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Cashin On Gartman On Diocletian's Lessons In Central Planning

Tyler Durden's picture




 

We all have had our fair share recently of Gartman the "market timer" (here and here). However, little have we experienced of Gartman "the historian". Here he is, by way of Art Cashin, being off by 300 years notwithstanding, describing something that he has intoned on recently in his ever-so-frequent appearances on CNBC: the "they" who are in control, or in this case the central planners whose decisions ultimately lead to nothing but ruin.

 

Art Cashin - Too Good Not To Pass Along

In his latest Gartman newsletter, Dennis cites historians, Will and Ariel Durant, on the decline of the Roman Empire.

Rome had its socialist interlude under Diocletian. Faced with increasing poverty and restlessness among the masses, and with the imminent danger of barbarian invasion, he issued in A.D. 3 an edictum de pretiis, which denounced monopolists for keeping goods from the market to raise prices, and set maximum prices and wages for all important articles and services. Extensive public works were undertaken to put the unemployed to work, and food was distributed gratis, or at reduced prices, to the poor. The government – which already owned most mines, quarries, and salt deposits – brought nearly all major industries and guilds under detailed control. “In every large town,” we are told, “the state became a powerful employer, standing head and shoulders above the private industrialists, who were in any case crushed by taxation.” When businessmen predicted ruin, Diocletian explained that the barbarians were at the gate, and that individual liberty had to be shelved until collective liberty could be made secure. The socialism of Diocletian was a war economy, made possible by fear of foreign attack. Other factors equal, internal liberty varies inversely with external danger.

 

The task of controlling men in economic detail proved too much for Diocletian's expanding, expensive, and corrupt bureaucracy. To support this officialdom – the army, the courts, public works, and the dole – taxation rose to such heights that people lost the incentive to work or earn, and an erosive contest began between lawyers finding devices to evade taxes and lawyers formulating laws to prevent evasion. Thousands of Romans, to escape the tax gatherer, fled over the frontiers to seek refuge among the barbarians. Seeking to check this elusive mobility and to facilitate regulation and taxation, the government issued decrees binding the peasant to his field and the worker to his shop until all their debts and taxes had been paid. In this and other ways medieval serfdom began.

Read it. Put it down. Pick it up and reread it again. Repeat several times. There are many lessons here, many important lessons. (We think the date, however, is a typo. Diocletian ruled from 284 to 305)

 

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Thu, 04/12/2012 - 11:00 | 2337873 Rastadamus
Rastadamus's picture

No taxation without condoms....

Thu, 04/12/2012 - 11:07 | 2337921 SilverTree
SilverTree's picture

It's all history.

Thu, 04/12/2012 - 11:12 | 2337940 CClarity
CClarity's picture

And Diocletian built his Palace in Split - along the Croatian Coast, across the Adriatic Sea and far from the flames of Rome.

Where do we think Paulson, Bernanke, Greenspan, Blankfein, Mozilla, etc will build their palaces?  I doubt Greenwich and Aspen etc will continue to be as hospitable in the future.

Thu, 04/12/2012 - 11:18 | 2337974 slewie the pi rat
slewie the pi rat's picture

Croatia still has appeal

 

 

Robert Benmoshe: It wasn't so bad [before] because I was there six months out of the year [during] my retirement. [But] in August [2009], the folks at AIG asked me to come out of my retirement. I told them I couldn't start until October and they said look, the current CEO, he wants to retire. We need you to start. I said I have to go back for my first harvest of Zinfandel; my son is coming with my granddaughter and his wife so I've got a family thing. I said I don't know how I can do both. So we agreed that I would start early but then I could go finish up my Croatia stuff. It is difficult but the team I have there—no place else in the world can you find people like these people, they’re just fabulous; they’re helping me in every way they can.  

 

WineSpectator: When you're not drinking Croatian Zinfandel, what are you drinking?

 

Robert Benmoshe: Most of the time I'm drinking

http://www.winespectator.com/webfeature/show/id/41382

Thu, 04/12/2012 - 11:40 | 2338108 CClarity
CClarity's picture

Odlicno!  I'm pretty sure he's drinking and growing Plavic Mali, not Zinfandel.  But they're "cousins", similar to Primitivo.

Thu, 04/12/2012 - 15:11 | 2338971 Likstane
Likstane's picture

How can you believe what this slewie says?  Isn't ha an imposter?

Thu, 04/12/2012 - 11:40 | 2338103 SteveGennisonBa...
SteveGennisonBallWasher's picture

I was at his palace last year.  Split is a great city.

Thu, 04/12/2012 - 12:42 | 2338447 Carl Spackler
Carl Spackler's picture

Where do we think Paulson, Bernanke, Greenspan, Blankfein, Mozilla, etc will build their palaces? 

Answer:    Jackson Hole, Wyoming

Not easy to get to and plenty of natural resources nearby.

Thu, 04/12/2012 - 15:03 | 2338938 rosiescenario
rosiescenario's picture

True, but lots of ultra conservative extremely well armed peasants in the region. Trust me Bernank and his minions fit in with the Wyoming population like skunks at a church social...

Thu, 04/12/2012 - 12:44 | 2338453 Nukular Freedum
Nukular Freedum's picture

Yes and I noticed some of the same parallels myself in the following blog article a few months ago, kudos to them for the greater detail (I'm no historian!)

http://pearlsforswine.wordpress.com/2012/01/29/the-crisis-of-the-third-c...

Thu, 04/12/2012 - 13:42 | 2338646 Stuck on Zero
Stuck on Zero's picture

Bush and family purchased 89,000 acres in Paraguay. 

