Ancient Rome today (revised)

Simkhovitch, V. (1916): “Rome's Fall Reconsidered”. Political Science Quarterly Vol. 31, No. 2. Open Access at JSTOR:
https://www.jstor.org/stable/2141560?seq=1

 

When wealth grows faster than it concentrates, wealth spreads. You get the upswing of an economic cycle. When wealth concentrates faster than it grows, you get the downswing.

 - Arthurian

I'm going to quote Simkhovitch again. I'll pick up where I left off on the 18th, this time the first few sentences of the paragraph. And I will interrupt to talk about the ideas. Page 217:

The entire history of Rome is but a series of illustrations of this story. Steady is the legislation against interest and drastic are the measures against the money lenders, but unchecked is the concentration of landed property even in spite of social resolutions and social wars.

"Steady is the legislation against interest and drastic are the measures against the money lenders," Simkhovitch says, "but unchecked is the concentration of landed property..."  

I don't see that "the concentration of landed property" has much to do with the lending of money. The people who owned the massive properties of ancient Rome probably didn't need to borrow to buy more. Adding to their property was a form of saving. The buyers had the money they needed.

The people who had to sell their properties to the massive landowner, I figure those people had been doing some borrowing. But they wouldn't have needed to borrow more just to sell their few acres of land. 

 

I believe policy should be changed to reduce our reliance on credit today, by reducing the incentives that encourage the provision and use of credit. I believe money (money that requires neither interest payment nor repayment of principal) should be increased at the same time, to sustain spending levels.

But I also believe that policy must be changed to encourage accelerated repayment of debt, to counterbalance the encouraged borrowing. (And to fight inflation. But we already have policy to fight inflation. What we lack is policy to offset the unnaturally rapid growth of debt that is caused by policy which encourages borrowing.)

Because I know policy can be highly effective, I figure that these changes will reduce the cost of using money and will therefore boost the nonfinancial economy. I believe economic policy can be highly effective. But the Simkhovitch quote suggests that he would not agree. The "steady" legislation against interest and the "drastic" measures against lenders in ancient Rome must be considered strong policy. Simkhovitch says it was not effective.

I think the Roman response was incorrectly targeted. It did not stop the concentration of wealth in ancient Rome because punishing lenders is not the way to limit the concentration of wealth.

 

To reduce and reverse the concentration of wealth in our time, I believe the business income tax must be changed. 

In our economy, a business spends its capital to create output, then sells the output to recover its capital plus a profit. But under our existing tax code, only the profit is subject to income tax. Recovered capital is not taxed, because property is held to be sacred. (This is not tax advice. It is a general overview. Do not try to do your taxes based on what I'm saying.) Recovered capital is not taxed, because property is held to be sacred.

The failure to tax capital (the failure, that is, to tax gross business receipts) creates a tax advantage for business that is not available to consumers. This tax advantage shifts income and wealth from consumers to businesses. Among businesses, the greatest tax advantage goes to the business with the most capital to spend. The least advantage goes to the business with the least capital to spend. Property-is-sacred policy, therefore, if allowed to continue, will lead to ever-more-extreme concentration of wealth. More extreme, even, than what we have at present. 

The property-is-sacred principle is embedded in our tax code. Our tax code is creating the extreme concentration of wealth. And the concentration of wealth is leading us, as it led Rome, to the fall of civilization. Our tax code must change.

The property-is-sacred principle is embedded in our thinking. Therefore it appears in the tax code, in our encouragement of corporate mergers and acquisitions, and everywhere economic policy reaches. This, more than anything, is what must change. Our thinking must change. 

It is not property, but civilization that is sacred.

The principle of parallel evolution supports the view that ancient Rome would have had property-is-sacred policy similar to our own.

Based on what Simkhovitch says, the property-is-sacred principle was not constrained in ancient Rome. Nor was it constrained if we judge by the size of latifundia -- they became "as large as provinces" Simkhovitch says on page 222, in the Rome's Fall Reconsidered essay linked above.

The latifundia are evidence that Rome had property-is-sacred policy. The rise of such massive concentrations of "landed property" is evidence of it.

The latifundia are evidence also that Rome created no policy that effectively undermined the property-is-sacred principle and the resulting concentration of wealth.

Given the reverence people have for the property-is-sacred principle, that principle continues to operate until the government no longer exists, the government that wrote it into the tax code. When that government falls, the latifundia become the new centers of government -- subject, of course, to things being worked out hands-on during the darkest, most militaristic free-for-all centuries of the dark age. 

Long after the dark age, the ultimate form of property-is-sacred emerges: divine right of kings.

I want to put a stop to the concentration of wealth by eliminating property-is-sacred from our tax code.

Exhaustion of the soil led to a general decline of income because most of the people in ancient Rome were farmers. Simkhovitch says exhaustion of the soil made farming unproductive, leaving income unable to meet "ordinary expenses". We can see this as a chain of causality:

Exhaustion of the soil => decreasing productivity => declining income

"The progressive exhaustion of the soil", Simkhovitch writes, "was quite sufficient to doom Rome".

His most significant expression of the forces at work appears on page 217: "The increasing weight of accumulated interest on the loan and the decreasing productivity of the land seal the fate of the landowner." This combination of forces is nearly identical to that described by J. W. Mason and Arjun Jayadev in Fisher Dynamics in Household Debt: The Case of the United States, 1929-2011:

In particular, the 1980s can be understood as a slow-motion debt deflation (or debt-disinflation), with the combination of slower nominal income growth and higher interest rates producing rising debt-income ratios despite a substantial fall in household spending relative to income.

The fall of Rome was caused by declining income, the growth of debt, and the inability or refusal to resolve these problems. We face exactly the same problems and we, too, are unwilling or unable to resolve them. 

In our case, though, the problems do not arise from exhaustion of the soil. The primary source in our case is bad economic policy.

In our time, exhaustion of the soil is not responsible for the decline of income. Rather, policymakers believe that inflation results primarily from excessive wage increases. The relative decline of income is largely a result of anti-inflation policy. At EconomicsHelp we read:

Rising wages are a key cause of cost-push inflation because wages are the most significant cost for many firms.

If this is both true and relevant, or even if it is only what people believe, it is enough to make wage restraint perhaps our most effective and certainly our most used approach to controlling inflation.

