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A History of Inflation in Rome: Are We on a Similar Course?



June 22, 2009 – Comments (18)

Recently, the second chapter of Forty Centuries of Wages and Price Controls by Robert L. Schuetting and Eamonn Butler was released for a free read at the Mises Institute.

You may be wondering why I would post about ancient Rome on a day like today. Iran is boiling over. Dozens were killed by a suicide bomber in Iraq over the weekend.  The stock market has turned downward and there seems to be no end to the bad news.  Well, I suppose I am posting this for several reasons. 

1. Governments rarely learn from history, as you are about to read.  America - and just about every government - debases their currency for the same reason the Romans did: it concentrates power in the hands of government.

2. Inflation always follows currency debasement. It's mild at first, but then escalates out of control quickly.  Furthermore, once it becomes "ok" to increase the money supply "just a little," it becomes harder to stop the government from doing it on a regular basis.

3. Almost all governments in modern times use the same methods to combat inflation that the Romans tried, they just have new names for these policies.  

4. Although much is known about Roman military exploits and leadership, little is known about Roman economics.

5. If the rest of the book is as good as this chapter, it may be worthwhile to purchase.

I hope you enjoy the read. I'd love to hear comments about the similarities you see in Roman and American fiscal policy.  

David in Qatar

Without further delay, here is Chapter Two:

Price Fixing in Ancient Rome

As might be expected, the Roman Republic was not to be spared a good many ventures into control of the economy by the government. One of the most famous of the Republican statutes was the Law of the Twelve Tables (449 B.C.) which, among other things, fixed the maximum rate of interest at one uncia per libra (approximately 8 percent), but it is not known whether this was for a month or for a year. At various times after this basic law was passed, however, politicians found it popular to generously forgive debtors their agreed-upon interest payments. A Licinian law of 367 B.C., for instance, declared that interest already paid could be deducted from the principal owed, in effect setting a maximum price of zero on interest. The lex Genucia (342 B.C.) had a similar provision and we are told that violations of this "maximum" were "severely repressed under the lex Marcia." Levy concludes that "Aside from the Law of the Twelve Tables, these ad hoc or demagogic measures soon went out of use."[1]

The laws on grain were to have a more enduring effect on the history of Rome. From at least the time of the fourth century B.C., the Roman government bought supplies of corn or wheat in times of shortage and resold them to the people at a low fixed price. Under the tribune Caius Gracchus the Lex Sempronia Frumentaria was adopted, which allowed every Roman citizen the right to buy a certain amount of wheat at an official price much lower than the market price. In 58 B.C. this law was "improved" to allow every citizen free wheat. The result, of course, came as a surprise to the government. Most of the farmers remaining in the countryside simply left to live in Rome without working.

Slaves were freed by their masters so that they, as Roman citizens, could be supported by the state. In 45 B.C., Julius Caesar discovered that almost one citizen in three was receiving his wheat at government expense. He managed to reduce this number by about half, but it soon rose again; throughout the centuries of the empire, Rome was to be perpetually plagued with this problem of artificially low prices for grain, which caused economic dislocations of all sorts.[2]

In order to attempt to deal with their increasing economic problems, the emperors gradually began to devalue the currency. Nero (A.D. 54–68) began with small devaluations and matters became worse under Marcus Aurelius (A.D. 161–180) when the weights of coins were reduced. "These manipulations were the probable cause of a rise in prices," according to Levy. The Emperor Commodus (A.D.180–192) turned once again to price controls and decreed a series of maximum prices, but matters only became worse and the rise in prices became "headlong" under the Emperor Caracalla (A.D. 211–217).[3]

Egypt was the province of the empire most affected, but her experience was reflected in lesser degrees throughout the Roman world. During the fourth century, the value of the gold solidus changed from 4,000 to 180 million Egyptian drachmai. Levy again attributes the phenomenal rise in prices which followed to the large increase of the amount of money in circulation. The price of the same measure of wheat rose in Egypt from 6 drachmai in the first century to 200 in the third century; in A.D. 314, the price rose to 9,000 drachmai and to 78,000 in A.D. 334; shortly after the year A.D. 344 the price shot up to more than 2 million drachmai. As noted, other provinces went through a similar, if not quite as spectacular, inflation.[4] Levy writes,

