How were production and commerce financed? First by the maintenance of a comparatively reliable currency internationally honored. All Roman coins had suffered gradual depreciation since the First Punic War, for the Treasury had found it convenient to pay off governmental war debts by permitting the inflation that naturally comes from the multiplication of money and the diminution of goods. The as, originally a pound of copper, had been reduced to two ounces in 241, one ounce in 202, half an ounce in 87 B.C., and a quarter ounce in A.D. 60. During the final century of the Republic the generals had issued their own coinage, usually in aurei, gold coins, normally worth one hundred sesterces. From this military coinage that of the emperors was descended, and the emperors followed Caesar’s custom of stamping their effigies on their issues as symbols of the state’s guarantee. The sesterce was now made from copper instead of silver and was revalued at four asses.VI Nero lowered the silver content of the denarius to ninety per cent of its former quantity, Trajan to eighty-five per cent, Aurelius to seventy-five, Commodus to seventy, Septimius Severus to fifty. Nero reduced the aureus from one fortieth of a pound of gold to one forty-fifth, Caracalla to one fiftieth. A general rise of prices accompanied these depreciations, but income seems to have risen commensurately until Aurelius; perhaps this controlled inflation was a simple way of relieving debtors at the expense of creditors whose superior ability and opportunity, unchecked, would have concentrated wealth to the point of economic coagulation and political revolution. Despite these changes we must consider the Roman fiscal system one of the most successful and stable in history. For two centuries a single monetary standard was honored throughout the Empire; and with this stable medium investment and trade flourished as never before in the memory of men.
Consequently bankers were everywhere. They served as money-changers, accepted checking accounts and interest-bearing deposits, issued travelers’ checks and bills of exchange, managed, bought, and sold realty, placed investments and collected debts, and lent money to individuals and partnerships. This banking system had come from Greece and the Greek East, and was mostly in the hands of Greeks and Syrians even in Italy and the West; in Gaul the words for Syrian and banker were synonyms.49 Interest rates, which had sunk to four per cent under the weight of Augustus’ Egyptian spoils, rose to six per cent after his death, and reached their legal maximum of twelve per cent by the age of Constantine.
The famous “panic” of A.D. 33 illustrates the development and complex interdependence of banks and commerce in the Empire. Augustus had coined and spent money lavishly, on the theory that its increased circulation, low interest rates, and rising prices would stimulate business. They did; but as the process could not go on forever, a reaction set in as early as 10 B.C., when this flush minting ceased. Tiberius rebounded to the opposite theory—that the most economical economy is the best. He severely limited the governmental expenditures, sharply restricted new issues of currency, and hoarded 2,700,000,000 sesterces in the Treasury. The resulting dearth of circulating medium was made worse by the drain of money eastward in exchange for luxuries. Prices fell, interest rates rose, creditors foreclosed on debtors, debtors sued usurers, and moneylending almost ceased. The Senate tried to check the export of capital by requiring a high percentage of every senator’s fortune to be invested in Italian land; senators thereupon called in loans and foreclosed mortgages to raise cash, and the crisis rose. When the senator Publius Spinther notified the bank of Balbus and Ollius that he must withdraw 30,000,000 sesterces to comply with the new law, the firm announced its bankruptcy. At the same time the failure of an Alexandrian firm, Seuthes and Son—due to their loss of three ships laden with costly spices—and the collapse of the great dyeing concern of Malchus at Tyre, led to rumors that the Roman banking house of Maximus and Vibo would be broken by their extensive loans to these firms. When its depositors began a “run” on this bank it shut its doors, and later on that day a larger bank, of the Brothers Pettius, also suspended payment. Almost simultaneously came news that great banking establishments had failed in Lyons, Carthage, Corinth, and Byzantium. One after another the banks of Rome closed. Money could be borrowed only at rates far above the legal limit. Tiberius finally met the crisis by suspending the land-investment act and distributing 100,000,000 sesterces to the banks, to be lent without interest for three years on the security of realty. Private lenders were thereby constrained to lower their interest rates, money came out of hiding, and confidence slowly returned.50