Free money: nothing new under the sun

Reading this morning about the European Central Bank its targetted longer-term refinancing operations (TLTROs, or free money) I recalled a fascinating episode from history, recounted in Money, The Unauthorised Biography, by Felix Martin, a most excellent reading adventure.

When Emperor Tiberius in AD 33 enforced a law introduced by Julius Caesar, he caused a credit crunch. “All the familiar features of a modern banking crisis followed,” writes Felix Martin.

“There was a mad scramble to call in loans in order to comply. The property market collapsed as mortgaged land was fire-sold to fund repayments. Mass bankruptcy threatened to engulf the financial system. With Rome in the grip of a credit crunch, the emperor was forced to implement a massive bailout.

“The Imperial treasury refinanced the overextended lenders with a 100 million sesterces programme of three-year interest-free loans against security of deliberately overvalued real estate.”

Nothing new under the sun, eh?