“… If society could solve all its problems by printing money, the Roman Empire would rule the world.”
– Fringe news aggregator Zero Hedge, addressing the Federal Reserve
That line came to mind as I was wandering over what remains of the Roman town of Verulamium. It’s now a green grassy park in the middle of St Albans, where the white remains of ancient walls stand up from the ground like sun-bleached old bones.
It’s Boaz here, back resuming normal service at the helm of Capital & Conflict. I hope you’ve been enjoying Nickolai Hubble’s market musings in my absence.
I was in St Albans for the pubs, but I’ve always got time for a little history. Boudicca trashed Verulamium “back in the day”, but the Romans rebuilt the town and stayed there for centuries. It had several of the hallmarks of Roman occupation – a forum, a basilica, a theatre. But then the legions upped sticks and left in the early 400s as the Empire became less stable, never to return again.
Those buildings they left behind were then cannibalised by the remaining townsfolk to build other things. In fact, the cathedral of St Albans was built from bits of earlier Roman stonework (amongst many other things – I don’t think I’ve ever seen a building which is such a hodgepodge quilt of different building materials).
St Alban himself was a product of Roman occupation. During the persecution of Christians in the early Empire, Alban sheltered a Christian priest in Verulamium, and converted after witnessing the man’s piety. He proceeded to help the priest escape when soldiers showed up by impersonating him, and was executed for it.
He’s the first British martyr saint, and I was interested to find that this has made him something of a “common ancestor” within Christianity, meaning Catholics, Anglicans, and Eastern Orthodox folks can all perform religious rites at his cathedral as the schism and the reformation all occurred much later.
It’s a source of constant fascination for me both how much and how little still remains of the Roman Empire. In its ascendancy, those within and shielded by it must have found it hard to imagine a world without Rome at its centre. But as the Romans discovered, despite all their technology and civilised practices… debt, compound interest, and unfunded pension liabilities (in Rome’s case, those promised to legionaries) are harsh mistresses. Always have been, always will be.
Debasing your currency to pay for the problems they create doesn’t solve the problem – only shifts it elsewhere, and delays the judgement for a little longer.
It was harder for the Romans as their coinage contained precious metals. Citizens could see every day how their coins were being clipped at the edges and how prices were going up. And over time, they could see the coinage in circulation gradually changing colour as the treasury melted down old coins, diluted the molten metal with copper, and then minted more of them.
For governments and their central banks today, the process isn’t nearly so hard. Our technology and civilised practises make debasing money a much subtler process. Citizens today don’t see the banknotes changing getting clipped, as the banknotes are fundamentally near-worthless. They just see the prices going up.
But just as it was for the Romans, inflation isn’t going to make the problems of debt, compound interest, and unfunded pension liabilities go away for us either. It’ll only shift those problems into different, amplified problems for somebody else to deal with. Problems which eventually became too great for the Romans to control.
There’s an argument for gold amid all this, but ultimately for Roman citizens it wasn’t just protecting their savings that became their priority, but their very lives. As I’ve said recently in this letter, the social unrest we’ve seen in recent months will be small fry compared to what will rumble on to the scene should high inflation return, either in the ways we have described in this letter, or through another mechanism. While goldbugs will have their savings intact, they may have other, more pressing issues to deal with if they live in metropolitan areas.
But hopefully, this time around, it won’t come to that. Hopefully we’ll figure out some much more peaceful way of solving the issues of gross indebtedness which doesn’t disturb society or drastically infringe on civil liberties. Hopefully.
I’m still getting caught up on the latest news, but I’ll be back with something more pleasant to write to you about tomorrow. We’ve got a major event lined up next week which is causing all manner of excitement here at Southbank Investment Research. Back by popular demand is the sequel to our “Beyond Oil” summit from earlier in the year – and Kit Winder has secured quite the roster of special guests…
I’ll leave you today on a more positive note. As I mentioned earlier, I was mainly in St Albans for the pubs: the city has the highest concentration of drinking establishments per square mile in the UK (that nowhere in Scotland can claim that title is a mystery to me). The trip was a resounding success, and should you ever pay that city a visit, a highly recommend a trip to The Mermaid and to The White Lion where you shall find a great atmosphere, great service, and a great pint.
Editor, Capital & Conflict
For charts and other financial/geopolitical content, follow me on Twitter: @FederalExcess.
Category: Investing in Gold