Thu, 04/12/2012 - 16:44 | 2339334 BarberKen19
BarberKen19's picture

my neighbor's mom makes $82 hourly on the computer. She has been out of a job for ten months but last month her pay check was $14998 just working on the computer for a few hours. Read more on this web site and click Home .....  WWW.LAZYCASH.COM

Thu, 04/12/2012 - 11:12 | 2337938 TruthInSunshine
TruthInSunshine's picture

How appropriate and commensurate to the times we are living in, under the guidance of fractional reserve banking charlatans, doing the bidding of

http://www.paralumun.com/romecurr.htm

The type of coins issued changed under the coinage reform of Diocletian, the heavily debased antoninianus (double denarius) was replaced with a variety of new denominations, and a new range of imagery was introduced that attempted to convey different ideas. The new government set up by Diocletian was a tetrarchy, or rule by four, with each emperor receiving a separate territory to rule. The new imagery includes a large, stern portrait that is representative of the emperor. This image was not meant to show the actual portrait of a particular emperor, but was instead a caricature that embodied the power that the emperor possessed. The reverse type was equally universal, featuring the spirit (or genius) of the Romans. The introduction of a new type of government and a new system of coinage represents an attempt by Diocletian to return peace and security to Rome, after the previous century of constant warfare and uncertainty. Diocletian characterizes the emperor as an interchangeable authority figure by depicting him with a generalized image. He tries to emphasize unity amongst the Romans by featuring the spirit of Romans (Sutherland 254). The reverse types of coins of the late Empire emphasized general themes, and discontinued the more specific personifications depicted previously. The reverse types featured legends that proclaimed the glory of Rome, the glory of the army, victory against the "barbarians", the restoration of happy times, and the greatness of the emperor. These general types persisted even after the adoption of Christianity as the state religion of the Roman Empire. Muted Christian imagery, such as standards that featured Christograms (the chi-rho monogram for Jesus Christ’s name in Greek) were introduced, but with a few rare exceptions, there were no explicitly Christian themes. From the time of Constantine until the "end" of the Roman Empire, coins featured indistinguishable, idealized portraits and general proclamations of greatness. Although the denarius remained the backbone of the Roman economy from its introduction in 211 BC until it ceased to be normally minted in the middle of the third century, the purity and weight of the coin slowly, but inexorably decreased. The problem of debasement in the Roman economy appears to be pervasive, although the severity of the debasement often paralleled the strength or weakness of the Empire. While it is not clear why debasement was such a common occurrence for the Romans, it's believed that it was caused by several factors, including a lack of precious metals, inadequacies in state finances, and inflation. When introduced, the denarius contained nearly pure silver at a theoretical weight of approximately 4.5 grams. The theoretical standard, although not usually met in practice, remained fairly stable throughout the Republic, with the notable exception of times of war. The large number of coins required to raise an army and pay for supplies often necessitated the debasement of the coinage. An example of this is the denarii that were struck by Mark Antony to pay his army during his battles against Octavian. These coins, slightly smaller in diameter than a normal denarius, were made of noticeably debased silver. The obverse features a galley and the name Antony, while the reverse features the name of the particular legion that each issue was intended for (it is interesting to note that hoard evidence shows that these coins remained in circulation over 200 years after they were minted, due to their lower silver content). The coinage of the Julio-Claudians remained stable at 4 grams of silver, until the debasement of Nero in 64, when the silver content was reduced to 3.8 grams, perhaps due to the cost of rebuilding the city after fire consumed a considerable portion of Rome. The denarius continued to decline slowly in purity, with a notable reduction instituted by Septimius Severus. This was followed by the introduction of a double denarius piece, differentiated from the denarius by the radiate crown worn by the emperor. The coin is commonly called the antoninianus by numismatists after the emperor Caracalla, who introduced the coin in early in 215. Although nominally valued at two denarii, the antoninianus never contained more than 1.6 times the amount of silver of the denarius. The profit of minting a coin valued at two denarii, but weighing only about one and a half times as much is obvious; the reaction to these coins by the public is unknown. As the number of antoniniani minted increased, the number of denarii minted decreased, until the denarius ceased to be minted in significant quantities by the middle of the third century. Again, coinage saw its greatest debasement during times of war and uncertainty. The second half of the third century was rife with this war and uncertainty, and the silver content of the antonianus fell to only 2%, losing almost an appearance of being silver. During this time the aureus remained slightly more stable, before it too became smaller and more base before Diocletian’s reform. The decline in the silver content to the point where coins contained virtually no silver at all was countered by the monetary reform of Aurelian in 274. The standard for silver in the antonianus was set at twenty parts copper to one part silver, and the coins were noticeably marked as containing that amount (XXI in Latin or KA in Greek). Despite the reform of Aurelian, silver content continued to decline, until the monetary reform of Diocletian. In addition to establishing the tetrarchy, Diocletian devised the following system of denominations: an aureus struck at the standard of 60 to the pound, a new silver coin struck at the old Neronian standard known as the argenteus, and a new large bronze coin that contained two percent silver. Diocletian issued an Edict on Maximum Prices in 301, which attempted to establish the legal maximum prices that could be charged for goods and services. The attempt to establish maximum prices was an exercise in futility as maximum prices were impossible to enforce. The Edict was reckoned in terms of denarii, although no such coin had been struck for over 50 years (it is believed that the bronze folles was valued at 12.5 denarii). Like earlier reforms, this too eroded and was replaced by an uncertain coinage consisting mostly of gold and bronze. The exact relationship and denomination of the bronze issues of a variety of sizes is not known, and is believed to have fluctuated heavily on the market. The exact reason that Roman coinage sustained constant debasement is not known, but the most common theories involve inflation, trade with India, which drained silver from the Mediterranean world, and inadequacies in state finances. Another reason for debasement was lack of raw metal with which to produce coins. Italy itself contains no large or reliable mines for precious metals, therefore the precious metals for coinage had to be obtained elsewhere. The majority of the precious metals that Rome obtained during its period of expansion arrived in the form of war booty from defeated territories, and subsequent tribute and taxes by new-conquered lands. When Rome ceased to expand, the precious metals for coinage then came from newly mined silver, such as from Greece and Spain, and from melting older coins. Without a constant influx of precious metals from an outside source, and with the expense of continual wars, it would seem reasonable that coins might be debased to increase the amount that the government could spend. A simpler possible explanation for the debasement of coinage is that it allowed the state to spend more than it had. By decreasing the amount of silver in their coins, Rome could produce more coins and "stretch" their budget. As time progressed the trade deficit of the west because of its buying of grain and other commodities led to a currency drainage in Rome. As a renowned collector from the 18th century once said, "Each Roman coin is a unique, yet sophisticated piece of history."

Thu, 04/12/2012 - 11:15 | 2337949 SilverTree
SilverTree's picture

Pre-1965 coin clipping, bitches.

