed collections. Given the parallels to our situation, I can only imagine what Romulus Augustus, widely considered to be the last of the Roman Emperors, would tell President Barack Obama today about how to prevent the wholesale destruction of our own "Empire." But it would probably go like this... Cara praeses Obama, (Dear President Obama) Like mine, your world is changing fast. No doubt it's very different from the one you thought you'd inherited. Your success will depend on new thinking and an eye to the future taken from lessons of the past. I wouldn't be offended if you have never heard of me. I oversaw the dying days of what you know as the Classic Western Roman Empire. My fall in September 476 marked the end of centuries of greatness and the fall of ancient Rome. Some historians consider my departure as the beginning of the Middle Ages. I understand the nature of collapse: how it begins, how it progresses, and where it all ends. As a historical footnote to a once great empire, here's my advice to you, Mr. President. Your country will cross a dangerous line once the voters figure out they can entitle themselves. Our senate failed to understand this and, over time, our once proud Treasury became a proxy for a handout. Our citizens changed fundamentally as the reliance on public spending and debt became more pervasive. Our society grew lazy when it became more profitable to merely accept handouts than to engage in hard work. Our labor concentrated itself as did our profits. Nowhere was this more clear than the latifundia – that's what we called our large estates.
Typically owned by wealthy individuals, the latifundia effectively put small farmers and other businessmen out of work because they could not compete with the lower prices and efficiencies, nor the economies of scale. Over time, this resulted in a collapse of morals from one generation to the next and a loss in work ethic. The reliance on big operations also resulted in higher unemployment, particularly in our larger cities where people congregated because they had nowhere else to go. We thought that giving people free wheat beginning in 58 BC would work when Publius Clodius Pulcher insisted it would change things. Instead, it merely made the problem worse. If you want to push back or counter my assertion, please feel free to do so. I don't expect anything less. But, ask yourself why your citizens no longer vote for the candidates who can bring about the best future. Try to deny that they now vote for those candidates least likely to interfere with their handouts. We did and it cost us terribly. Politicians who focus on surviving threats from each other lose sight of the nation they serve and its people. While we never perfected the process of transferring power from one emperor to the next, I see direct parallels in your Presidential elections. Your Super PACs create controversial and misleading attack ads. Your RNC and DNC are private corporations acting under the guise of the public interest. You have gerrymandered political voting to the point where nobody can effectively "win." Your government is deteriorating to the point where it is government at the people rather than by the people. I am told by those who have recently arrived in the afterworld that 67% of the voting public did not want Obamacare, yet got it anyway. I am also informed that at one point more than 70% of the people did not want the financial bailouts nor more stimulus, yet got that too. At some point, you will have to take your losses. We tried to avoid the issue and, although it ultimately took centuries to unwind, the role of the state in presuming that it would operate more efficiently than the private markets ultimately led to economic fragmentation. As conditions deteriorate, you would be wise to watch carefully for the concentration of power risks becoming absolute. That's why corruption has become a way of life inside your Congress and Senate. Know that influence peddling is just as alive in your time as it was in mine. And it is every bit as dangerous. High taxes and public spending rob the economy. We learned very painfully that when money is cheap, productivity falls as do margins, even though overall business activity expands for a time. We also came to understand that high interest rates force efficient capital allocation and cause businessmen to make decisions based on what they must have versus what's nice to have (just as individuals do).