"In monetary affairs, ineffectual regulations were decreed to Combat Gresham's Law [bad money drives out good] and domestic speculation in the different kinds of money. It was forbidden to buy or sell coins: they had to be used for payment only. It was even forbidden to hoard them! It was forbidden to melt them down (to extract the small amount of silver alloyed with the bronze). The punishment for all these offenses was death. Controls were set up along roads and at ports, where the police searched traders and travelers. Of course, all these efforts were to no purpose."[5]

The Edict of Diocletian

The most famous and the most extensive attempt to control prices and wages occurred in the reign of the Emperor Diocletian who, to the considerable regret of his subjects, was not the most attentive student of Greek economic history. Since both the causes of the inflation that Diocletian attempted to control and the effects of his efforts are fairly well documented it is an episode worth considering in Some detail.

Shortly after his assumption of the throne in A.D. 284, "prices of commodities of all sorts and the wages of laborers reached unprecedented heights. " Historical records for determining the causes of this remarkable inflation are limited. One of the few surviving contemporary sources, the seventh chapter of the De Moribus Persecutorum, lays almost all the blame squarely at the feet of Diocletian. Since, however, the author is known to have been a Christian and since Diocletian, among other things, persecuted the Christians, we have to take this report cum grana salis. In this attack on the emperor we are told that most of the economic troubles of the empire were due to Diocletian's vast increase in the armed forces (there were several invasions by barbarian tribes during this period), to his huge building program (he rebuilt much of his chosen capital in Asia Minor, Nicomedia), to his consequent raising of taxes and the employment of more and more government officials and, finally, to his use of forced labor to accomplish much of his public-works program.[6] Diocletian himself, in his edict (as we shall see) attributed the inflation entirely to the "avarice" of merchants and speculators.

A classical historian, Roland Kent, writing in the University of Pennsylvania Law Review, concludes from the available evidence that there were several major causes of the sharp rise in prices and wages. In the half century before Diocletian, there had been a succession of short-reigned, incompetent rulers elevated by the military; this era of weak government resulted in civil wars, riots, general uncertainty and, of course, economic instability. There certainly was a steep rise in taxes, some of it justifiable for the defense of the empire but some of it spent on grandiose public works of questionable value. As taxes rose, however, the tax base shrank and it became increasingly difficult to collect taxes, resulting in a vicious circle.[7]

It would seem clear that the major single cause of the inflation was the drastic increase in the money supply owing to the devaluation or debasement of the coinage. In the late republic and early empire, the standard Roman coin was the silver denarius; the value of that coin had gradually been reduced until, in the years before Diocletian, emperors were issuing tin-plated copper coins that were still called by the name "denarius." Gresham's law, of course, became operative; silver and gold coins were naturally hoarded and were no longer found in circulation.

During the fifty-year interval ending with the rule of Claudius Victorinus in A.D. 268, the silver content of the Roman coin fell to one five-thousandth of its original level. With the monetary system in total disarray, the trade that had been hallmark of the empire was reduced to barter, and economic activity was stymied.

"The middle class was almost obliterated and the proletariat was quickly sinking to the level of serfdom. Intellectually the world had fallen into an apathy from which nothing would rouse it."[8]

To this intellectual and moral morass came the Emperor Diocletian and he set about the task of reorganization with great vigor. Unfortunately, his zeal exceeded his understanding of the economic forces at work in the empire.

In an attempt to overcome the paralysis associated with centralized bureaucracy, he decentralized the administration of the empire and created three new centers of power under three "associate emperors." Since money was completely worthless, he devised a system of taxes based on payments in kind. This system had the effect, via the ascripti glebae, of totally destroying the freedom of the lower classes — they became serfs and were bound to the soil to ensure that the taxes would be forthcoming.