 

http://en.wikipedia.org/wiki/Methods_of_coin_debasement

Thu, 04/12/2012 - 13:04 | 2338506 valkyrie99
valkyrie99's picture

The main reason that silver was in constant short supply and needed to be debased rooted back to Caesar’s time. Caesar had created gold coinage with his image at a 12/1 ratio to silver.  Previously it has been valued at about 6-7/1 gold/silver ratio since the rise of the first temples of Greece that originally monetized gold (which was also overvalued by extremes compared to how much it would trade for by weight previously – before this people used many commodities as money but trade was based on the “cow standard” for 3,000 years). Anyways, the overvaluation of gold coinage was very profitable for the classical Roman state as Ceasar’s coinage became the reserve currency throughout the ancient societies although in the east, esp. India, the gold/silver ratio was still 6-7/1.  This meant that one could receive about twice as much gold for a trade in India then they could at home! 

 

The Roman Empire took many steps to keep this secret unknown, prevent merchants from taking advantage of this disparity, and fought many wars to stay in control of this trade. Rome ensured, also often by sword, only the empire had the monetary power to coin gold (silver and at times copper was permitted to be coined by territories) and that only the Roman gold coins would be used in trade within its boundaries.  Over time this imbalance caused silver (the more ‘democratic;’ of currencies that more parties could coin that was originally more prevalent among the population) to slowly filter to the east.  This process was accelerated as Rome’s industry became increasingly focused on war so increasingly only the raw silver was traded for gold that could be coined at 100% profit for the Romans, instead of goods also being traded at an additional 100% profit in gold. 

 

This was one way wealth became concentrated within the empire (currency of the masses being drained while the currency of the state increased in quantity that stayed help between powers of the state and their cronies).  There were many other ways wealth was concentrated, such as conscription of small landowners to fight in wars and when they would return their land being seized by large landowners who would loan land and equipments back to them so they would finds themselves slaves to pay it back whenever weather dictated an unproductive harvest.  Diocletian passed laws limiting the amount of land that could be owned that their appear to be no attempts at any time to follow (actually most believe price controls were never enforced either and many believe they weren’t really price controls that were discovered but actually lists of exchange rates provided by institutions of the state when exchanging grains or cows or tools for gold that actually acted as a price floor, only used top pay taxes and repay loans at lowered prices when market prices would have fallen below in years of good harvests, revamping a simular idea that had been used by the Egyptians/Assirians/Babilonians milleniums before).  

 

Because very few of the measures in the article above were actually followed, they didn’t make much impact.  Depreciation likely did cause inflation, but the rate of depreciation was slow enough that it would have fallen within what central banks shoot for today; no, not great but also not devastating hyperinflation….also society didn’t show any improvement when the currency was later help stable from 4-700AD(ish?) We find that as Rome continued to decline this was replaced by much stronger deflation as silver currency disappeared to the east and the gold became increasingly held within the Roman capitol, which was moved to Constantinople, the wealthiest city in the world of the time that was surrounded by triple 60 foot walls while the countryside started into the dark ages and a time known as the silver famine and Rome lost control of these once massive territories.  

 

Thu, 04/12/2012 - 13:28 | 2338597 tarsubil
tarsubil's picture

So Constantinople held that gold until the egg was cracked by the Venetians/Crusaders?

Thu, 04/12/2012 - 11:13 | 2337944 Eclipse89
Eclipse89's picture

But who are today's barbarians? Choose:

a) Evil speculators

b) Bernanke & Co.

c) The swiss

Thu, 04/12/2012 - 11:20 | 2337987 Ted Baker
Ted Baker's picture

THE SWISS BUSTERS

Thu, 04/12/2012 - 11:27 | 2338026 Bartanist
Bartanist's picture

The first question is "who is the emperor?". Once one finds the emperor then everyone who is not under the control of the emperor is, by definition, a barbarian.

Thu, 04/12/2012 - 11:28 | 2338034 walküre
walküre's picture

You have to ask? Really?

The evil barbarian islamofascist terrorists of course! We need to spend trillions more to fight them in their caves or whereever they may be hiding.

Thu, 04/12/2012 - 11:01 | 2337880 spiral_eyes
spiral_eyes's picture

Excellent work, Tyler.

Thu, 04/12/2012 - 11:02 | 2337889 JailBank
JailBank's picture

Did Diocletian have sweet GSA getaways? I get everything except the corrupt government. The good people on the television told my Obama has singlehandedly stomped out all corruption in government. Who I am I to say that has not happened? I can't think for myself.

 

Long Live the FED. Long Live the Bernank!

Thu, 04/12/2012 - 11:06 | 2337900 Goldfinger
Goldfinger's picture

Intersting that everybody liked it enough to forward it on... Originally forwarded by John Mauldin..

 

I’m Worried

David Kotok
April 8, 2012

A note to readers. This 2000-word commentary is a longer-term view; think in terms of years, not months or days. The essay is not in conflict with the fully invested position currently held at Cumberland. The words reflect my personal thinking only. Some of my colleagues disagree. In my personal view, the future is uncertain (of course) and may be unattractive for the longer-term outlook. In my view, our American political system is failing us. In my view, we are joining the list of declining world powers. The framework to support that argument follows.

"The external menace 'You'll end up like Greece, if you do not do this and that' and the internal opprobrium heaped on some categories of taxpayers are very powerful and dangerous instruments to deprive people of their own personal freedoms." –Vincenzo Sciarretta

My friend Vincenzo is a journalist from Italy. He is a serious writer and researcher. He has covered the financial markets and economy of Italy for years. He and I co-authored a book on Europe during the optimistic period. If he and I were to write such a book now, it would probably be quite pessimistic.

Vince responded to my recent email series about the downward spiral underway in the euro zone. Readers may find those essays at www.cumber.com. Vince noted my reports from the meetings in Paris and my reference to the upcoming French elections, where the promise of the Socialist candidate is to raise the tax rate on the highest income level to 75%. I will end this commentary with a longer email from Vince, in which he quotes historian Will Durant and discusses the fall of the Roman Empire.

Now to write some thoughts that gnaw at me in the late of the night, when sleep is elusive.

Simply put: I'm worried.