I only wished we had learned sooner. Beginning with Marcus Aurelius, we suffered from merciless inflation. Some of this was simply due to the fact that we stopped conquering other lands and peoples. Mostly, however, it was due to the fact that without a constant inflow of new wealth from those lands, we could not keep up our spending. The term "pyramid scheme" did not exist in our time but I believe it applies. Our wealthy, like yours, had plenty of gold to spend but the majority of our citizens watched helplessly and hopelessly as the amount of actual money in circulation dropped to the point where it became worthless. We repeatedly devalued our currencies swapping one for the other as values dropped. We printed money in the short term oblivious to the damage we were doing in the longer term. For example, our silver denarius, which was introduced around 210BC, was used to debase the prior copper coin, the aes, reducing its weight from 1 pound to the point where it was half an ounce. We introduced new coins like the antoninianus and the aureus in successive attempts to solve the problem. We also began reducing the actual metal content in our gold and silver coins so that the actual metal made up less than 25% of its actual weight. In some cases, we even used tin in an attempt to maintain the silver color of coins, but that didn't fool people for long. To compensate, merchants raised prices to the point where nobody could afford to use real money. Inflation hit very hard. Barter became the method of the day. As hard as it is for you to imagine, salaries were eventually paid in food and clothing. Taxes were collected in fruits and vegetables. Our troops were paid with rationed supplies. The middle class was obliterated as once free men transitioned into debtors' hell, existing hand to mouth under draconian taxes that robbed them of their future. We learned the hard way that a strong currency creates hope. And hope, in turn, creates value. The strongest years of our Empire were driven by the concept of a better future rather than merely by survival. Taxing our public enslaved them, creating what in the Middle Ages would come to be called serfdom. Most of our banks, by the way, failed in the 3rd and 4th centuries. Unless you are prepared to endure the same crisis, I urge you to do whatever it takes to support your currency. Do not let Fed Chairman Ben Bernanke or any of his central banking cabal to further devalue the money you need to function. Hold your nation together and keep your people free. When the cost of money is low, governments will waste it and businessmen will not invest. You have to make it profitable for businessmen to take on risk. Otherwise they will not invest because there is no measure of return. Lending to the government does not count because it's an implied tax that robs the private sector of the wealth needed for innovation and growth. I am appalled to learn that the Federal Reserve itself bought 77% of new Federal debt in 2011 according to Standford Economist, John Taylor (we do have the Internet in the hereafter, too). That is simply not sustainable. The people cannot benefit from the Fed's actions since it is the people, via the public treasury, who are buying the majority of new debt issued. Bread and circuses will not placate the masses for long. In ancient Rome, our emperors used to pay privately for circuses, gladiatorial contests and public food as a means of distracting our population from the hopelessness of their situation. It worked quite well for a while. But eventually people figured out the bread was rotten and that the circuses really were a colossal waste of their money and did nothing for their future. I see a direct parallel. You have 330 million people and they seem to be focused on the possibilities of more bailouts rather than building their own future. Your government already faces a fiscal gap of $222 trillion dollars, according to Professor Lawrence Kotlikoff of Boston University...up $11 trillion from a year ago. Social Security, Medicare, Medicaid...you can't keep creating money from thin air any more than we did. If you are to fix this, Kotlikoff estimates an immediate 64% increase in Federal taxes or a 40% cut in benefits. Neither is appealing and neither is likely to work in your time any more than it did in mine. By the time we realized that radical fiscal reform was necessary to build a stronger Roman Empire and a more balanced economy, it was too late. And finally, exceptionalism is not a mandate for internationalism In Rome we learned the hard way that we were not exceptional. We tried to foist our elitism on those we conquered. Although it worked for a time – several centuries, in fact – once our elite no longer saw the necessity to serve the people, much less in our military, we broke down. Our Empire failed because we did not appreciate the need for mutual obligation and appreciation. Certainly you could counter by charging that the United States has not colonized anything in years except perhaps Hawaii in 1959. Literally, you'd be right. But figuratively, you'd be quite wrong. The United States has engaged in a highly charged morally-based international business model since it was founded. This may have worked well for more than 200 years given that the rest of the world was unable to compete and eager to do business with you, but ultimately it will fail. Other nations now have options of their own and the incentive to take corrective action--or risk being dragged down with you. One last thing. Don't be so arrogant to believe that it can't happen to you. If the Roman Empire can collapse, yours can too. Sincerely, Romulus Augustus Reprinted with permission from Money Morning. August 16, 2012 Copyright © 2012 Money Morning
|