The "reforms" that are of most interest, however, are those relating to the currency and prices and wages. The currency reform came first and was followed, after it had become clear that this reform was a failure, by the edict on prices and wages. Diocletian had attempted to instill public confidence in the currency by putting a stop to the production of debased gold and silver coins.

According to Kent,

"Diocletian took the bull by the horns and issued a new denarius which was frankly of copper and made no pretense of being anything else; in doing this he established a new standard of value. The effect of this on prices needs no explanation; there was a readjustment upward, and very much upward."[9]

The new coinage gave some stability to prices for a time, but unfortunately, the price level was still too high, in Diocletian's judgment, and he soon realized that he was faced with a new dilemma.

The principal reason for the official overvaluation of the currency, of course, was to provide the wherewithal to support the large army and massive bureaucracy — the equivalent of modern government. Diocletian's choices were to continue to mint the increasingly worthless denarius or to cut "government expenditures" and thereby reduce the requirement for minting them. In modern terminology, he could either continue to "inflate" or he could begin the process of "deflating" the economy.

Diocletian decided that deflation, reducing the costs of civil and military government, was impossible. On the other hand,

"To inflate would be equally disastrous in the long run. It was inflation that had brought the Empire to the verge of complete collapse. The reform of the currency had been aimed at checking the evil, and it was becoming painfully evident that it could not succeed in its task."[10]

It was in this seemingly desperate circumstance that Diocletian determined to continue to inflate, but to do so in a way that would, he thought, prevent the inflation from occurring. He sought to do this by simultaneously fixing the prices of goods and services and suspending the freedom of people to decide what the official currency was worth. The famous edict of A.D. 301 was designed to accomplish this end. Its framers were very much aware of the fact that unless they could enforce a universal value for the denarius in terms of goods and services — a value that was wholly out of keeping with its actual value — the system that they had devised would collapse. Thus, the edict was all pervasive in its coverage and the penalties prescribed, severe.

The edict was duly proclaimed in A.D. 301 and, according to Kent, "the preamble is of some length, and is couched in language which is as difficult, obscure, and verbose as anything composed in Latin."[11] Diocletian clearly was on the defensive in announcing such a sweeping law, which affected every person in the empire every day of the week; he uses considerable rhetoric to justify his actions, rhetoric that was used before him and which, with variations, has been used in most times and places since.

"He begins by listing his many titles and then goes on to announce that: The national honor and dignity and majesty of Rome demand that the fortune of our State … be also faithfully administered…. To be sure, if any spirit of self-restraint were holding in check those practices by which the raging and boundless avarice is inflamed … peradventure there would seem to be room left for shutting our eyes and holding our peace, since the united endurance of men's minds would ameliorate this detestable enormity and pitiable condition [but since it is unlikely that this greed will restrain itself] … it suits us, who are the watchful parents of the whole human race, [the term "parents" refers to his associate Augustus and two Caesars] that justice step in as an arbiter in the case, in order that the long-hoped-for result, which humanity could not achieve by itself, may by the remedies which our forethought suggests, be contributed toward the general alleviation of all."[12]

In The Common People of Ancient Rome, Frank Abbot summarizes the essence of the edict in the following words:

"In his effort to bring prices down to what he considered a normal level, Diocletian did not content himself with half measures as we are trying in our attempts to suppress combinations in restraint of trade, but he boldly fixed the maximum prices at which beef, grain, eggs, clothing and other articles could be sold [and also the wages that all sorts of workers could receive] and prescribed the penalty of death for anyone who disposed of his wares at a higher figure." [13]

To be continued in the comments...