When I get worried, I read and re-read in my library. I can honestly say that I have had my nose in a thousand of those books. The library holds many texts by giants. They wrote about history, economics, and finance. They took the strategic view. George Akerlof, Jared Diamond, Niall Ferguson, Carmen Reinhart & Ken Rogoff, Robert Shiller, and Nassim Taleb are among the modern writers. Milton Friedman, Martin Gilbert, Friedrich Hayek and his polar opposite John Maynard Keynes, Ludwig von Mises, R.R. Palmer, and Adam Smith are among the classics.

A favorite of mine is Paul Kennedy. Twenty-five years ago, this Yale historian concluded his monumental work The Rise and Fall of Great Powers with a profound observation:

"In the largest sense of all, therefore, the only answer to the question increasingly debated by the public of whether the United States can preserve its existing position is 'no – for it simply has not been given to any one society to remain permanently ahead of all the others, because that would imply a freezing of the differential pattern of growth rates, technological advance, and military developments which has existed since time immemorial."

Kennedy then argued that the United States has the ability to moderate or accelerate the pace of decline. Such is also the case for other great powers, many of which are in a state of decline from their centuries-old power peak. Among others in his treatise, Kennedy's history lessons examine Spain, France, Rome, and the Austro-Hungarian Empire.

I think I just covered a lot of the euro-zone geography.

In 1987, Kennedy warned us, "The task facing American statesmen over the decades, therefore, is to recognize that broad trends are under way, and that there is a need to 'manage' affairs so that the relative erosion of the United States' position takes place slowly and smoothly." He added the additional warning that it not be "accelerated by policies which bring merely short-term advantage but longer-term disadvantage."

Unfortunately, America's leadership has not heeded such warnings.

For decades futurists have complained about the rising use of government debt financing by the United States. They predicted calamitous outcomes, which did not arrive as expected. Paul Volcker and Alan Greenspan applied monetary policy in ways that allowed inflation and, hence, interest rates to spend a quarter century in decline. The Volcker-Greenspan era opened with the highest interest rates since the Civil War. Building on this downward momentum, Ben Bernanke has taken the target short-term interest rate to near zero and held it there.

During the same three decades, the US altered its fiscal policy, first under Ronald Reagan and almost continuously since. (The Clinton administration was the exception.) Rising deficit financing has been facilitated by falling nominal interest rates. That combination leads to level, or even falling, aggregate debt service. You can owe more and more and have smaller and smaller monthly payments. That is the magic of falling interest rates. Until they hit the zero boundary.

What happens when the music stops and the chairs are full? Are we reaching that point in the United States? It appears we have done so in Europe, certainly in Greece, the eldest of the declining great powers. We are also getting there in Japan and the UK. All four confront similar financial straits: zero-bound interest rates coupled with expanding national government debt.

About 85% of the capital markets of the world trade by means of the dollar, yen, pound, and euro. The G-4 central banks have collectively expanded their holdings of government securities and loans from $3.5 trillion to $9 trillion in just four years. At the prevailing very low interest rates, the functioning of monetary policy and the role of fiscal policy merge. Is there any difference between a million-dollar suitcase of one hundred dollar bills and a million-dollar, zero-interest treasury bill? You need an armed guard to protect the first one. With the second one, you need to clear an electronic trade in a safe financial institution, not an unsupervised (no more Fed surveillance) Federal Reserve primary dealer like MF Global. Your earnings on either the cash or the T-bill are the same: you earn zero. You can use the treasury bill to secure a repo transaction at a near-zero interest rate. You can use the cash to conduct many types of black-market or gray-market trades. Is it any wonder that the hundred-dollar bill is so popular? Isn't it understandable that roughly two-thirds of US currency circulates outside the United States?

Is this a healthy situation? How long can it persist? What happens next? When interest rates eventually rise, what will be the result of this blend of monetary/fiscal policy as its unwinding turns malignant?

Moreover, who then will be the politicians that inherit this mess? Who will occupy the central banker's chair?

I worry because there is no rationally explained strategic-exit plan in the G4. Not in the US. Not in Japan. Not in the euro zone. Not in the United Kingdom.

I also worry because the direction of taxation is up, if certain politicians continue to have their way. I worry because US business tax rates are now the highest in the entire world. In addition, I worry because of the increasing power that national governments wield in the mature economies of the world.

Applied power eventually leads to serfdom.

Increasing taxation is a characteristic of a declining great power.

Governments are failing to heed Paul Kennedy's warnings. They are worsening the longer-term outlook. The Western world's leaders ignored Kennedy when he wrote "… accelerated by policies which bring merely short-term advantage but longer-term disadvantage."

Zero-bound interest rates are a short-term advantage. We enjoy them. We profit from them. We expect them to continue for a while. They are like the oxygen administered to a very ill patient. If the patient dies, the oxygen has eased the pain in the terminal phase. If the patient lives, the lungs have been scarred and need many years of healing and repair. Today, the patient is receiving oxygen in the G4. Death is being delayed (Greece) or, perhaps, thwarted (elsewhere in the euro zone, Japan, US, and UK).

We do not know how this will play out. History only warns us that many of the likely outcomes may be unpleasant. The authors I cited have articulated their differing and diverse views. Their conclusions have tended to be in the form of warnings.

Paul Kennedy favors candor. In his second, exquisite work, Preparing for the Twenty-First Century, he wrote: "Many earlier attempts to peer into the future concluded either in a tone of unrestrained optimism, or in gloomy forebodings, or (as in Toynbee's case) in appeals for spiritual revival. Perhaps this work should also finish on such a note. Yet the fact remains that simply because we do not know the future, it is impossible to say with certainty whether global trends will lead to terrible disasters or be diverted by astonishing advances in human adaption."

Of course, we hope for the latter and worry about the former. History gives us little comfort.

For the time being we shall remain on the sanguine side with regard to this global experiment with increasing debt, zero-bound interest rates, and a monetary/fiscal policy compromise that obfuscates the difference between them.

As long as this persists, it means financial markets do well, stocks rise, risk assets regain favor, bonds with hedges yield results, and cash continues to earn zero return.

That is now. It may change tomorrow, next week, next month, next year or not for quite some time. There is no way to know.