In our time, the relative decline of income is not responsible for our growing debt. Rather, policymakers believe that using credit is good for growth. The inexplicably massive debt of our time is largely a result of policies built on the notion that the use of credit is always good for economic growth. Two quotes I presented a few years back:

• Steve Waldman: "I am not a fan of the Great Moderation. Central bankers and economists found it pleasant at the time, but sustaining that comfort required that cash wage growth be suppressed [and] that credit be expanded..."
• Edward Harrison: "Also, regarding economic policy in the United States, policy makers aren’t gathering around a table and asking “how can we drive down wages and goose consumption at the same time?” Rather, this is the de facto policy which is inherent in monetary and industrial policy."

The growth of debt results primarily from our policies because policymakers spent decades creating policy based on the idea that using more credit is always good for growth; and because we have no policies designed to accelerate the repayment of debt and thus no way to offset the unnatural increase in debt resulting from the policies that encourage credit use.

Simkhovitch makes a convincing argument that in ancient times, exhaustion of the soil was responsible for the fall of Rome. In our time it should be obvious that bad economic policy is the source of our troubles. First on the list, in chronological order, are policies based on the idea that using credit is always good for growth.

Certainly, when we have too little debt, using more credit helps to improve the economy. But when we have too much debt, using less credit helps to improve the economy. There is a happy medium that has been overlooked: There is an optimum level for debt, a narrow range that best promotes economic growth and employment, and minimizes inflation.

How much debt is best? I can't calculate the number. But my limited abilities are not the problem. The problem is that few economists are looking for the optimum level, and none of them think in terms of an optimum level of debt. Many of them still think using more credit is always good.

The parroting of old, overused ideas cannot solve the problem. Civilization, it has been said, demands an artist.

I have suggested as a way to reduce the growth of debt, that we need credit to grow more slowly than money. This could be achieved, perhaps, by means of permanently high interest rates. But permanently high interest rates are a property of the dark age, so this solution seems inappropriate. High rates, in addition, are not conducive to economic growth. (Existing policy uses high rates to slow economic growth when fighting inflation.) And high rates increase financial cost. Permanently high rates are not a good solution.

Consider this alternative: We should have tax credits that encourage debtors to make extra payments on their debt; the encouragement is that the tax bill is reduced commensurately.

Economic policy encourages borrowing. Our policy causes unnaturally rapid growth of debt. This is how we came to have so much debt in our economy. It is why our debt continues to grow, even now.

If we insist on having policy encourage the use of credit, then we must also have policy that accelerates repayment of debt. By this method we can reduce the growth of debt to a more natural level. 

We should aim to reduce debt to the level that best promotes economic growth.

 

I propose using fiscal policy to accelerate the repayment of debt. Fiscal policy is tax policy. But let me say clearly that I am talking about new incentives and disincentives that induce us to make extra payments on our debt, by reducing our taxes when we do so. I am not talking about changing the level of government revenue. I do not take a position on changing the level of government revenue. I do not take a position on it because the root of the problem lies elsewhere. It lies in the mix of cash and credit that we use for money. The more credit there is in the mix, the more costly it is to use money. The less credit there is in the mix, the less costly it is to use money.

There was ten times more credit in use (per dollar of money) in 2007 than there was in 1947:

Figure 1: Dollars of Credit-in-use per Dollar of M1 Money

The graph shows almost continuous increase in the cost of using money. If interest rates never changed, interest cost per dollar in 2007 would have been 10 times what it was in 1947.

Maybe that's good for bankers and creditors. It is not good for most people today, just as it was not good for most people in ancient Rome.

The 1947-2007 increase is due almost entirely to bad policy and to the wrong-headed thinking that says increasing our use of credit is always good for the economy. We did not recognize the error in this thinking in the 15 years before 1947. And we have not recognized it in the 15 years since 2007. But it is not yet too late to learn from our mistakes.

The recommended objectives of the policy I propose are these:

• The volume of credit-in-use (or "debt") should grow more slowly than the quantity of money.
  
• Repayment of debt should be accelerated by policy, to counteract the rapid growth of debt which results from policy that encourages the use and provision of credit.
  
• To eliminate the factor most responsible for the concentration of wealth, the business income tax must tax gross receipts rather than net income. Tax rates should be adjusted down so that government revenue is not increased by the change in taxable income.
  

To preserve civilization, it is not the solution simply to have Elon Musk buy Twitter.

Ancient Rome today

Simkhovitch, V. (1916): “Rome's Fall Reconsidered”. Political Science Quarterly Vol. 31, No. 2. Open Access at JSTOR:
https://www.jstor.org/stable/2141560?seq=1

PLEASE REFER TO THE REVISED VERSION OF THIS POST

 

When wealth grows faster than it concentrates, wealth spreads. You get the upswing of an economic cycle. When wealth concentrates faster than it grows, you get the downswing.

 - Arthurian

Long-term slowing of economic growth is indistinguishable from the decline of civilization.

 - Arthurian

I'm going to quote Simkhovitch again. I'll pick up where I left off on the 18th, this time the first seven sentences from the paragraph. And I will interrupt to talk about the ideas. From pages 217-218:

The entire history of Rome is but a series of illustrations of this story. Steady is the legislation against interest and drastic are the measures against the money lenders, but unchecked is the concentration of landed property even in spite of social resolutions and social wars.

"Steady is the legislation against interest and drastic are the measures against the money lenders," Simkhovitch says, "but unchecked is the concentration of landed property..."  

I don't see that "the concentration of landed property" has much to do with the lending of money. The people who owned the massive properties of ancient Rome probably didn't need to borrow to buy them. The buyers had the money they needed.

The people who had to sell their properties to the massive landowner, I figure those people had been doing some borrowing. But they wouldn't have needed to borrow more just to sell their few acres of land. 

 

I believe policy today should be changed to reduce the incentives that encourage the provision and use of credit, in order to reduce our use of credit. I believe money (money that requires neither interest payment nor repayment of principal) should be increased at the same time, to sustain spending levels.

But I also believe that policy must be changed to encourage the accelerated repayment of debt, to counteract the encouraged borrowing. (And to fight inflation. But we already have policy to fight inflation. What we lack is policy that offsets the unnaturally rapid growth of debt caused by policy.)

Because I know policy can be highly effective, I figure that these changes will reduce the cost of using money and therefore boost the nonfinancial economy. I believe economic policy can be highly effective. But the quote suggests that Simkhovitch would not agree.

The "steady" legislation against interest and the "drastic" measures against lenders in ancient Rome must be considered strong policy. Simkhovitch says it was not effective.

I think the Roman response was incorrectly targeted. It did not stop the concentration of wealth in ancient Rome because punishing lenders is not the way to limit the concentration of wealth.

 

To reduce and reverse the concentration of wealth in our time, I believe the business income tax must be changed. 

