The Appeal of the Fifth Century

Things were falling apart in the fifth century; government wasn't working; leaders didn't lead. Sound familiar?

There was one leader among the Emperors: Majorian. He tried to reform the corrupt government--until he was killed for trying. On the other hand, there was a parade of incompetents: Valentinian III, a ladies man, lasted 30 years, but hardly ruled a day, except in his bedroom. Petronius Maximus, one of the wealthiest Senators, lasted a few months after sending his bodyguard to assassinate Valentinian, avenging the Emperor's affair with Maximus' beautiful wife. Maximus was torn apart by the Roman mob three months later, when the Vandals were poised to sack Rome.

But what was most wrong in the fifth century, what resonates most with the current United States, was that the government itself didn't work. No one could make any useful decision. There was one way to do things--like painting the Emperor to be an inanimate god, and buying foreign soldiers to protect him, and the Empire. There was no way to respond to change, no way to do things differently.

The only way to raise money for the government's rear-guard defense was to force local gentry to make the populace pay, sometimes far more than they owed; the gentry often used foreign soldiers, the bucelarii. And with every taxation, the Empire grew poorer.

What happened in Rome in the fifth century has fascinated people in our era, because the Roman Empire lasted, as an Empire, 507 years. The American Empire has lasted 65 years. Romans thought the Empire would never fall, yet their leaders, the Senators, agreed to a coup d'état by the palace guard, rather than pay taxes, and so insured the Empire's downfall.

Americans would rather not do anything if it means raising taxes, except paying for "our boys," for "Defense." To most, it is as inconceivable that the United States might no longer be "number one," as it was to Romans that their empire would cease to exist.

In Rome, if the wealthy had been taxed, trade might have recovered, and the Empire could have afforded to fight off its enemies. In Washington, the powerful overawe any needed reform--to combat climate change, or to regulate finance, for example--and our march towards disaster is unchecked, even after electing Obama with an overwhelming mandate for change.

Like the fifth century, the 21st is marked by government that doesn't work: the Senate is blocked from all needed reform by a dedicated minority that only wants power and blocks anything threatening the--to them--profitable status quo.

In the fifth century, the strong man behind the throne had Majorian killed. Obama needn't be assassinated, if he's caved in to insiders' demands. He may still not live out his term, but he has a better chance, having placated health care "providers," Wall Street, the military, and the corporate-owned media.

In Rome in the fifth century, the wealthiest eclipsed the State with their riches, but did not contribute to the Empire's defense; they profited from it, instead. In the 21st century, bankers are bailed out by the taxpayers, and then pay each other huge bonuses, but they still don't lend out enough to business; they speculate, lend to each other, instead, and probably make money on the ongoing wars. They don't create needed jobs.

In the Roman Empire of the fifth century, there was no paper currency, no keystroke credit and debit, but the gold, silver and copper coins were continually devalued; the follis, a bronze coin with a silver coating, became smaller and smaller. That was how the empire paid its bills: by coining money with less and less intrinsic value. Significantly, gold coins were not devalued, but in the fifth century, only the wealthy ever saw them.

It's both simpler and more complicated in the 21st century; money can be printed ad infinitem, but even more easily, money can be created by a Fed entry on the credit side, literally by a keystroke. The Fed has lent, or created, trillions of dollars in the current crisis, which has certainly kept us out of a deep Depression; that is the advantage of fiat money. But what, really, determines the value of the US dollar? Only "the good faith and credit" of the United States. The Chinese and others may get to the point in which "good faith" is not good enough.

The Fed has, for many years, set money targets that create a moderate rate of inflation: 1-2%, usually. Libertarians of the Ron Paul variety claim that fiat money, and regulated money growth is a grand theft, a conspiracy of the government and banks, creating money to extract value as an unacknowledged tax. It may actually work that way: government buying goods and services for nothing other than its own creation. But the intent is to keep business humming, since a slowly inflating currency increases demand for goods and services. Deflation is what all want to avoid: prices go down (the value of the currency goes up), because no one is buying, or able to sell. Deflation has actually happened recently, in economic sectors like housing.

The point of this slightly technical discussion is this: fiat money permits macro-management of the economy, but it can also corrupt it entirely. The fear is that it has already. On the other hand, a currency based on gold would be subject to the availability of the metal, not on any monetary policy. The Spanish Empire was impoverished by the mountains of gold it carried off from Peru and Mexico: gold fueled inflation, and destroyed Spanish industry for centuries. A gold standard in the American colonies held back development; there wasn't enough money to go around.

Maintaining a viable value for the dollar is crucial. We don't want to see all assets lose their value, the way they did in Weimer Germany in the 1920's. Then, a young girl who was later my music teacher, worked as a babysitter. Her price: whatever it cost to buy a loaf of bread that day. Before revaluation, it took a wheelbarrow full of Marks.

So far, despite the huge amounts of money created not just by the United States but by all major currency countries (the UK, Europe, China, Japan), the dollar has not depreciated significantly. In fact, if the US had not created more money, and all those other countries had, the dollar would have become more valuable, but we wouldn't be able to export goods; we'd be facing deflation.

As it is, all the important economies are being sustained by fiat currency manipulation: the US is only the largest of them.

But the fact of dysfunctional governments printing money also rings a resonance between the Roman Empire in the fifth century and the American in the 21st. In Rome's case, the currency became too devalued to pay off the palace guard; it was bought off with a crown: Odoacer, an Ostrogoth, became the King of Italy, with the power to make land grants to his followers: they became the new aristocracy. The Empire became a distant memory.

In the 21st, the jury is still out. Can Geithner and Bernanke restrain themselves enough to create only the money needed, and not a cent more?

In the fifth century, there were radical leaders, who offered extreme change. Attila, for example, tried to destroy urban civilization (he saw it as evil); the Vandals attempted merely a change in personnel: Vandals replacing wealthy Romans; they didn't succeed, ultimately. Monks offered eternal life, instead.

Now, there is al Qaeda--and a whole variety of end-time cults hoping for the Rapture.

The ultimate appeal of the fifth century was that everything fell apart. The European economy did not revive for 700+ years; the Dark Ages replaced Empire; "powers" became highly localized; Europe became the feudal system.

It's not clear, yet, whether we will follow Rome into the "dustbin of history," or whether we'll retire gracefully to become a "former" empire, like the UK, or the Netherlands. But one way or another, the American era is on the way out as surely as the Roman era was, long before 476.

What do you think? Comments?