For the downside from history we return to Vincenzo's email to me:

"Dear David,

"I invite you to read the last few sentences of the below article from The Lessons of History, by Will and Ariel Durant. It is about how the destruction of the Roman Empire through the taxation channel made people 'slaves,' in other words how serfdom emerged. This is my number one fear for Italy, but I guess France is making the same mistakes, just starting from a lower debt level. You can also find an online version of the book, thanks to Google.

"Rome had its socialist interlude under Diocletian. Faced with increasing poverty and restlessness among the masses, and with the imminent danger of barbarian invasion, he issued in A.D. 3 an edictum de pretiis, which denounced monopolists for keeping goods from the market to raise prices, and set maximum prices and wages for all important articles and services. Extensive public works were undertaken to put the unemployed to work, and food was distributed gratis, or at reduced prices, to the poor. The government – which already owned most mines, quarries, and salt deposits – brought nearly all major industries and guilds under detailed control. 'In every large town,' we are told, 'the state became a powerful employer, standing head and shoulders above the private industrialists, who were in any case crushed by taxation.' When businessmen predicted ruin, Diocletian explained that the barbarians were at the gate, and that individual liberty had to be shelved until collective liberty could be made secure. The socialism of Diocletian was a war economy, made possible by fear of foreign attack. Other factors equal, internal liberty varies inversely with external danger.

"The task of controlling men in economic detail proved too much for Diocletian's expanding, expensive, and corrupt bureaucracy. To support this officialdom – the army, the courts, public works, and the dole – taxation rose to such heights that people lost the incentive to work or earn, and an erosive contest began between lawyers finding devices to evade taxes and lawyers formulating laws to prevent evasion. Thousands of Romans, to escape the tax gatherer, fled over the frontiers to seek refuge among the barbarians. Seeking to check this elusive mobility and to facilitate regulation and taxation, the government issued decrees binding the peasant to his field and the worker to his shop until all their debts and taxes had been paid. In this and other ways medieval serfdom began."

Thank you, Vincenzo, for this serious response. Thank you Paul Kennedy for superbly articulating history and issuing clear warnings. Thank you, dear reader, if you are still with me. I hope I have provoked some thought.

Now we will seek another night's sleep and hope it is not elusive.

David R. Kotok, Chairman and Chief Investment Officer

Thu, 04/12/2012 - 11:20 | 2337984 CrashisOptimistic
CrashisOptimistic's picture

Neither I nor more or less anyone else read a word of that post.

Go beyond 3-4 paragraphs in a comment thread and you will not be read.  That's not an attack.  That's just reality.

Thu, 04/12/2012 - 11:31 | 2338040 Goldfinger
Goldfinger's picture

So how do you explain Up votes? People clicking randomly? Nobody is forced to read stuff they don't want. The article was very short. This one, i think is worht the read.. Also  it ends with the same quote from a different person. This was the point of my reposting it.

Thu, 04/12/2012 - 11:46 | 2338144 5880
5880's picture

now that's a good attention span!

Thu, 04/12/2012 - 11:05 | 2337902 Jason T
Jason T's picture

"The disintegration continued, and there seemed no power great enough to stop it. The treasury was empty, agriculture prostrate, industry demoralized, trade stagnant, and the only commercial activity was a maddened, consuming, parasitic speculation. In A.D. 301 Diocletian issued his famous price fix- ing decree as the last measure of a desperate sovereign."

pg. 43 of Money and Man by Elglin Groseclose

Thu, 04/12/2012 - 11:06 | 2337906 truont
truont's picture

...The Road to Serfdom...

Thu, 04/12/2012 - 11:06 | 2337912 bank guy in Brussels
bank guy in Brussels's picture

Martin Armstrong has said that Julius Caesar was assassinated because he wanted to lower interest and debt burdens on the common people ... with the Senators who killed him representing the money-lending interests of the time.

There is indeed, not that much new under the sun.

Thu, 04/12/2012 - 11:25 | 2338022 walküre
walküre's picture

Instead they established Christianity as the hopium of their time. It gave them a good run. Don't you think?

Thu, 04/12/2012 - 13:09 | 2338515 TBT or not TBT
TBT or not TBT's picture

Yield unto Caesar, as J.C. Himself reportedly put it.   Reportedly as in, by the persons who wrote the various gospels a pretty long time after His crucifiction.    

Another reason Christianity took over BTW, was through differential survival rates of Christian's children versus those of pagans.   The pagans aborted a lot of their children well after the usual frist-9-months-in-the-womb period preferred by current day post-christian pagans.     The pater familias held the power of life and death over wife and family.   Christians adopted a more moderate approach that favored life, and so their movement grew quickly over the generations.

Thu, 04/12/2012 - 13:32 | 2338608 Nukular Freedum
Nukular Freedum's picture

Well he wasnt. He was killed because Brutus was descended from the Marcus Brutus credited with founding the republic. It was a matter of family honour and he did it, as he said, for "freedom".

Its true that the Aristocratic class were antagonistic to Caesars reforms but the actual catalyst was Brutus' Republican psychology.

Thu, 04/12/2012 - 11:21 | 2337916 vast-dom
vast-dom's picture

Change a few names and details and that decline is all about NOW.

 

(PS: the Romans did engage in their very own kind of HFT too: a free subsbription to my posts if you can figure it out [hell that's a better and legit free subsciption as compated to Graham's Pheonix non-free free newsletter].)

Thu, 04/12/2012 - 11:08 | 2337918 xela2200
xela2200's picture

History teaches that nobody ever learns from history.

Thu, 04/12/2012 - 11:17 | 2337970 vast-dom
vast-dom's picture

Correctamundo! 

Thu, 04/12/2012 - 11:40 | 2338105 Boston
Boston's picture

Or they DO learn from history, but "they" then die off, leaving their kids and grandkids....who have not learned from history.....to repeat the mistakes of their parents and grandparents.

Hence the ~80 year, or long cycle.

Thu, 04/12/2012 - 11:52 | 2338180 vast-dom
vast-dom's picture

They learn that history repeats itself and so they justify repeating the wholesale theft of their time. The standard "criminal" rationale: If I don't do it, somebody else will; or in our case: If I don't do it, it's only a matter of time before this happens again.

Thu, 04/12/2012 - 11:08 | 2337925 williambanzai7
williambanzai7's picture

FEDERAL RESERVE POLITBURO

Thu, 04/12/2012 - 11:38 | 2338014 gjp
gjp's picture

They truly are the politburo with their cynical manipulation of the public, central planning, and helping themselves and their friends to all the spoils.