In our economy, a business spends its capital to create output, then sells the output to recover its capital plus a profit. But under our existing tax code, only the profit is subject to income tax. Recovered capital is not taxed, because property is held to be sacred. (This is not tax advice. It is a general overview. Do not try to do your taxes based on what I'm saying.) Recovered capital is not taxed, because property is held to be sacred.

The failure to tax capital (the failure, that is, to tax gross business income) creates a tax advantage for business that is not available to consumers. This tax advantage shifts income and wealth from consumers to businesses. Among businesses, the greatest tax advantage goes to the business with the most capital to spend, and the least advantage goes to the business with the least capital to spend. Property-is-sacred policy, therefore, if allowed to continue, will lead to ever-more-extreme concentration of wealth. More extreme, even, than what we have at present. 

The property-is-sacred principle is embedded in our tax code. Our tax code is creating the extreme concentration of wealth. And the concentration of wealth is leading us, as it led Rome, to the fall of civilization.

The property-is-sacred principle is embedded in our thinking. Therefore it appears in the tax code, in our encouragement of corporate mergers and acquisitions, and everywhere economic policy reaches. This, more than anything, is what must change. Our thinking must change. 

It is not property but civilization that is sacred.

Based on what Simkhovitch says, the property-is-sacred principle was not addressed in ancient Rome. Nor was it addressed if we judge by the size of latifundia -- they became "as large as provinces" it says on page 222 in the Rome's Fall Reconsidered essay linked above.

The latifundia are evidence that Rome had a property-is-sacred policy. The rise of such massive concentrations of "landed property" is evidence of it.

The latifundia are evidence also that Rome created no policy that effectively undermined the property-is-sacred principle and the resulting concentration of wealth.

The principle of parallel evolution supports the view that ancient Rome would have had a property-is-sacred policy similar to our own. In our case today, we already have banks that are said to be "too big to fail".

 

Given the reverence people have for the property-is-sacred principle, that principle continues to operate until the government no longer exists, the government that wrote it into the tax code. When that government falls, the latifundia become the new centers of government -- subject, of course, to things being worked out hands-on during the darkest, most militaristic free-for-all phase of the dark age. 

Long after the dark age, the ultimate form of property-is-sacred emerges: the divine right of kings.

I want to put a stop to the concentration of wealth by eliminating property-is-sacred from our tax code.

 

The seven-sentence Simkhovitch quote continues:

... social wars. Because of this peculiar character of credit in certain historical periods ...

Note: "certain historical periods" should be interpreted to mean "in certain stages of the cycle of civilization": Because of this peculiar character of credit in certain stages of the cycle...  Again:

Because of this peculiar character of credit in certain historical periods, money lending was not a savory occupation. The gentleman, therefore, who in our industrial and mercantile life is a pillar of society and a respectable financier, is known by a different name under agricultural conditions. His name is Usurer.

Simkhovitch's words here seem quite strongly to refer to stages in the cycle of civilization. There are stages when money lending is "savory" and stages when it is not. Specifically, he says money lending is not savory in the "agricultural" stage, an early part of the cycle.^[1] But with the rise of "mercantile life" and then an industrial age, money-lending and borrowing at interest are more widely accepted, at least among people who hope to make money by those activities.

... Usurer. Not that his profits from money-lending are any larger, but that he is lending money for purposes of consumption to a man as a rule already economically doomed, while the "banker" is lending money for productive purposes and as a rule to the advantage of the borrower. Hence the different attitude towards the "financier" now and in ages past.

Simkhovitch focuses on two different categories for the use of borrowed money: "productive purposes" and "purposes of consumption". He is hinting at the obvious here: productive purposes increase output. Purposes of consumption do not. Productive purposes, by increasing output, increase the producer's income. This increased income can be used to pay down the debt without leaving other things unpaid.

Purposes of consumption do not increase output. They increase spending without increasing the borrowers' income. Repayment of debt can come only by delaying some other payment. Simkhovitch says exhaustion of the soil made farming unproductive and income stagnant.

It is interesting to see how Simkhovitch determines the purpose of the debt in ancient Rome. On page 220 he writes:

By improving land we add to our capital, while by robbing land we add immediately to our income; in doing so, however, we diminish out of all proportion our capital...

By definition, for Simkhovitch, growing indebtedness is evidence that the debtor is borrowing for purposes of consumption. Because if you were borrowing for productive purposes, with the extra income you'd have paid off that debt. Simkhovitch (page 217) concludes:

The wholesale indebtedness of the Roman farmer class obviously suggests indebtedness for purposes of consumption.

It is easier to distinguish the two types of debt in our day: Borrowing by businesses is for productive purposes. Borrowing by consumers is not. Easier to distinguish, but I don't know if the logic is any better.

But the most significant expression of the forces at work comes shortly after the page 217 quote above: "The increasing weight of accumulated interest on the loan and the decreasing productivity of the land seal the fate of the landowner." 

In other words, the fall of Rome was caused by exhaustion of the soil, growth of debt, and the inability or refusal to resolve these problems. Exhaustion of the soil caused a general decline of income, because most of the people were farmers. The rising cost of accumulating debt made the decline of income worse. No happy ending was possible.

In our time, exhaustion of the soil is not responsible for the decline of income. Rather, policymakers believe that inflation results primarily from excessive wage increases. The relative decline of income is largely a result of anti-inflation policy.

In our time, the relative decline of income is not responsible for our growing debt. Rather, policymakers believe that using credit is good for growth. The growth of debt results primarily from policies that promote the use of credit and, jointly, from the absence of policies designed to offset our increased use of credit by accelerating the repayment of debt.

Simkhovitch makes a convincing argument that in ancient times, exhaustion of the soil was responsible for the fall of Rome. In our time it should be obvious that bad economic policy is the source of the problem. First on the list, chronologically, are policies based on the idea that using credit is always good for growth.

When we have too little debt, using more credit helps to improve the economy. When we have too much debt, using less credit helps to improve the economy. There is a happy medium. There is an optimum level for debt, a narrow range that best promotes economic growth and employment and minimizes inflation.

How much debt is best? I cannot calculate that for you. But my limited abilities are not the problem. The problem is that few economists are looking for the optimum level, and none think in terms of an optimum level. Many of them still think using more credit is always good.

That's just not good enough.

I have suggested as a way to reduce the growth of debt, that we need credit to grow more slowly than money. This could be achieved, perhaps, by means of permanently high interest rates. But permanently high interest rates are a property of the dark age; this solution seems inappropriate. High rates, in addition, are not conducive to economic growth. (Existing policy uses high rates to slow economic growth when fighting inflation.) And high rates increase financial cost. Permanently high rates are not a good solution.

