When In Rome

Everyone is well aware of the birth, rise, decline and eventual crash of the Roman Empire. The Roman Empire fell for many reasons such as military corruption, a decline in overall morality of the Roman citizens and a government that cannot function properly under the great expansion Rome was undergoing at the time. But, the most curtail reason why the government failed was due to lack of economic knowledge the Romans possessed. (http://www.angelfire.com/darkside/sjhscult/notes/unit1/fall_rome.htm)

Background: Towards the end of the Roman days, the Romans relied more and more on foreign goods and taxes were extremely high for some while some were not even taxed. Finally, one of the biggest things is the way Rome fell was the choice of the people by hording money. Although not mentioned in detail by the article, a look at this hoarding of money can easily destroy an economy based on the principles of the circular flow chart. (http://ancienthistory.about.com/gi/o.htm?zi=1/XJ&zTi=1&sdn=ancienthistory&cdn=education&tm=11&gps=39_12_1280_705&f=11&tt=2&bt=1&bts=1&zu=http%3A//web.archive.org/web/20040411190830/http%3A//www.acs.ohio-state.edu/history/isthmia/teg/Hist111H/issues/rome1.html) (http://ancienthistory.about.com/cs/romefallarticles/a/fallofrome_3.htm)

So…What’s up?: Yeah, I know, what a great story about the Romans right? But how does that even apply to economics or even the United States today? Well, towards the end of the Roman Empire, Rome was expanding far too fast for the Roman economy to handle, so they began importing many goods. In my opinion, the excessive import of foreign goods can cripple and severely damage an economy. Think about it, the US is possibly the most insufficient country because we rely on food, clothing, housing materials and much more shipped from halfway across the world. At first it seemed like a cheap and easy answer to become the super power of the world, but today and in recent years, it has crippled the economy by sending jobs overseas. In Ancient Rome, I’m sure this is what happened slowly causing Rome to fall.

Another reason of why the Romans fell was the fact that the citizens were hoarding their gold coins in there house instead of spending, investing or paying taxes with them causing a hiccup in the circular flow. The circular flow chart is a chart of economic activity that looks at both houses and firms. (The producing and consuming units.) The circular flow chart can be in many different forms, but this basic structure is the same all around. On one side there are households and on the other there are firms. In between there are foreign markets, the government, and banks. The firms provide the households with wages, and the households many put them in the bank, pay taxes to the government, or buy goods and services from the firms. The flow of money keeps in the economy so it may grow and sustain itself. Any disturbance in this flow can throw this cycle off and cause depressions, recessions, inflation and disequilibrium. It seems almost too easy to keep this flow going. Just put your money in a bank, invest it, spend it or pay taxes with it. The best example to equate with today’s society is the fall of 2008 with all the toxic assets and the increased gas prices. People became scared and stopped spending money. This is also most likely what happened in Rome.

Based on what is known about the American and Roman economy, could America come crashing down just like the Romans did thousands of years ago?