The Day Mount Vesuvius Erupted
“Injustice, swift, erect, and unconfin’d,
Sweeps the wide earth, and tramples o’er mankind” – Homer, The Iliad
On August 24, 79 A.D., Pompeii was thriving. The gods had graced this Roman trading hub with prosperity and richness, making life seem nearly perfect.
The townsfolk enjoyed luxurious homes adorned with beautiful courtyard gardens and modern amenities. Central heating warmed their rooms through hot air circulating within cavity walls and under floors. A vast reservoir supplied fresh water via underground pipes to both residences and public buildings.
Fresh fish from the Bay of Naples were abundant at the Macellum (the grand food market) and numerous cauponae (small eateries). The large amphitheater offered endless entertainment. Life was pleasant and idyllic for all residents—and the future seemed ever brighter. Everyone believed there would be no end to this prosperity.
Since its founding almost 700 years earlier, Pompeii had known almost continuous progress. The idea that anything might disrupt this prosperity seemed unimaginable. Who, on that morning, could have predicted that there would not be another 700 years of advancement?
Yet, just when certainty was at its peak, Mount Vesuvius erupted.
Nineteen hours later, the once vibrant civilization lay silent for the next 1,669 years.
Ignoring the Warning Signs
Looking back at history and critiquing its figures can appear unjust. Their errors seem glaring, their follies numerous, and their shortcomings almost comical. They often resemble misguided individuals in a tragic play.
Was George Armstrong Custer merely an overconfident Lieutenant Colonel who condemned his men to disaster at Little Bighorn? Possibly, especially considering that Sitting Bull, Crazy Horse, and three times the number of his cavalry were positioned across the river.
Were George Donner and his brother Jacob naive when they led their party into the Sierra Nevada during late fall? Perhaps, particularly when they resorted to cannibalism to survive the brutal blizzard.
Yet they were human, just as we are—neither more nor less intelligent. Our aim isn’t to mock them, but rather to glean lessons from their experiences.
In the case of Pompeii, those willing to observe could see the warning signs. Seventeen years before the eruption, a massive earthquake had damaged several structures in the city. In the years leading up to 79 A.D., smaller tremors occurred frequently, yet the populace paid little mind to the warnings.
Ignoring these signals had catastrophic consequences. Just a day after the Vulcanalia—dedicated to the Roman god of fire—Mount Vesuvius unleashed its fury. A cloud of gas and ash enveloped Pompeii, instantly extinguishing lives and entombing the city under 60 feet of ash and pumice.
“You could hear women lamenting, children crying, men shouting,” recounted Pliny the Younger, who lived from 61 A.D. to 112 A.D. “Some were so terrified of death that they prayed for it. Many raised their hands to the gods, while even more believed that the gods had abandoned them, ushering in an eternal night for the world.”
Warning Signs of a Financial Vesuvius
This week, global markets turned to Greece for guidance on trading strategies. The announcement from Prime Minister George Papandreou regarding a national referendum on a new European Union bailout plunged markets into a two-day decline. In a swift change of course, he retracted the call for a referendum, sending markets into a brief rally.
While the Greeks offer a captivating spectacle, they serve as more than mere entertainment. Amidst Papandreou’s blunders and the posturing of Sarkozy and Merkel, warning signals of a financial crisis emerged from the Borsa Italiana in Milan, Italy.
Following last week’s European Summit, yields on 10-year Italian bonds surged to approximately 6.25 percent. Additionally, the spread between Italian and German bonds ballooned to 4.36 percent—up from just 1.5 percent a year ago.
This shift indicates that borrowing costs in Italy have significantly increased compared to last year. If Italy mirrors Greece’s trajectory, it may soon become too costly for the country to borrow in the bond market, necessitating a bailout as well.
However, unlike Greece, which represents only 2.6 percent of the Eurozone GDP, Italy accounts for a staggering 16.9 percent. If the Italian bond market collapses, much like an ice cream in the summer sun, the repercussions of a bailout would be shattering, igniting a financial eruption akin to Vesuvius.
Sincerely,
MN Gordon
for Economic Prism
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