But you know you got the cyrillic all wrong, don't you?  I guess if it was right, though, most would be unable to read it.

+1 regardless, I love you Banzai, and the inclusion of Montgomery Burns is brilliant

Thu, 04/12/2012 - 11:13 | 2337946 MrBoompi
MrBoompi's picture

Yes, we all know that once a country started feeding the poor for free, the collapse of that society soon followed, and we should know better than to ever mess with monopolies.

\sarc

Thu, 04/12/2012 - 21:48 | 2340240 StychoKiller
StychoKiller's picture

"Poor" is a state of mind.

Thu, 04/12/2012 - 11:16 | 2337957 CrashisOptimistic
CrashisOptimistic's picture

Sorry, and yeah, I do appreciate the work to find such perspective, but this is not useful.

There is no history.  There has never before been a world of 7 billion people facing loss of the oil that provides food.  The famines of history have generally been blight or weather derived and as such they were known to be temporary.

Insufficient oil is not temporary.  Roman-like government control of oil industry will not add a drop to what comes out of the ground.

This is not a problem with any historic parallels.  There have never been 6 billion rotting corpses choking rivers any time in history. 

Thu, 04/12/2012 - 11:21 | 2337996 walküre
walküre's picture

CrashisOptimistic says:

There have never been 6 billion rotting corpses choking rivers any time in history.

Wow, you are setting new records for your handle. And I thought I was having a bad morning. Please tell me you didn't short this bullshit market in the last few days?

Thu, 04/12/2012 - 11:27 | 2338024 CrashisOptimistic
CrashisOptimistic's picture

The market doesn't matter.  Quotes from Putin this morning matter.

He wants to remove all new oil field development from the export tax.

Why?  Because investment in drilling is NOT FLOWING IN.  You have to understand the details to understand what this means.

Russia's fields are OLD.  They are not able to hold oil production up.  They HAVE to drill new fields to offset the declining output from the old fields and money is not coming in to pay for that drilling -- for the rather good reason that the prospects of success per hole are less and less bright because the brightest seismic image areas have already been drained.

If Russia loses production, there is nowhere to make that up.

Thu, 04/12/2012 - 11:34 | 2338054 walküre
walküre's picture

Right. LNG could power vehicles but that is only a very small part of the overall applications for oil. We can't replace oil. Period.

Thu, 04/12/2012 - 15:08 | 2338952 rosiescenario
rosiescenario's picture

Uh, you might wish to look at what Germany did during WWII and what SASOL did in So. Africa before stating "we cannot replace oil". The whalers out of Nnatucket once said a similar thing.

Thu, 04/12/2012 - 12:39 | 2338438 robobbob
robobbob's picture

disagree

the magnitude of the problem is unique, however, all historical collapses have appeared to be the end of the world to the participants.

subsahara africa is littered with lost kingdoms where land depletion was permenant. the fall of the mayans and the anasazi indians are pegged to that same occurrance.

peak oil, peak wheat, peak maize, peak silver, peak limestone, peak trust. All cultures that relied too heavily on a given resource being available in quanties and at costs that were not sustainable or substitutable have suffered the same fate. failing to make adaquate provisions is to walk into the malthusian trap. for the benefit of a few elites, we are blindly walking straight into it.

the only difference this time is that it will be televised.

Thu, 04/12/2012 - 14:44 | 2338866 QuietCorday
QuietCorday's picture

Very true. What you see across a lot of the ME isn't "natural"; it is the result of 6000 years of agriculture ripping everything out of the soil, and serious levels of deforestation by humans at the same time. They overuse the resource, and the lands turns to dust.

Thu, 04/12/2012 - 11:17 | 2337969 azzhatter
azzhatter's picture

But....but.....we have the shale

Thu, 04/12/2012 - 11:21 | 2337992 ebworthen
ebworthen's picture

"...corrupt bureaucracy" would be the key term from the fall of Diocletian.

Ours includes Wall Street hand-in-hand with government stealing from whomever they can.

The worst of both worlds; crony capitalism and parasitic socialism working toward the same goal - oppression of the individual and family for the sake of the corporation and state.

 

Thu, 04/12/2012 - 11:22 | 2337997 Ostapuk Ivano
Ostapuk Ivano's picture

So is it time to leave the USA? What country would make sense?

Thu, 04/12/2012 - 13:16 | 2338538 Nukular Freedum
Nukular Freedum's picture

Dumbfuckistan.

Thu, 04/12/2012 - 11:23 | 2338005 insanelysane
insanelysane's picture

But.....This time is different!

Thu, 04/12/2012 - 11:38 | 2338094 spanish inquisition
spanish inquisition's picture

I know! We have computers now.

Thu, 04/12/2012 - 11:28 | 2338029 Paul Atreides
Paul Atreides's picture

Some very striking similarities to the US Government including this one.

Good read, thanks Tyler!

Thu, 04/12/2012 - 11:37 | 2338073 Bam_Man
Bam_Man's picture

But we have Facebook and Farmville. So maybe it is different this time.

Thu, 04/12/2012 - 11:39 | 2338085 moriarty
moriarty's picture

How prescient, just read the part of Atlas Shrugged where the collectivist (socialist & capitalist) are thrashing such emergency powers.

Thu, 04/12/2012 - 11:44 | 2338129 the grateful un...
the grateful unemployed's picture

slavery was the primary method of employment. a lot is made of the internal problems in Rome, while the expansion into europe met growing resistance. the (corporate) supply lines were long, and vulnerable to attack. (wars have been fought through industrialization for the last hundred years. when W2 ended we had manufactured  acres and acres of new planes and tanks ready to go into battle. the other side was out of even basic supplies) the Roman soldier carried a shovel, he was a builder, and an organizer.

the current state of economic asymmetrical warfare is where Rome found itself toward the end of the empire, sitting in large castles which required most of the what they took in tribute to maintain. they were at the end of a long vulnerable supply line, isolated, sending less home (margins were as thin as they are in China right now), fighting an enemy who was taking his supplies from the land, with very little processing or organization and no central authority or supply lines, and bureaucracy to maintain.

then the slaves they had taken had wavering loyalty, (think Afghanistan by analogy) and China economically. the last three Presidents have handed China a gift, which they will return in the form of military confrontation, and economic competition in capital and finance.

the Roman form of tribute (like the multinationals today, which we like to think are loyal to the US, but we know are only loyal to themselves) was an expanded commoditization of all products and cultures. in the end Rome was a lot smaller, and the US will be too, but rolling back the global economy will help smooth the transition (rather than expanding it to even greater heights). it's usually at this point in time that the progressive gets kicked out, but both candidates this year have the same view on corporate (america?)