Consider this alternative: We should have tax credits that encourage debtors to make extra payments on their debt; the encouragement being that the tax bill is reduced commensurately.

We use economic policy to encourage borrowing. Our policy causes unnaturally rapid growth of debt. This is how we came to have so much debt in our economy. It is why our debt continues to grow even now.

If we insist on having policy encourage the use of credit, then we must also have policy that accelerates repayment of debt. By this method we can reduce the growth of debt to a more natural level. 

Preferably, we can reduce debt to the level that best promotes economic growth.

 

I propose using fiscal policy to accelerate the repayment of debt. Fiscal policy is tax policy. But let me say clearly that I am talking about new incentives and disincentives that induce us to make extra payments on our debt, by reducing our taxes when we do. I am not talking about changing the level of government revenue. I do not take a position on changing the level of government revenue. I do not take a position on it because the root of the problem lies elsewhere. It lies in the mix of cash and credit that we use for money. The more credit there is in the mix, the more costly it is to use money. The less credit there is in the mix, the less costly it is to use money.

There was ten times more credit in use (per dollar of money) in 2007 than there was in 1947:

Figure 1: Dollars of Credit-in-use per Dollar of M1 Money

The graph shows almost continuous increase in the cost of using money. If interest rates never changed, interest cost per dollar in 2007 would have been 10 times what it was in 1947.

That's great for bankers and creditors. It is not good for most people today, just as it was not good for most people in ancient Rome.

The recommended objectives of policy I propose are these:

• The volume of credit-in-use (or "debt") should grow more slowly than the quantity of money.
  
  
• Repayment of debt should be accelerated by policy, to counteract the rapid growth of debt resulting from policy that encourages the use and provision of credit.
  
  
• To eliminate the factor most responsible for the concentration of wealth, the business income tax must tax gross income rather than net income. Tax rates should be adjusted down so that government revenue is not increased by the change in taxable income.
  

To preserve civilization, it is not enough just to have Elon Musk buy Twitter.

"The entire history of Rome"

Vladimir Simkhovitch writes:

If the farmer is borrowing to meet the exigencies of a so-called bad year, his distress is temporary, and he is likely to square himself during the next good year; but if his distress is due to the progressive deterioration of his farm, he will be unable to extricate himself. Such indebtedness is hopeless. The increasing weight of accumulated interest on the loan and the decreasing productivity of the land seal the fate of the landowner. He certainly is not in an economic position to increase his land-holdings to a point where the larger product might supply his wants. Because he does not have enough land, what little he has will be taken from him and be given to him that has both land and economic capacity. In this way a farmer will be driven off the land and the holdings of some one else increased. That is the process of concentration of landed property. If this process should appear as a general phenomenon, as it did in Rome as well as in Greece, it is a factor of momentous social significance.

The entire history of Rome is but a series of illustrations of this story.

 

From page 217, or 18 of 44, in Rome's Fall Reconsidered
Read or Download from JSTOR at
https://www.jstor.org/stable/2141560?seq=1

 

I was illustrating that story the other day in The Angst of Rome.

Felix qui potuit rerum cognoscere causas.

Google Translate: Happy is he who was able to ascertain the causes of things.

The effects one can always see; of the effects one constantly hears: but the cause one must find.

- Vladimir Simkhovitch

From page 208, page 9 of 44 in Rome's Fall Reconsidered
Read or Download from JSTOR at
https://www.jstor.org/stable/2141560?seq=1

 

 

Simkhovitch comes back to this topic on page 224:

But we are told that Italy's depopulation was due to the civil strife and wars, to the ever-increasing marsh areas, and growing unhealthiness, and to a thousand and one other cherished explanations-all of them to a large extent based on contemporary documents and to a greater or lesser extent true, but all of them, at best, important symptoms or minor effects rather than fundamental causes.

The definition of 'trustworthy'

At MacroMania there is a quote from Andre Gide:

Believe those who are seeking the truth. Doubt those who find it.

I like those two sentences, and these two:

Those, who are strongly wedded to what I shall call “the classical theory”, will fluctuate, I expect, between a belief that I am quite wrong and a belief that I am saying nothing new. It is for others to determine if either of these or the third alternative is right.

The impact of inflation on international trade

 

Richard Cantillon (French: [kɑ̃tijɔ̃]; 1680s – May 1734) was an Irish-French economist and author of Essai Sur La Nature Du Commerce En Général (Essay on the Nature of Trade in General), a book considered by William Stanley Jevons to be the "cradle of political economy"...

 - Wikipedia

 

Three fragments from one paragraph in the Wikipedia article:

Addressing the mercantilist belief that monetary intervention could cause a perpetually favourable balance of trade, Cantillon developed a specie-flow mechanism foreshadowing future international monetary equilibrium theories. He suggested that in countries with a high quantity of money in circulation, prices will increase and therefore become less competitive in relation to countries where there is a relative scarcity of money. 

 

Cantillon also held that increases in the supply of money, regardless of the source, cause increases in the price level and therefore reduce the competitiveness of a particular nation's industry in relation to a nation with lower prices. 

 

Cantillon did not believe that international markets tended toward equilibrium, and instead suggested that government hoard specie to avoid rising prices and falling competitiveness.

I have removed the word "Thus" from the beginning of the second fragment and the word "However" from the beginning of the third. These words connect the latter fragments  to what comes before in a way that requires me to stop and think about the relationships between fragments. I don't want to do that. It's a distraction. 

I want to think about the ideas within the fragments. Here, let me focus on the ideas:

• In countries with a high quantity of money in circulation, prices will increase; these nations therefore become less competitive in international trade.
  
  
• Increases in the supply of money, regardless of the source, cause increases in the price level and therefore reduce the nation's competitiveness in international trade.
  
  
• He suggested that government hoard specie to avoid rising prices and declining competitiveness in international trade.

It's all one idea, isn't it: Inflation at home makes a nation less competitive in international markets. (Don't focus on "the supply of money" as the cause of inflation; that is a separate topic. The key idea in the fragments above is that one of the effects of rising prices is the tendency toward trade deficits.)

For me, the idea was obvious, once I thought of it. But it took me a very long time to think of it. Since the inflationary '70s, when I got interested in the economy, this paragraph from Wikipedia is I think the first time I ever saw the idea laid out with a little emphasis.

Oh, yes, I recall Thomas Palley, back in 2017, saying

Moreover, the last four decades have seen several episodes of extended dollar over-valuation that have caused large trade deficits that have done great damage to U.S. manufacturing.

