“Injustice, swift, erect, and unconfin’d,
Sweeps the wide earth, and tramples o’er mankind” – Homer, The Iliad
Everything was just the way it was supposed to be in Pompeii on August 24, 79 A.D. The gods had bestowed wealth and abundance upon the inhabitants of this Roman trading town. Things were near perfect.
Residents of Pompeii lived in large homes with elegant courtyard gardens and all the modern conveniences. Rooms were heated by hot air flowing through cavity walls and spaces under the floors. Running water was provided to the city from a great reservoir and conveyed through underground pipelines to houses and public buildings.
Fresh fish from the Bay of Naples were readily available in the Macellum (great food market) and countless cauponae (small restaurants). Entertainment was on hand at the large amphitheatre. Life was agreeable, affable, and idyllic for all…and it was only getting better. Everyone just knew it.
By 79 A.D. Pompeii had experienced nearly uninterrupted advancement from its founding almost 700 years earlier. That this would ever change was unthinkable. On the morning of August 24th, who but a doomsayer would suggest there wouldn’t be another 700 years of progress?
Yet, just then, when things couldn’t have seemed more certain, Mount Vesuvius blew.
Nineteen hours later, where there had been life and a thriving civilization…there was silence for the next 1,669 years.
Ignoring the Warning Signs
Viewing events through the lens of history and hindsight is unfair to its participants. Their missteps are too obvious, their vanities are too abundant, and their inferiorities too absurd. They appear to be mere imbeciles on parade.
Was George Armstrong Custer really just an arrogant Lieutenant Colonel who led his men to massacre at Little Bighorn? Maybe. Especially when Sitting Bull, Crazy Horse, and numbers over three times his cavalry appeared across the river.
Were George Donner and his brother Jacob naïve fools when they led their traveling party into the Sierra Nevada in late fall? Perhaps. Particularly when they resorted to munching on each other to survive the raging blizzard.
Still they were human just like we are human…no smarter, no dumber. We’re not here to ridicule them; but rather, to learn from them.
In the case of Pompeii, the warning signs were evident to those who bothered to heed them. Seventeen years before Mount Vesuvius erupted there was a massive earthquake that damaged many of the structures within the city. Then, leading up to 79 A.D., frequent, but smaller, quakes occurred…soon no one seemed to pay them any concern.
Unfortunately, ignoring these warnings proved fatal. Coincidentally, one day after the Vulcanalia – the festival of the Roman god of fire – Mount Vesuvius erupted. A cloud of gas and ash spewed down on Pompeii, instantly killing its inhabitants and burying the city under 60 feet of ash and pumice.
“You could hear women lamenting, children crying, men shouting,” was the account by Pliny the Younger, 61 A.D – 112 A.D. “There were some so afraid of death that they prayed for death. Many raised their hands to the gods, and even more believed that there were no gods any longer and that this was one unending night for the world.”
Warning Signs of a Financial Vesuvius
This week world markets turned to the Greeks for guidance on how to make their trades. Monday’s announcement by Prime Minister George Papandreou of a national referendum to approve another bailout from the European Union sent markets into a two day tailspin. Then, in schizophrenic fashion, he withdrew the call for referendum, and markets rejoiced.
The Greeks, no doubt, are an entertaining bunch. But they are more than merely entertainment. They are a warning sign of something much more. For while Papandreou was blundering, and Sarkozy and Merkel were blustering…across the Ionian Sea, and up the peninsula from the buried City of Pompeii, warning signs of a financial Vesuvius were flashing off and on at the Borsa Italiana in Milan, Italy.
Since last week’s European Summit, yields on 10-year Italian bonds have spiked to around 6.25 percent. Additionally, the spread between 10-year Italian bonds has jumped 4.36 percent above German bunds. One year ago the spread was just 1.5 percent.
What this means is that it’s much more expensive to borrow money in Italy than it was a year ago. Moreover, if Italy follows Greece’s lead, borrowing costs will escalate rapidly. Before long, it’ll cost too much for Italy to borrow in the bond market. They’ll require a bailout too.
But, alas, where Greece’s economy represents just 2.6 percent of the Eurozone economy, Italy’s economy represents 16.9 percent. When the Italian bond market freezes over like a durian gelato a European bailout of Italy will be uncontrollable…the financial Vesuvius will explode.
for Economic Prism