Thu, 04/12/2012 - 11:44 | 2338135 Bartanist
Bartanist's picture

The collection, control and use of power always seemingly leads to stagnation. The status quo becomes too powerful to overcome.

Growth comes from the decentralization of power and competition.

But, try telling a ruling power that the best thing he can do for his country, its people and the world is to distribute his power as widely as possible ... he would look at you as if you were an idiot.

Thu, 04/12/2012 - 13:10 | 2338521 tarsubil
tarsubil's picture

Hard to tell the difference between Ego and Satan.

Thu, 04/12/2012 - 13:18 | 2338548 Henry Hub
Henry Hub's picture

"...Poverty is therefore a most necessary and indispensable ingredient in society…It is the source of wealth, since without poverty, there could be no labour; there could be no riches, no refinement, no comfort, and no benefit to those who may be possessed of wealth." - Patrick Colquhoun

It look like we're in for more centralization of power and income disparity in this country. It's a good time to be in the one percent, for everyone else not so much.

Thu, 04/12/2012 - 11:50 | 2338152 Thunderlips
Thunderlips's picture

Diocletian didn't reign in AD3.  That would have been Augustus.  Diocletian was many centuries later.

He was so disliked that when he retired, the only Roman Emperor to do so voluntarily, he was begged constantly to return to the throne.

Also, maximum prices weren't a new legal innovation never before seen in the Empire prior to Diocletian, either.

The cost of defending far flung borders and the destruction of the Italian middle class by skilled slaves of the wealthy and the concentration of land into the hands of the few caused the fall of Rome.  The hardy farmers' sons who used to make up the Legions ended up being sold into slavery to satisfy debt claims.

Thu, 04/12/2012 - 12:17 | 2338318 Czechmate
Czechmate's picture

Summed up nicely.  Well done Thunder!

Thu, 04/12/2012 - 22:11 | 2340314 StychoKiller
StychoKiller's picture

[quote] He was so disliked that when he retired, the only Roman Emperor to do so voluntarily, he was begged constantly to return to the throne. [/quote]

 

Hmm, something illogical about that sentence...

Thu, 04/12/2012 - 11:50 | 2338170 pashley1411
pashley1411's picture

though not commented on, and not having access to Durant, the date of the edict has been clipped.   Its either 300 AD or 301 AD, not 3 AD (Augustus).   

Thu, 04/12/2012 - 11:53 | 2338185 Die Weiße Rose
Die Weiße Rose's picture

Nineteen Eighty-Four (first published in 1949) by George Orwell is a dystopian novel about Oceania, a society ruled by the oligarchical dictatorship of the Party. Life in the Oceanian province of Airstrip One is a world of perpetual war, pervasive government surveillance, and incessant public mind control, accomplished with a political system euphemistically named English Socialism (Ingsoc), which is administered by a privileged Inner Party elite. Yet they too are subordinated to the totalitarian cult of personality of Big Brother, the deified Party leader who rules with a philosophy that decries individuality and reason as thoughtcrimes; thus the people of Oceania are subordinated to a supposed collective greater good. The protagonist, Winston Smith, is a member of the Outer Party who works for the Ministry of Truth (Minitrue), which is responsible for propaganda and historical revisionism. His job is to re-write past newspaper articles so that the historical record is congruent with the current party ideology.

Twenty -Twelve (censored by Google in 2012) a world of perpetual war, pervasive government surveillance, and incessant public mind control, via all Apple-devices and "apps" that enables GPS tracking and total 24/7 surveillance of all Apple consumers and users, who submit and surrender their freedom to the totalitarian Corporate and State control freely and willingly by subscription to complete and total control.

Big Brother Apple and the Apps know where you are and what you think, anytime.

We know you, we got all your information!

George Orwell would have been amazed!

wr;)

Thu, 04/12/2012 - 12:01 | 2338231 slewie the pi-rat
slewie the pi-rat's picture

edictum de pretiis = edict on prices    L0L!  "i command you to halt, price-BiCheZ!"

you know who came after dio-cletus?  constantine!  he just moved outa rome, went istan-bullshit,  then, a few year later, he legalized christianty~~by converting, no less, and turned the tables on the homey cohorts, centurians, and caterers, big-time

soon, the  First Council of Nicaea gathered and the bishops agreed to outlaw self-castration;  they wrote a buncha stuff, but had trouble agreeing on exactly what all those words meant, pretty much all the time

they're still very lawyerly about all their silly rules, derived from "eyewitness accounts" written on napkins centuries before and vast piles of homiletics, all derived from a teaching which advised against lawyers (and banksters) b/c of their overwhelmingly incredible coefficients of hypocrisy

and, to allow these men to self-castrate would be a blessing to the children of theFaithful;  eyewitness accounts are a two-way street

Thu, 04/12/2012 - 12:11 | 2338287 johnjkiii
johnjkiii's picture

Somebody forgot Constantine and his re-coinage of 310. Saved the empire for a while but in the end the system gamers won and flushed Rome into history. What, you may ask, can we do to make money during this period? History is instructive but to read and scream that we are repeating it is otherwise useless.

Thu, 04/12/2012 - 12:11 | 2338288 johnjkiii
johnjkiii's picture

Somebody forgot Constantine and his re-coinage of 310. Saved the empire for a while but in the end the system gamers won and flushed Rome into history. What, you may ask, can we do to make money during this period? History is instructive but to read and scream that we are repeating it is otherwise useless.

Thu, 04/12/2012 - 12:14 | 2338305 ebworthen
ebworthen's picture

"History is instructive but to read and scream that we are repeating it is otherwise useless."

So is repeating posts, but, buy Gold and Silver.

