(Interviewed by Louis James, Editor, International Speculator)
L: Doug, it seems that in almost every conversation we have, you mention something about ancient history, particularly Roman history. In our conversation on speculative fiction, you mentioned that it and ancient literature are your favorite kinds of reading. So let’s talk about Rome – why the fascination, and is it really that relevant to investors struggling to understand the 21st century?
Doug: Well, there’s actually a bit of a cottage industry that’s developed, comparing ancient times to modern times, since Gibbon wrote the Decline and Fall of the Roman Empire), the first volume of which was published in 1776. I’m a big fan of the book, not only as a history, but as very elegant and readable literature. And it’s actually a laugh riot; Gibbon had a very subtle wit. But since then there have been huge advances in our understanding of Rome, driven by archeological discoveries. There were many things Gibbon just didn’t know, because he was basically a philologist and based his synthesis on what the ancients said about themselves.
L: There was no real science of archeology back then, so Gibbon was a collector of hearsay.
Doug: That’s why the study of history is so tendentious; so much of it is “he said/she said,” so to speak. But in Gibbon’s day, there wasn’t even yet much done to correlate what was written with what was on the monuments – even the well-known monuments – and on the coins. Forget about people actually getting their hands dirty, digging around in the provinces for what was left of Roman villas, battle sites, and that sort of thing. A great deal of work has been done on this in the last generation especially, so we know a lot more about what probably really happened now.
The thing that interests me the most about it is what you can learn following the history of Rome, from its semi-mythical founding by Romulus and Remus to what’s generally designated as its end in 476 AD, when the child-emperor Romulus Augustus was deposed by Odoacer (a Germanic general who was in charge of what passed for the Roman army – but by then the army was almost entirely Germanic mercenaries who had no loyalty to the idea of Rome). It looks a lot like the American experience over the last couple hundred years. It starts with conquest and expansion, leads to global dominance, and then slips into decline.
L: Wait, wasn’t Rome overrun by Goths?
Doug: At that time, basically the beginning of the 5th century, the capital had long since left Rome, even in the western empire, so it wasn’t really a question of the city being overrun by Goths in one final bloody orgy. Rome was sacked several times in the 5th and 6th centuries. These were very costly in terms of accumulated capital, but all that capital apparently couldn’t motivate the Romans to defend themselves. The sacks were more of a shakedown than a conquest.
The first big sack was courtesy of the Visigoths under Alaric in 410 AD. But Alaric had worked with the Romans as a mercenary, and he was a convert to Christianity. The sack was relatively sedate, lasting three days by agreement. What happened under the Vandals under Geiseric in 455 lasted two weeks, but still didn’t result in the burning of the city and wholesale murder of the populace. Like the sack of 410, it was basically just a time when, by agreement, the Vandals were allowed to come and haul off whatever they could move, because it seemed better than the alternative. What’s interesting to me is that the Vandals arrived by ship, from North Africa. In other words, by then Spain, Gaul, and North Africa were already independent, feudal-style kingdoms.
But Rome was still a giant city then, with several hundred thousand inhabitants, although down from perhaps a million at its peak in Caesar’s time. The actual collapse – the depopulation – of the city only really occurred in the mid 6th century, when the eastern emperor Justinian tried to recapture the west, and wound up destroying what was left of it, while bankrupting the east. So many wars, then and now, are nothing more than a dramatization of rulers psychological aberrations, played out at the expense of their subjects…
L: Back up a second, how about an overview before we get into the details.
Doug: Sure. Rome went through at least three stages. It started out as a yeoman republic, just a village on the Tiber river. Whether it was the Romans, or the Sabines, or any of the other numerous tribes of the times that became dominant was really simply the luck of the draw. Anyway, Rome started out as a republic of farmers, each of whom had his own plot of land on which he grew his grain and raised cattle. It’s a bit of a paradox, in some ways resembling what’s happened with America, because they fought these wars against their neighbors, which made them bigger and brought them wealth, but that also sowed the seeds of their own destruction. That was especially true of the big wars, like the three against Carthage, each of which lasted a long time.
