by chycho

As many are aware, in March 2008, David M. Walker, the Comptroller General of the United States and head of the Government Accountability Office, resigned his commission 5 years before the end of his 15-year term expired. His reasons for resigning were that he was limited to what he could do and that the United States was in danger of collapsing in much the same manner as the Roman Empire.

“Drawing parallels with the end of the Roman empire, Mr Walker warned there were ‘striking similarities’ between America’s current situation and the factors that brought down Rome…”

For months before his resignation he traveled the country educating Americans about the financial crisis and the pending bankruptcy of the United States.

60 Minutes segment with David Walker originally broadcast on March 4, 2007

What transpired with Walker jumping ship and in the first three months of 2008 was nothing short of the beginning of the largest consolidation of wealth in the history of the United States. Walker’s resignation removed the last obstacle for those controlling US fiscal policy to readily make available cheap money.

Unfortunately, it appears that the true magnitude of Walker’s departing sentiment has not been fully appreciated by citizens of the United States, or citizens of other countries for that matter.

I believe the reason for this lack of appreciation from the general populace regarding Walker’s warning is due to the fact that the Fall of Rome seems to be, at best, a distant historical event, and at worst, an exaggerated fable told by alarmists - if only this was true. As Walker states in the above interview;

“Unfortunately, they don’t get it. I don’t know anybody who has done their homework, has researched history, and who’s good at math, who would tell you that we can grow our way out of this problem.”

The long term remedy for this fiscal irresponsibility is to make sure that everyone learns how to communicate in The Language of Mathematics. The short-term fix is to remind people why Rome fell.

I’m working on the long term remedy, as for the short term fix, below you will find excerpts from “a transcript of Prof. Joseph Peden's 50-minute lecture ‘Inflation and the Fall of the Roman Empire’ given at the Mises Institute Seminar on Money and Government in Houston, Texas on October 27, 1984. The original audio recording (mp3) is available courtesy of the Mises Institute.”

Please note that the transcript and the excerpts are only from the 50-minute lecture. A 30-minute question an answer period follows the lecture, the transcript for which is not available. The Q&A contains a lot of great information such as the following:

“Inflation is not an act of god, it is an act of men, specific men, who foster it for their own particular ends, and therefore it seems to me the first step before we can be effective in devising an anti-inflationary policy is to clearly identify who actually is profiting from this system and who is not. It is naive to think that no one profits from inflation, certain people do. Clearly with the credit system of the United States government, the government itself could not possibly allow any serious deflation because its own public debt would have to be repudiated. And so, one of our basic problems is, that the United States government is itself the largest obstacle to a non-inflationary policy. Economists may have more to say about that, but I think the political question is, ‘who profits from this?’ If we can identify those people then we can move a head and find a political strategy to identify those people and identify those who are being hurt…

“I don’t think the problem of educating the mass of the public is very difficult, I think the problem with educating our leaders, our elite, is more difficult. But I think the reason for that is so many of our elite’s profit from the system. You’re assuming that they’re just naïve, but I notice that they are naïve in their own self interest.”

To help draw parallels between the factors that brought down Rome and those that have collapsed the United States I have provided some links for specific excerpts. These should help those that dismiss such comparisons to begin to appreciate David Walker’s warnings.

Excerpts from the lecture and links to previously posted information follows:

“I've been asked to speak on the theme of Roman history, particularly the problem of inflation and its impact. My analysis is based on the premise that monetary policy cannot be studied, or understood, in isolation from the overall policies of the state. Monetary, fiscal, military, political and economic issues are all very much intertwined. And the reason they are all so intertwined is, in part, due to the fact that the state, any state, normally seeks to monopolize the supply of money within its own territory.

“Monetary policy therefore always serves, even if it serves badly, the perceived needs of the rulers of the state. If it also happens to enhance the prosperity and progress of the masses of the people, that is a secondary benefit; but its first aim is to serve the needs of the rulers, not the ruled. And this point is central, I believe, to an understanding of the course of monetary policy in the late Roman Empire…” (Federal Reserve begins war on local currencies: Banking institutions try to maintain their stranglehold on Americans and Geithner: Auditing the Fed is a "line that we don't want to cross")

“(Caracalla) raised the pay of the soldiers fifty percent, and to achieve this he doubled the inheritance taxes paid by Roman citizens. When this was not sufficient to meet his needs, he admitted almost every inhabitant of the empire to Roman citizenship. What had formerly been a privilege now became simply a means of expanding the tax base. He then went further by proceeding to debase the coinage… But the real crisis came after Caracalla, between 258 and 275. In a period of intense civil war and foreign invasions, the emperors simply abandoned, for all practical purposes, a silver coinage. By 268 there was only five tenths percent silver in the denarius. And prices in this period rose in most parts of the empire by nearly a thousand percent. The only people who were getting paid in gold were the barbarian troops hired by the emperors…” (US Still Paying Blackwater Millions - Update to “Blackwater: a summary of what Americans are paying for with their tax dollars”)

“Now, Constantine's reform in one sense began the reversal of the process: the gold coinage was sufficiently large that it began to take hold and to circulate more freely. The silver coinage failed and, what was worse, at no time in this period did the central government try to control the token coinage. And the result of that was [that] token coinage was being minted not only by the imperial mints, but also by the mints of cities. In other words, if a city couldn't pay its costs, pay its salaries to its employees, it simply struck up some token coinage and issued that…” (Big Banks Don't Want California's IOUs)

“In other words, gold was a hedge against inflation for those who had it, and these were principally the troops and the civil servants. The taxpayers had to buy these gold coins in order to pay their taxes and so, if they were wealthy enough, they could afford to buy these gold coins which were increasingly expensive in terms of token money. If they were poorer they simply couldn't pay the taxes and this meant they lost their lands in one form or another or became delinquents; and we hear constant references to people abandoning their land, disappearing…” (Year 2006/07: Subprime Market Collapses)