"Dollar overvaluation" is not the same as inflation, but it has a similar impact on prices. I took Palley's sentence as confirmation of my thought that inflation makes a nation less competitive in international markets. Not that I had the idea before Richard Cantillon, of course. I'm not that old. But I only recently found the Cantillon paragraph at Wikipedia.

 

The Cantillon paragraph only seems to emphasize inflation's impact on trade because I am focusing on that aspect of it. At the source, the three fragments shown above are followed by two additional sentences that are not related to inflation. One sentence is on Cantillon's view that the balance of trade can be improved "by offering a better product". The other considers mercantilism as the possible source of Cantillon's "preference" for a favorable balance of trade.

The paragraph after the one considered here moves on to consider Cantillon's theory of interest. Wikipedia does not emphasize the impact of inflation on international trade. We're lucky we got the three sentences we got.

There has been a lot of discussion in this country (and elsewhere I suppose) about our trade deficits, and a lot about inflation, but almost none (that I have seen) pointing out our trade deficits as a consequence of inflation.

If you want to call something "the Cantillon effect", it should be this.

"five selected but critical shortcomings"

 A Google search for econ led me to the Economics page at arXiv, a collection of econ papers. In that archive I found the landing page for Macroeconomic and financial management in an uncertain world: What can we learn from complexity science? (PDF, 23 pages) by Thitithep Sitthiyot of the Public Debt Management Office, Ministry of Finance, Thailand.

I know I'm not supposed to judge a book by its cover, but the title of this paper induced me to download the thing. Glad I did. I got as far as the Introduction where I read

Section II discusses five selected but critical shortcomings of existing knowledge in macroeconomics and finance.

That's what I want to present today. This is from the opening paragraph of Section 2:

The main shortcomings in macroeconomics and finance have to do with models and assumptions. For macroeconomics, the model that is being widely used by economists to analyze and forecast the effects of economic policies on the economy is known as the Dynamic Stochastic General Equilibrium or DSGE model. This model has been heavily criticized by many scientists outside the field of economics and by a number of economists that many assumptions imposed in the DSGE model are not consistent with empirical observations.

In a footnote at that point, Sitthiyot says: "Ormerod (2006) refers to Kenneth Arrow, the winner of the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel in 1972, who regards the DSGE model as being empirically refuted." The paragraph resumes:

This paper chooses to discuss three main assumptions imposed in the DSGE model that do not fit with what happen in reality, namely, the equilibrium state of the economy, the external random shocks as the only factor that could affect the system, and the representative agent with rational expectations.

I like this paper because it is well organized, and because it gathers and presents specific complaints. Below I present a shortened version of the five critical shortcomings given in Section 2 of the paper:

The main shortcomings in macroeconomics and finance have to do with models and assumptions. For macroeconomics, the model that is being widely used by economists to analyze and forecast the effects of economic policies on the economy is known as the Dynamic Stochastic General Equilibrium or DSGE model...

1. Models
This paper chooses to discuss three main assumptions imposed in the DSGE model that do not fit with what happen in reality, namely, the equilibrium state of the economy, the external random shocks as the only factor that could affect the system, and the representative agent with rational expectations.

1a. The Equilibrium State
As its name suggests, the DSGE model assumes an equilibrium state of the economy. Casti (2010) illustrates that, in the real world, an economy where supply and demand are in balance never happens even approximately. According to Helbing (2015), economic system is unlikely to be in equilibrium at any point in time. Rather, it is expected to show a complex non-equilibrium dynamics. Ball (2012) notes that the equilibrium assumption originates from microeconomic theory as an analogue of equilibrium physical systems such as gases which have stable and unchanging states. The physical sciences, however, have long moved on to describe non-equilibrium process such as weather system but economics has not...

1b. The External Random Shocks
Kirman (2010) argues that, by and large, the fluctuations of the economy are the result of interaction among agents who make up the system and not due to some exogenous shocks. Kirman also refers to Sornette (2003) who makes a similar point that a stock market crash is not the result of short-term exogenous events but rather involves a long-term endogenous build-up with exogenous events acting merely as triggers. The idea that endogenous factors could gradually cause the system out of equilibrium is not entirely new, however. It has long been recognized and studied by many disciplines such as physics, biology, ecology, and sociology...

1c. The Representative Agent with Rational Expectations
In addition, the DSGE model assumes that the whole population in the economy can be represented by a representative agent with rational expectations who tries to maximize expected utility at any given period subject to inter-temporal budget constraint. It is as if one person’s thought can be used to represent the way in which everyone else in the entire economy thinks. Clearly, the model ignores the interaction among different agents comprising the economy and positive feedback which could cause emergent phenomena.

There is more. I am trying to present the minimum that shows Sitthiyot's approach and the concept presented in the paper. (The outlining, in bold text, is mine, added to be sure I captured all five points in this short overview.) Section 2 continues:

2. Assumptions
While the drawbacks of macroeconomics are due mainly to the model and assumptions, the problem in finance has to do with assumptions. There are two assumptions this paper chooses to discuss. The first assumption often imposed in finance is that price changes are independent... The second assumption is about the distribution of data.

2a. Price Changes are Independent
The first assumption often imposed in finance is that price changes are independent. One could think of tossing a fair coin as a metaphor. The results coming out of a coin tossing are independent from each other. The coin does not have a memory whether it landed head or tail in the past... In reality, changes in prices are not independent. Financial data have a property of path dependence or long memory. Normally, big changes are followed by big changes, the so-called clustered volatility...

2b. The Distribution of Data
In addition to the assumption that price changes are independent which is not consistent with empirical observations, financial data do not follow normal distribution as assumed in modern finance. Rather, it exhibits power law distribution with fat tails. According to Haldane and Nelson (2012), the power law distribution with fat tails implies that the probability of large events decreases polynomially with their size while, in the normal distribution world, the probability of large events declines exponentially with their size, making large events increasingly rare at a rapid rate. In contrast, under power law distribution, these large events are much more likely.

To provide a numerical example of how risky it might be if one assumes normality of distribution of data, this paper refers to a study conducted by Benoit Mandelbrot using daily index movement of Dow Jones Industrial Average during the period of 1916-2003. Based on Mandelbrot’s empirical findings, normal distribution implies that there should be fifty-eight days when the Dow moves more than 3.4% while in fact there are one thousand and one. In addition, normal distribution predicts six days where the Index swings beyond 4.5% whereas there are three hundred and sixty-six days according to the empirical observations. And lastly, the Index that swings more than 7% should come once every three hundred thousand years as predicted by normal distribution while the twentieth century already observed forty-eight days. It is crystal clear based on this empirical evidence that assuming that data have normal distribution would highly underestimate risk.