You see, in order to fight in the Roman army, you had to be a landowner. They wouldn’t take the riff-raff; it was a great honor to be in the Roman army. So, you had to be a landowner to join, but if you did join, you had to leave for five, ten years, maybe more. Your wife and maybe a young son you left behind often couldn’t handle things. They’d borrow money and then couldn’t pay it back. So, the soldiers’ farms would go back to bush or get taken over by creditors. And by the time he was done fighting in the wars, if he survived, the typical legionary was not so interested in being a farmer anymore. They’d looted and plundered, perhaps gained some slaves, and wanted to live the high life in the city. So, like America, Rome became more urban and less agrarian.
Things started coming apart in the second century BC, with civil wars and generals like Marius and Sulla appearing on the scene, finally reaching a crisis with Julius Caesar – which, incidentally, is the portion of Roman history that’s been best recorded, with the most written documents that have survived…
L: Hold on a minute. You’re saying that Julius Caesar was the beginning of the end? Most people think of him as the beginning of the beginning – the man who forged the empire.
Doug: By the time of Caesar, the Romans had already conquered Greece. Pompey the Great had conquered the Near East. Spain and North Africa had been provinces since the Punic wars. Most of the empire had already been conquered – except for Gaul, Egypt, and Dacia, which is today’s Romania. Gaul, today’s France, was the big one. Incidentally, the HBO series Rome is quite historically accurate, with relatively minor flights of poetic license. It covers the time from the rise of Caesar to the ascension of Augustus, with great attention to the detail of daily life back then. I also recommend Gladiator especially for the opening battle scene.
The interesting thing is that in the early days, war was actually quite profitable. You conquered a place and stole all the gold, cattle, and … people who were eligible to be enslaved. That was a lot of wealth you could bring home – and then you could milk the area for many years to come with taxes.
L: And you gave the people bread and circuses once a year, so they’d decide you weren’t such bad guys and weren’t worth rebelling against.
Doug: Yes. It was a very profitable enterprise. The problem was that as they pushed their borders out, after they looted and pillaged, they had to defend those borders – especially against those people not worth conquering, like the Germans across the Rhine and Danube. The Goths, Huns, and Vandals, and so forth. They didn’t have anything worth plundering in their endless forests, but they had to be defended against. And on the other side of the empire, the Persians were a military power to contend with. This became increasingly, impossibly costly. So the wars were what made Rome great, but were also a big part of its undoing. Both because they helped destroy the essential social fabric of Rome by wiping out its agrarian roots and by corrupting everyone with a constant influx of cheap slave labor and free food – and by actually drawing in potential invaders.
Anyway, after Caesar, Rome changed from the Republic into what’s called the Principate, starting with Augustus, the first emperor, although he pretended to be just the first man of the senate. Pretenses fell off increasingly over time. After the third century, which was a disastrous period of one civil war after another, with the legions fighting each other and the currency getting debased, the Principate changed into what’s known as the Dominate, with the ascension of Diocletian and then Constantine. From that point forward, the emperor no longer even pretended to be the first among equals, but was treated more like an oriental prince.
L: By saying “oriental prince,” you’re saying there was an element of divinity in that?
Doug: Yes, although even some Western emperors liked to think they were related to the gods. The capital moved from Rome to Constantinople, which brought in a lot of oriental influence, including habits like bowing and scraping before the emperor. That was unheard of previously. The senate, which had been run under something of an ethos of noblesse oblige among the powerful, turned into a bureaucracy. The official language changed from Latin to Greek, at least in the East.
By the time Odoacer, a general on Rome’s mercenary army, overthrew Romulus Augustus, no one even knew or cared that it happened – it was a minor event. Even Odoacer himself didn’t care, because he didn’t bother making himself emperor. Nothing changed because of it. Archeologists have found that even in places overrun by Goths and Vandals, life in the villas went on more-or-less as it had; the “barbarians” had been at least partially romanized for a hundred years or so.
Perhaps it might be as if your worthless and ineffectual town council, which serves no useful purpose but bedevils you with taxes and regulations, were kicked out and replaced by an out-of-town motorcycle gang. They might actually be better in some ways, because at least they’d probably be practical and realistic people. The decay was a gradual thing.
L: The Dark Ages didn’t start with a crash, then, but with a loss of knowledge over centuries?