“In Diocletian's time, in the year 301, he fixed the price at 50,000 denarii for one pound of gold. Ten years later it had risen to 120,000. In 324, in other words 23 years after it was 50,000, it was now 300,000; and in 337, the year of Constantine's death, a pound of gold brought 20,000,000 denarii… I think it should be a great comfort to us: historians of prices in the Roman Empire have come to the conclusion that despite all of this inflation – or perhaps we should say, because of all this inflation – the price of gold, in terms of its purchasing power, remained stable from the first through the fourth century. In other words, gold remained, in terms of its purchasing power, a stable value whereas all this coinage just became increasingly worthless. What were the causes of this inflation? First of all, war… (Collapsing the Economy in the Buildup to World War III: 11 of the Most Important Economic Events of the Last 11 Years)

“The size of the army, I think I indicated already, had increased. Doubled from the time of Augustus to Diocletian, and the size of the civil service I indicated also. Now, all these events strained the fiscal resources of the state beyond its ability to sustain itself, and the debasement and the taxation were both used to keep the ship of state going; frequently by debasing, then by taxation, and then often simply by accusing people of treason and confiscating their estates. One of the Christian fathers, Saint Gregory Nazianzus, commented that war is the mother of taxes and I think that's a wonderful thing to keep in mind: war is the mother of taxes. And it's also, of course, the mother of inflation…” (The Grand Chessboard: The Game at Play is the Business of War)

“Now, what were the consequences of inflation? One of the odd things about inflation is, in the Roman Empire, that while the Roman state survived – the Roman state was not destroyed by inflation – what was destroyed by inflation was the freedom of the Roman people, and particularly the first victim was their economic freedom. Rome had basically a laissez-faire concept of state/economy relations. Except in emergencies, which were usually related to war, the Roman government generally followed a policy of free trade and minimal restriction on the economic activities of its population. But now under the pressure of this need to pay the troops and under the pressure of inflation, the liberty of the people began to be seriously eroded – and very rapidly…” (America’s march towards fascism: and some helpful hints on how to protect yourself from the United States government and To the citizens of the UK, you are about to go into lockdown: Birth of fascism in real time)

“In other words, what we have here is a kind of nationalization of private enterprises, and this nationalization means that the people who risk their money and their talent are compelled to now serve the state whether they like it or not…” (Applying the Iraq war multiplier to the bailouts: If you’re going to eat shit, eat it with a spoon)

“We know for example from studies of Palestine, particularly in the Rabbinical writings, that in the course of the 3rd and early 4th century the structure of landholding in Palestine changed very dramatically. Palestine in the 2nd century was largely composed of small peasant landholders with very small acreage, perhaps an average of two and a half acres. By the 4th century those small holders had virtually disappeared and been replaced by vast estates controlled by a few large landowners. The peasants working the estates were the same people, but they had in the meantime lost their land to the larger landowners…” (Why Corporations, Emerging Powers and Petro-States Are Snapping Up Huge Chunks of Farmland in the Developing World)

“How did people protect themselves from this? Well, first of all, mortgages virtually ceased; long-term mortgages virtually ceased to be given. Long-term loans of any kind disappeared. No one will lend unless they are guaranteed payment in gold or silver bullion. In fact the government itself, under Diocletian and Constantine, refused to accept gold coins in payment of taxes, but insisted instead on gold bullion. So that the coins that you bought in the marketplace had to then be melted down and presented in the form of bullion; and the reason was [that] the government was never sure how adulterated its own gold coinage really was so they insisted on bullion…” (The rules of the game have changed: Liquidity disappears and markets collapse)

“Now, we may wish to find some lessons in this tale of [the] monetary policies of the late Roman Empire. The first lesson, I think, must be that if war is the health of the state, as Randolph Bourne said, it is poison to a stable and sound money. The Roman monetary crisis therefore was closely connected with the Roman military problem. Another lesson is that the problems become solvable when a ruler decides that something can be done and must be done. Diocletian and Constantine clearly were willing to act to protect their own ruling-class interest, the military and the civil service. Monetary reforms were necessary to win the support of the troops and the bureaucrats that composed the only real constituency of the Roman state, and the two-tier system was designed to this end. It brought about a stable monetary standard for the ruling group who did not hesitate to secure it at the expense of the mass of the population.

“The Roman state survived. The liberty of the Roman people did not. When freedom became possible in the west in the 5th century, with the barbarian invasions, people took advantage of the possibility of change. The tax burden remained burdensome even after the gold standard was re-established. The peasantry had become totally alienated from the Roman state because it was no longer free. The business community likewise was no longer free, and the middle class of the urban cities was no longer free.

“The economy of the west was perhaps more fatally weakened than that of the east, and when we read in the writings of the early 5th century Christian priest Salvian of Marseille his account of why the Roman state was collapsing in the west – he was writing from France, Gaul – Salvian says that the Roman state is collapsing because it deserved collapse; because it had denied the first premise of good government which was justice to the people. And by justice he meant a just system of taxation. Salvian tells us, and I don't think he's exaggerating, that one of the reasons why the Roman state collapsed in the 5th century was that the Roman people, the mass of the population, had but one wish after being captured by the barbarians: that they would never again fall under the rule of the Roman bureaucracy. In other words, the Roman state was the enemy, the barbarians were the liberators. And this undoubtedly was due to the inflation of the 3rd century. While the state had solved the monetary problem for its own constituents, it had failed to solve that monetary problem for the masses and continued to use an oppressive system of taxation in order to fill the coffers of the ruling bureaucrats and military.”

Source: http://www.chycho.com/?q=Walker_Rome