That's all five points. Gathering them together makes them easy to understand and makes a strong critique of economic thought. And I have to say the presentation of Mandelbrot's numbers is awesome!

Written 106 years ago, but even more relevant today

Two pages from Rome's Fall Reconsidered, a Google Book.

 

"Latfundia" is "big farms" or "large landholdings", super-big and super-large. In those days, land was wealth.

Is it not interesting that he is not presenting us with a list of factors that were leading Rome to its destruction? On the contrary, he points out one predominant factor, the latifundia, the concentration of wealth, ruining both Rome and the provinces...

 

We looked at Melania on 25 Feb:

In AD 404 Melania freed 8000 slaves out of a total of 24,000 on sixty farms, villas or hamlets which she owned in the vicinity of Rome.

Melania had income comparable to the imperial revenues.

That last line struck me when I read it (in the '80s maybe) so that I never forgot it. With my memory. But Seneca blows that out of the water when he says A large tract of land, formerly sufficient for a whole nation, is now barely enough for a single lord!

And Cicero blows Seneca out of the water, quoting a tribune who says there are less than two thousand property owners in the whole of Rome!

 

When Horace asks What does ruinous time not impair? he is asking What is left after the decline of civilization takes its toll?

It's a good question. The answer: Not very much. The fall is rapid. When you hit bottom, however, you can be stuck there for a long time.

//

So, which is it? The latifundia, or the corruption? Simkhovitch answers that question on the next page:

In that very same ode Horace tells us why he takes so desperate a view of things. The great deeds of the Romans were the deeds of a sturdy farmer race, of the "mascula proles rusticorum militium, docta versare glebas Sabellis ligonibus" -- and these farmer's sons existed no longer. If they could not maintain themselves on their farms, still worse were the chances for a respectable existence in Rome; there they lost what little they had and became demoralized, dependent paupers.

The two complaints, the two Roman explanations of their own decline and disintegration reduce themselves, therefore, to one single explanation. For it is clear that the latifundia and corruption are but different aspects of the same social phenomenon. If the moral disintegration was due to the disappearance of the self-supporting, self-respecting farmer class, and the inordinate wealth and fantastic luxury of the small upper class, the latifundia were but a real-estate expression of the same phenomenon. The place of innumerable small farms was taken by extraordinarily large estates -- the latifundia.

//

Google's Ngram Viewer is a gold mine. I can search for usage of a phrase, then search thru the source books going back to 1800 to find it in use in a Google Book. And a lot of these old Google Books are marked "Full Book Available". And a lot of those old books say things worth repeating.

The Angst of Rome

Again, the opening sentence of the first chapter in Brooks Adams's The Law of Civilization and Decay:

When the Romans first emerged from the mist of fable, they were already a race of land-owners who held their property in severalty, and, as the right of alienation was established, the formation of relatively large estates had begun. 

The "right of alienation" means you can legally buy and sell land. Ownership "in severalty" means you can do it. When people own land, and can buy and sell it, you would expect to see some "relatively large estates" arise, as Brooks Adams describes, as part of a natural process, the concentration of wealth. A natural or, at any rate, a legal process.

Among the first facts we know of ancient Rome, Adams says, is that the concentration of wealth was already under way. When we get past the myths and legends, he says, the first thing we know about Rome is concentration of wealth. 

When some people are acquiring land, others are becoming landless; in Rome's agricultural economy, landless and poor.

 

Branko Milanovic, a few years back, read and took notes on Francis Fukuyama's book The Origins of Political Order. He writes:

I noticed among my notes a number of Fukuyama’s views on economics, many directly critical of some mainstream nostrums... I decided to bring up Fukuyama’s several economic statements, with only minimal commentary from me.

First among these economic statements is "Against 'property rights fetishism' (Fukuyama’s term)". Milanovic quotes Fukuyama:

In a Malthusian economy where intensive growth is not possible, strong property rights simply reinforce the existing distribution of resources.

Milanovic covers more of Fukuyama's economic statements. Then, wrapping things up, he writes:

At the end, another concept that I really liked, handsomly-termed,  “the iron law of latifundia” or large real estates: “the rich tend to get richer in the absence of state intervention” (p. 368)

Today we consider the time that begins with Brooks Adams's "When the Romans first emerged from the mist of fable, [the ordinary family] held perhaps twelve acres", and ends with evidence supporting Fukuyama's "iron law of latifundia".

 

The angst of the poor

I don't use the word angst and I don't know anyone who does. But the word popped into my head while I was writing this, so I looked it up. It looks like the right word:

"a feeling of deep anxiety or dread, typically an unfocused one about the human condition or the state of the world in general."

Like Jimmy Carter's malaise, but a stronger dose.

 

Over time, "the formation of relatively large estates" in ancient Rome progressed to the point where the wealthy were getting hungry for power and the poor were growing restless. The angst of the poor turned the popular mood against the king. The rich would take advantage of the popular mood to gain support for regime change, crush the kingdom, and establish a republic. Wikipedia's Conflict of the Orders page confirms that there was class struggle:

The Conflict of the Orders, sometimes referred to as the Struggle of the Orders, was a political struggle between the plebeians (commoners) and patricians (aristocrats) of the ancient Roman Republic lasting from 500 BC to 287 BC in which the plebeians sought political equality with the patricians.

The Roman Kingdom was a thing of the past. The Conflict of the Orders occurred in the Roman Republic. It was not resolved quickly because the underlying problem was so deeply troubling.

But the Conflict of the Orders arose almost immediately after establishment of the Republic. It did not arise from problems created by the Republic. It arose from problems that had developed in the time of the Kingdom. It arose after the regime change because regime change did not solve the problems, and people had to take action.

The angst that found vent in the Conflict was the same angst that had turned people against the king in the days of the last king (or kings) of Rome. The fact that the Conflict arose so soon after the regime change is evidence that the angst of Rome arose during the monarchy, turned the popular mood against the king, and created a political environment in which revolution could succeed. Angst led to revolution, not revolution to angst.

You will notice that the Conflict of the Orders is described as a political struggle for political equality. The angst, however, had economic roots. The Conflict was class struggle. Yet it is described today, and it was doubtless described at the time, as a political struggle.

Political solutions cannot solve economic problems. That is why the Conflict of the Orders lasted more than 200 years. My guess, it was the Roman nobility that insisted on calling the Conflict a political issue. If the poor knew better, their voice was muffled by the wealthy.