Doug: Actually, the Dark Ages didn’t really start until the Muslims closed off commerce on the Mediterranean. Mohamed comes out of what’s now Saudi Arabia in 630-something AD, and as the Muslim Empire grew, it cut off commerce east and west, and especially on the Mediterranean.
L: So, you’re saying that the final obliteration of what had been Roman civilization was the result of… an economic embargo?
Doug: That’s partially it. Lists have been compiled of at least 180 reasons why Rome fell. They range from lead in the pipes and cookware, Christianity, climate change, population decline, to barbarian invasions. And many, many others – many of them closely related, generally centering on political and military devolution. It seems to me that one of the major reasons was basic economics.
The bureaucracy became stifling, the taxes became unbearable, the money was completely debased. Diocletian put on wage and price controls – the first time recorded in the West. People became tied to their land, which became the start of feudalism. Trade came grinding to a halt. In those days there was very little surplus; the Industrial Revolution wasn’t there to magically make food and material appear. There’s some evidence that many residents of the empire were glad to see the overthrow of a system that made production and saving impossible. The Empire in 400 AD was sociologically, politically, and militarily very different from the one of, say, Marcus Aurelius in around 180, when the decline began in earnest – even though it still had the same borders.
Rome brought some fantastic benefits to the world, and by the time things really came unglued around the year 400, the roads, cities, baths, and aqueducts were everywhere. But the political system had hollowed out the economic system, and a lot of people were living in buildings they could no longer afford to maintain. Some similarities to modern times come to mind…
L: You mean it wasn’t Obelix and his mass production of menhirs that bankrupted Rome?
Doug: When it comes to Obelix and Asterix, I’ve got to say I’m firmly on the side of the Gauls. The emperors were always interested in amassing wealth and glory, but this always came at the expense of the conquered peoples, like the Gauls – who had quite an advanced civilization themselves. People think of the Romans as being a great civilizing force, but they were really just looting and pillaging their weaker neighbors.
L: How did it all get started? The Roman legions became famous for their advances in warfare, their “turtle” formations, etc., but that must have taken centuries to develop. Did they start with some advantage that allowed them to take over the Sabines and what-not, to become more powerful and be able to take over more tribes?
Doug: I’m not sure they did. It could just have been luck. I’m not sure anyone has come up with a credible explanation as to why it was Rome and not one of the other early tribes in the area that became dominant.
L: How about later? Were those military advances that decisive, or was it just a matter of having more and more wealth to put into the war effort with each conquest?
Doug: I think the technology the Romans developed was very important. Of course, against generals like Hannibal, Rome suffered some of its greatest military defeats, like the famous battle of Cannae, in which some 50,000 Romans were slaughtered in spite of their supposedly better training and equipment. The Romans’ main advantage was their organization. The Celts and Germanic tribes fought as individual warriors. Even in large numbers, they couldn’t cope with well-trained and well-organized soldiers fighting out well-planned battles.
L: Okay… Hm. So, is this fascination of yours with Rome a quirk of your personality, or is there some reason it should matter to investors today?
Doug: Along with the Greeks, the Romans form the base of Western civilization. We know a lot about Rome now, and they were people exactly like us. And the rise of Rome does in many ways parallel the rise of America. Its rise, its peak – and at this point I think you can even see its decline reflected in the distant mirror of Rome. We see the same change from a republic to a highly bureaucratized state with tentacles all over the world and great importance placed on the military. The population relying on welfare (after the time of the conquest of Egypt by Caesar, most of the grain and olive oil, the two big commodities of the ancient world, were no longer grown in Italy; they were imported from Africa and given for free, or nearly free, to the people in Rome). Even what went on in the Circus Maximus, the Coliseum, and their many copies in smaller cities, has its parallel in today’s massive football events – not to mention cage fighting and other grisly sports. The big one, of course, is the gradual destruction of the currency.