Thu, 04/12/2012 - 12:13 | 2338300 Clovis Man
Clovis Man's picture

Although I agree with most of the article, I think it's picking on the wrong guy. I agree that it's all about the currency, blaming it on Diocletian the Socialist is disingenous.

I doubt that blame should fall on Diocletian. The Empire was already in the toilet and swirling around the drain except for military sucesses. A strong case could be made that if anything Diocletian brought some measure of stability while receiving blame for the predecessors "policies which bring merely short-term advantage but longer-term disadvantage." On second thought, go read yourself on the period Carus - Diocletian - Constantine.

What I see as a parallel is that our present administration isn't Diocletian. I say that because our the present administration has done nothing whatsoever to fix the problems that brought us to this pass, but rather pre-Diocletian. And furthermore neither party has made any hints about fixing the real problem which is debasement of the currency. In the old days it was done with reduced content coinage, today it is done in another way. It's the ability of the unregulated shadow banking world to create financial instruments that they are allowed to pretend are money and that the rest of us are supposed to make good on through the generosity of the Federal Reserve.

They've done nothing about those people, the so-called banksters, who control our economy and who are both looting it and destroying it, and they're trying to buy the rest of us off by running the printing presses full time. I have a job and no one I know is on food stamps or other panem et circenses programs, but I know that we've been bought off none the less. We just don't get the check mailed to our homes.

Regarding this:

"Extensive public works were undertaken to put the unemployed to work, and food was distributed gratis, or at reduced prices, to the poor. The government – which already owned most mines, quarries, and salt deposits – brought nearly all major industries and guilds under detailed control. “In every large town,” we are told, “the state became a powerful employer, standing head and shoulders above the private industrialists, who were in any case crushed by taxation.” When businessmen predicted ruin, Diocletian explained that the barbarians were at the gate, and that individual liberty had to be shelved until collective liberty could be made secure. The socialism of Diocletian was a war economy, made possible by fear of foreign attack. Other factors equal, internal liberty varies inversely with external danger."

Diocletian started all that? Umm, yeah, and President Obama created the Federal Reserve system.

I agree with the article's stance that over-regulation of business "kills the goose that laid the golden egg", but it has nothing to do with Socialism vs Capitalism or the Roman Empire. If the financial markets are not closely regulated, they will find a way to print money for themselves until it blows up for all of us. Diocletian, if anything tried to prevent that and bring stability to the currency and fairness to what passed for their taxation system back them.

Thu, 04/12/2012 - 13:20 | 2338558 tarsubil
tarsubil's picture

"If the financial markets are not closely regulated, they will find a way to print money for themselves until it blows up for all of us."

Would you agree with this: If the financial markets are not held accountable as everyone else is for fraud, they will find a way to print money for themselves until it blows up for all of us.

Do they need to be closely regulated with lots of rules or do basic rules that apply to everyone simply need to be enforced?

Fri, 04/13/2012 - 13:34 | 2342214 Clovis Man
Clovis Man's picture

Hmm, yes I see that you are correct. It has to be based upon "basic rules that apply to everyone simply need to be enforced" before anything else.

What we have now is lots of rules that don't apply to everyone because "lots of rules" usually results in lots of loopholes for TPTB.

Thu, 04/12/2012 - 12:21 | 2338339 ebworthen
ebworthen's picture

"One of the causes of the Roman Empire’s monetary crisis in the 3rd century was the ratio between the two precious metals fixed in Augustus’ coinage code. This ratio did not reflect actual coin values, and, in prompting outflows of undervalued coins, successively undermined the Roman currency."

http://www.oenb.at/en/ueber_die_oenb/geldmuseum/allg_geldgeschichte/antike/money_in_ancient_times.jsp

And now we have fiat currency unhinged from tangibles such as Gold and Silver and produced with "Ctrl-P".

Thu, 04/12/2012 - 12:26 | 2338366 New American Re...
New American Revolution's picture

Art has never been a very good historian....

Thu, 04/12/2012 - 13:40 | 2338640 Tigranes
Tigranes's picture

Nothing about the late Roman Empire/Republic's economic system could be construed as capitalist, socialist, or even mercantilist. In modern thinking, it would be more akin to an agricultural based plutocracy.

 

Diocletian is actually an interesting character. He was born to a peasant family, joined the Roman military, and eventually became a commander. He declared himself emperor during a low-point in Roman history. The preceding 80 years before Diocletian's reign witnessed a multitude of soldier emperors who reigned, on average, for two years. In the period of chaos following Pax Romana, the collapse of internal security destroyed the empire's economic prosperity. Roman currency had been debased to the point where barter economies emerged in major cities.

 

The man was a tyrant but he was successful in his objective in halting the collapse of the Roman Empire through his administrative and military reforms. He did set a price ceiling on many commodities in order to halt mass unrest in major cities over exorbitant food prices. Though its hard to sympathize with a predatory monopolists who used armed gangs to remove poor merchants and aristocrats who exploited the lower classes just as much as the empire.

 

The end of Roman 'liberty' began three hundred years prior to Diocletian's reign; with the fall of the Republic, the ruin of small farmers, and the establishment of the Latifundia system. And even before that, the late Republic was increasingly dominated by wealthy landlords and generals. 

 

In Diocletian's time the entire system was already rotten. By the end of the empire, the Roman Citizen was reduced to crushing poverty and subsistence farming; forced to fund barbarian armies.

Thu, 04/12/2012 - 13:51 | 2338673 CaptainTripps
CaptainTripps's picture

ALL ROADS lead to ROME

 

always did

 

where do you think the SHINY CITY on the hill stuff came from? yup ROME

 

how about all the architecture in DC , YALE, etc

 

YUP

ROME

 

the empire never ended just went into the church and then expanded again throughout governments  

Thu, 04/12/2012 - 15:04 | 2338935 ArgentoFisico
ArgentoFisico's picture

(We think the date, however, is a typo. Diocletian ruled from 284 to 308)

when JC was a kid the emperor was Caius Iulius Caesar Octavianus Augustus.... and the empire was just began (Rome was a republic for 7 centuries before it became an empire) 

Thu, 04/12/2012 - 15:22 | 2339013 ElvisDog
ElvisDog's picture

It wan't AD 3. Augustus was emperor until A.D. 14. Diocletian was much later, like in the 200's A.D.

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