The two rapes

The Roman "mist of fable" extends back not to the Empire nor to the Republic but before them to the Kingdom founded by Romulus at the age of 18, the story goes, and after killing his twin brother. 

Wikipedia points out that "no contemporary records of the kingdom" survive. So the story (not the history) is that Romulus was Rome's first king. And Tarquin (Lucius Tarquinius Superbus) was the seventh and final king of Rome.

Something else from Wikipedia's Roman Kingdom page: Apparently the first king and the last king have something in common: rape. Regarding Romulus, Rome's first king, they write:

Romulus was behind one of the most notorious acts in Roman history, the incident commonly known as the rape of the Sabine women. To provide his citizens with wives, Romulus invited the neighbouring tribes to a festival in Rome where the Romans committed a mass abduction of young women from among the attendees.

Regarding Tarquin, the last king, they write:

The seventh and final king of Rome was Lucius Tarquinius Superbus... Tarquin's reign is remembered for his use of violence and intimidation to control Rome, and his disrespect for Roman custom and the Roman Senate.

Things were not going well in Tarquin's time. Wikipedia doesn't say, but I would bet the economy was in trouble. And then things got worse:

Tensions came to a head when the king's son, Sextus Tarquinius, raped Lucretia, wife and daughter to powerful Roman nobles. Lucretia told her relatives about the attack, and committed suicide to avoid the dishonour of the episode.

The two rape stories have very different endings. For Rome's first king:

War broke out when Romulus refused to return the captives. After the Sabines made three unsuccessful attempts to invade the hill settlements of Rome, the women themselves intervened during the Battle of the Lacus Curtius to end the war. The two peoples were united in a joint kingdom, with Romulus and the Sabine king Titus Tatius sharing the throne.

The Romulus story has a happy ending: The victims intervened to stop the war. The warring parties joined forces. The warring kings shared the throne. Things went well for the first king of Rome. Things went even better a few years later, when the Sabine king died and Romulus was again the only king.

The ending was not so happy for Rome's last king:

Four men, led by Lucius Junius Brutus, and including Lucius Tarquinius Collatinus, Publius Valerius Poplicola, and Spurius Lucretius Tricipitinus incited a revolution that deposed and expelled Tarquinius and his family from Rome in 509 BC...

Brutus and Collatinus became Rome's first consuls, marking the beginning of the Roman Republic.

Not a happy ending for Tarquin. My first thought, reading that tale: It is funny that Wikipedia says

Four men, led by the first one and including the other three incited a revolution...

But then I noticed that Brutus and Collatinus, who became the first consuls, were two of the four who incited the revolution. Brutus and Collatinus profited by their act by becoming consuls. That is as unacceptable, in my view, as President Nixon appointing his own successor, and that successor granting Nixon a Presidential pardon.

Thinking about this further, it occurs to me that means, motive, and opportunity were present:

• Means -- the ability to commit this crime against the king -- was the angst of the poor, which created the environment needed for the revolution to be successful.
• Motive -- the reason for committing this crime against the king -- was the hunger for power among the rich.
• Opportunity -- the chance to commit this crime against the king -- was the rape of Lucretia by the king's son Sextus.
  

The Sabine rape story ends with the victims intervening and the kingdoms merging. The story has a happy ending for Romulus and Rome.

The Lucretia rape story ends with Lucretia stabbing herself to death. Brutus was prepared:

According to legend, Brutus grabbed the dagger from Lucretia's breast after her death and immediately shouted for the overthrow of the Tarquins.

It makes a good story. But no one immediately calls for the overthrow of government unless it suits his plan. 

I find means, motive, and opportunity behind the fall of the kingdom and the rise of the Roman Republic.

 

From the Start

Consider again what Brooks Adams said: "When the Romans first emerged from the mist of fable, they were already a race of land-owners..."

If we take myth, legend, and the mood of the people as evidence, we can say with some confidence that the concentration of wealth was under way since the time of Rome's first king, and that it had become problematic by the time of Rome's last king.

Romulus, first king of Rome,

established the senate as an advisory council with the appointment of 100 of the most noble men in the community.

So there was inequality from the start. There were nobles in power, from the start. And land was held "in severalty" with the "right of alienation" from the start (or soon after).

In the time of the Roman Kingdom, nobility had a presence and inequality was growing.

Over time, "the formation of relatively large estates" progressed to the point where the wealthy were getting hungry for power and the poor were growing restless. The angst of the poor turned the popular mood against the king. The rich took advantage of the popular mood to gain support for regime change, to crush the kingdom, to establish the republic, and to put themselves in charge.

The Moment of Breakdown

The historian Arnold J. Toynbee defined "breakdown" as the point at which the disintegration of civilization begins. Toynbee wrote

the ... schism of a society along lines of class is not only peculiar to civilizations but is also a phenomenon which appears at the moment of their breakdowns and which is a distinctive mark of the periods of breakdown and disintegration, by contrast with its absence during the phases of genesis and growth.

Toynbee said

the fundamental cause of the breakdowns which precede disintegrations is an outbreak of internal discords...

Internal discord -- class conflict -- is the cause of the breakdown and disintegration of civilization.

Among the first facts we know of ancient Rome, Adams says, is that "the formation of relatively large estates had begun."

By the time the Roman Kingdom gave way to the Roman Republic, internal discord and class conflict were rampant. The fact that Rome's last king was unpopular is evidence that inequality and poverty had been problematic for a long time. 

The fact that the revolution was successful is evidence that Rome's people supported the change in government. The fact that Rome's people supported the change in government is evidence of their dissatisfaction with existing conditions, and of their angst.

Angst does not arise overnight, not to the point where it supports revolution. The Roman Kingdom started angst-free, with a popular king. Conditions were so good that the Romans could kidnap the women of the neighboring town, and the women said "that's okay." Conditions were so good that the neighboring town and its king wanted to join up with Rome. Conditions were that good.

That was the beginning.

At the end, at the time of the rape of Lucretia, conditions were so bad that when Brutus grabbed the dagger and called for the overthrow of the king, the people were okay with it.

Somewhere between the first king and the last king, internal discord arose. Class conflict arose. It was the first indication of the breakdown of civilization. Yes, it was the nobility that profited by inequality, not the king. But the king got the blame.

How long is an Age?

It seems to vary:

That makes sense. An age takes as long as it takes. It works, because the definition of the word allows for differing lengths of different ages:

The "age" is the length of time the historical age existed. Makes sense to me. They even have singular and plural forms where the same definition applies. So you could have the Middle Ages, which is plural because it contains "early", "high", and "late" stages:

My reasoning fails. There are three ages in the Middle Ages, the first being the Early Middle Age. But no, it is the Early Middle Ages. 