Quite interesting to me is that in the days of the republic, Roman coins portrayed mythical figures, like gods and goddesses, and ideal concepts. They changed to portraits of the emperor after Caesar. In the U.S., 1913 – which was a pretty bad year overall, with the initiation of the income tax – was the year the first coin with a dead president’s head on it was introduced, the Lincoln penny. Before then, we only had things like Liberty, Indians, buffaloes, etc. on our coins. Since then, all our coins have had dead emperors on them. We started out with semi-mythic figures like Washington and Jefferson. But now we do the recently dead – Roosevelt, Kennedy, Eisenhower. It’s simply wrong to put the features of your rulers on the coinage. And the Romans, before Augustus, agreed. And, of course, gold was taken out of daily circulation in 1933, silver in 1965, and copper from the penny in 1982. Nothing new.
L: So, if the U.S. is in a Roman-style decline now, what would you say is the cause?
Doug: The same thing as in Rome: the currency has been debased, taxes have soared, regulation has become extremely onerous. But these things have political causes. Many, if not all, of those 180 reasons why Rome fell apply to the U.S. The empire has grown large and it’s bankrupting the country to defend itself against barbarian incursions. Even the lead in the water might have its counterpart in industrial food production.
I think there’s a good chance the U.S. government will disappear at some point, consumed by pure ineffectiveness and replaced with nothing. As we discussed last week, the very concept of the nation-state as we know it is an innovation of recent centuries and not something written in the bedrock of the universe. Its time is up.
L: So, back to my previous question, do you just like ancient history, or do you think it’s worth studying because those who don’t learn from history are doomed to repeat it?
Doug: It’s also been said that the only thing we learn from history is that we don’t learn anything from history.
L: Or that it doesn’t repeat, but it rhymes…
Doug: Yes, or simply that “history is bunk.”
But I do think it’s worth knowing and understanding history, for its perspective on the big picture, which is something we try to keep in mind while looking for trends to invest in. Like all the reasons we see for energy – especially oil – prices to go higher.
Before Rome, there was Athens. With the conquest of the New World, the Spanish Empire rose to a great height before disappearing completely. Most recently, there was the Soviet Empire, now consigned to the dustbin of history. All of these and many more have come and gone. Nothing lasts forever, and everyone knows it – if they’ll be honest for a moment. So it impresses me as being very jingoistic for Americans to carry on as though the U.S. can, should, and will dominate the world forever.
And, as we’ve discussed before, I don’t even like to call them Americans anymore, since the idea of America – which was excellent and unique – is dead, replaced by the United States.
L: The now forcibly United State.
Doug: Yes. I think it’s important for people to realize that what’s happening to the U.S. Empire is not the first time it’s ever happened to anyone. If history is any guide, it’s very unlikely that the U.S. will exist for much longer as the semi-coherent entity it is now, whether it takes 50 years, 100, or 150. The colors of the maps on the walls are always running. None of today’s borders, or politics, are part of the cosmic firmament.
The question is whether we’re more like Rome in 300 AD, or 400 AD?
It seems clear to me that once a power goes into decline, it never really makes a comeback. At least not for centuries. Greece and Rome never came back. Spain, Portugal, France, and Britain are still in decline, with Britain edging near the precipice. So is Russia. The Chinese and the Indians now seem well on their way to their day in the sun, however.
L: Has there ever been a time when your study of Roman history has given you understanding you’ve used directly, as a speculator?
Doug: Good question. Well, the clipping of the coins has a direct bearing on what’s going on now, with the same endgame looking very likely. It’s actually almost funny: one of the reasons the eastern Roman Empire lasted as long as it did was that for some reason – maybe they learned something from the fall of the western empire – their gold Solidus remained a stable and sound money for almost a thousand years after the western Roman Empire dried up and blew away. Looking at the history of Rome and other empires helps you keep things in perspective. We’re just another part of the passing parade. Regrettably, no longer different or special.
So, I do think about these things, as an investor and speculator, and I contemplate that the root cause of the fall of Rome was not just political, social and military, but also economic – so it matters when I see the same patterns today. It’s a perspective that helps us define trends like the long-term bets on higher energy prices we track in Casey’s Energy Report and metals trends in Casey’s International Speculator.
L: Well, I can’t say I’ve thought much about Augustus while out kicking rocks, looking for gold, but I have been on sites mined by Romans, as well as other empires over the centuries. Maybe I should give it more thought – when the facts today are obscured by fearful governments, history may provide the only reliable data for us to consider.
Doug: Maybe you should. ‘Til next time.