Yeah, it sounds better with the "s" on "age", but that's only because that's the familiar version. Why? Because that's how people say it, and that's how it is used. I'm sure it is not because if you say "early middle age" people think you are talking about people rather than historical periods. (I sure hope you think I'm trying to be funny, not just that I'm crazy.)

I don't really have a problem with the "s" on "Early Middle Ages". That's what it's called, and it sounds right. And people know there is just one of them, even though you say "ages". But I do have a problem with "Dark Ages".

Even Keynes, when he said "Yes, it was called the Dark Ages, and it lasted four hundred years", he used the plural. What, an "age" is 100 years, and there were four of them in the Dark Ages?

I don't think so.

I know, people use the plural when they talk about historical ages. I know. I usually don't object. I do it, too. I was doing it today. That's why I got thinking about it.

I think when people say "the Dark Ages" they mean the time after the fall of Rome, the early days of Europe before nations started to jell.

Yeah, me too. But not being a history buff, I didn't know that our Dark Ages was not the only Dark Ages. Before our Dark Ages was ancient Rome. Before ancient Rome was ancient Greece. Before ancient Greece was a Dark Ages:

The Greek Dark Ages is the period of Greek history from the end of the Mycenaean palatial civilization around 1100 BC to the beginning of the Archaic age around 750 BC.

Before the Dark Ages before Greece, there was the Mycenaean civilization:

Mycenaean Greece (or the Mycenaean civilization) was the last phase of the Bronze Age in Ancient Greece, spanning the period from approximately 1750 to 1050 BC.

Homer wrote about them:

Various collective terms for the inhabitants of Mycenaean Greece were used by Homer in his 8th-century BC epic the Iliad in reference to the Trojan War.

Before Mycenaean civilization? There was the "Helladic" Bronze Age. ("Age" singular, by the way.) According to the Wikipedia article,

The Early Helladic (EH) period (c. 3200–2000 BC) was a time of prosperity with the use of metals and a growth in technology, economy and social organization. The Middle Helladic (MH) period (c. 2000–1700/1675 BC) faced a slower pace of development...

The end of the Middle Helladic, together with the Late Helladic, make up the Mycenaean civilization. Let me stick my neck out and say that maybe the "slower development" part of the Middle Helladic was a dark (or dim) age that came before the Mycenaean civilization.

• 3200-2000 BC: Prosperity
• 2000-1700 BC: Dim/Dark Age
• 1750-1050 BC: Mycenaean Civilization
  
• 1100- 750 BC: Dark Age
• 750 BC - 476 AD: Ancient Greece and Rome
• 476 AD - 1000 AD: Dark Age
• 1000 AD - Present: Our civilization
  

See how that works? By this quick look back on it, there were two or three Dark Ages. No doubt there were other Dark Ages, along with other civilizations, that are not captured here.

I think our use of the phrase "Dark Ages" (plural) to describe the one Dark Age that followed the fall of Rome makes people think that there only ever was one Dark Age. But clearly there was more than one. Thinking there was only ever one Dark Age is a huge, huge mistake, because when you get a Dark Age, you lose a civilization.

So the point of this post is that from now on, when I talk about one Dark Age I will say "Dark Age" (singular). Only when I am talking about more than one Dark Age will I use the plural, "Dark Ages".

I had to go thru this. I hope it was worth your time.

The usurer and the peasant

A review by R. Latta of The Law of Civilization and Decay, the Brooks Adams book written in 1895. The 3-page review is from The International Journal of Ethics, Volume 9, Number 4, July 1899. The Journal was published by the University of Chicago Press. Links include:

• Landing Page
  
• Says "PDF" but isn't
  
• "PDF download"
  

Or you could just go to JSTOR for the July 1899 issue and download the review from there.

Sometimes, approval can be effusive (unrestrained, excessive) and flowery. If you want concise approval, you're better off reading a negative statement. R. Latta's opening sentence is concise:

Mr. Adams believes that he has discovered a law which governs the movement of human society in its "oscillations between barbarism and civilization."

The words suggest that Latta himself does not believe Adams has "discovered a law". And it's all downhill from there, as Latta presents Adams's view:

... as society becomes consolidated and centralized, energy expresses itself not as Fear but as Greed, and a new type of man becomes dominant, the economic man, who is unimaginative, sceptical, unwarlike, inartistic, a monster of voracity with the cleverness of a fiend and without a redeeming quality. Every race must come to this sooner or later, and ultimately "intensifying competition appears to generate two extreme economic types,-the usurer in his most formidable aspect and the peasant whose nervous system is best adapted to thrive on scanty nutriment." (P. x.) This condition may last for a time, until it is "ended by war, by exhaustion, or by both combined, as seems to have been the case with the Eastern Empire; or, as in the Western, disintegration may set in, the civilized population may perish, and a reversion may take place to a primitive form of organism." In this last case, the energy of the race is probably exhausted, and it must wait to be refreshed by the infusion of barbarian blood.

Adams wrote of "farmers" and usurers; Latta says usurers and "peasants". Nice trick: Latta downgrades farmers to peasants, and implicitly attributes the insult to Adams.

At least Latta doesn't miss the usurers. That's the important part, the growth of usury. Today we call it "financialization". Many people deny that it is a problem. 

Brooks Adams, grandson of John Quincy Adams, knew it was a problem in 1895.

Graph #1: Nonfinancial Debt Relative to Nominal GDP.
When debt increases, the interest cost also increases.
We think of "usury" only in terms of interest rates. But
a high level of debt has the same effect as high rates.

The graph shows debt increasing relative to GDP. The solid red lines indicate years. The dashed red lines show the level of debt as a percent of GDP for 1895 and for 2020.

Brooks Adams wrote The Law of Civilization and Decay in 1895. Nonfinancial debt that year amounted to 58% of nominal GDP. In 1848, the year he was born, the Debt-to-GDP ratio was half as high. Less than half. 

In 2020, the last year shown on the graph. the Debt-to-GDP ratio reached 293%. That is five times what it was in 1895, and more than ten times what it was in 1848. 

We can't let it keep going up. It is already causing problems. If we insist on having policies that encourage the use of credit, then we must have policies that encourage the repayment of debt. In addition, the economy is fragile because debt is so high. Therefore, in addition to encouraging the repayment of debt, our policies probably should help out a little. For example: tax credits that reduce the income tax we owe if we make extra payments on our debt.

If we really want to fix the economy, this is the way.