18 Comments – Post Your Own

#1) On June 22, 2009 at 12:11 PM, whereaminow (< 20) wrote:

The Results of the Edict

Diocletian was not a stupid man (in fact, from all accounts, he seems to have been more intelligent than all but a few of the emperors); he was therefore aware that one of the first results of his edict would be a great increase in hoarding. That is, if farmers, merchants, and craftsmen could not expect to receive what they considered to be a fair price for their goods, they would not put them on the market at all, but would await a change in the law (or in the dynasty). He therefore provided that

"From such guilt also he too shall not be considered free, who, having goods necessary for food or usage, shall after this regulation have thought that they might be withdrawn from the market; since the penalty [namely, death] ought to be even heavier for him who causes need than for him who makes use of it contrary to the statutes."[14]

There was another clause prescribing the usual penalty for anyone who purchased a good at a higher price than the law allowed; again, Diocletian was well aware of the normal consequences of such attempts at economic regulation. On the other hand, in at least one respect the edict was more enlightened (from an economic point of view) than many regulations of recent years. "In those places where goods shall manifestly abound," it declared, "the happy condition of cheap prices shall not thereby be hampered — and ample provision is made for cheapness, if avarice is limited and curbed."[15]

(Those modern nations who have had to endure "retail price maintenance," "fair-trade laws" and the various price-fixing agencies such as the International Air Transportation Association could well learn a useful lesson from Diocletian, who at least made it always legal to lower a price.)

"Diocletian had failed to fool the people and had failed to suppress the ability of people to buy and sell as they saw fit."

Parts of the price lists have been discovered in about 30 different places, mostly in the Greek-speaking portions of the empire. There were at least 32 schedules, covering well over a thousand individual prices or wages.

The results were not surprising and from the wording of the edict, as we have seen, not unexpected by the emperor himself. According to a contemporary account,

"then he set himself to regulate the prices of all vendible things. There was much blood shed upon very slight and trifling accounts; and the people brought provisions no more to markets, since they could not get a reasonable price for them and this increased the dearth so much, that at last after many had died by it, the law itself was set aside."[17]

It is not certain how much of the bloodshed alluded to in this passage was caused directly by the government through the promised executions and how much was caused indirectly. A historian of this period, Roland Kent, believes that much of the harm was indirect. He concludes,

"In other words, the price limits set in the Edict were not observed by the traders, in spite of the death penalty provided in the statute for its violation; would-be purchasers, finding that the prices were above the legal limit, formed mobs and wrecked the offending traders' establishments, incidentally killing the traders, though the goods were after all of but trifling value; hoarded their goods against the day when the restrictions should be removed, and the resulting scarcity of wares actually offered for sale caused an even greater increase in prices, so that what trading went on was at illegal prices, and therefore performed clandestinely."[18]

It is not known exactly how long the edict remained in force; it is known, however, that Diocletian, citing the strain and cares of government, resulting in his poor health, abdicated four years after the statute on wages and prices was promulgated. It certainly became a dead letter after the abdication of its author. Less than four years after the currency reform associated with the edict, the price of gold in terms of the denarius had risen 250 percent.

Diocletian had failed to fool the people and had failed to suppress the ability of people to buy and sell as they saw fit. The failure of the edict and the currency "reform" led to a return to more conventional fiscal irresponsibility and by A.D. 305 the process of currency debasement had begun again. By the turn of the century, this process had produced a two-thousand-percent increase in the price of gold in terms of denarii:

"These are impossible figures and simply mean that any attempt at preserving a market, let alone a mint ratio, between the bronze denarius and the pound of gold was lost. The astronomical figures of the French "assignats," the German mark after the First World War, and of the Hungarian pengo after the Second, were not unprecedented phenomena.[19] … Copper coins could very easily be manufactured; numismatists testify that the coins of the fourth century often bear signs of hasty and careless minting; they were thrust out into circulation in many cases without having been properly trimmed or made tolerably respectable. This hasty manipulation of the mints was just as effective as our modern printing presses, with their floods of worthless, or nearly worthless, paper money."[20]

M. Rostovtzeff, a leading Roman historian, summed up this unhappy experience in these words:

"The same expedient had often been tried before him and was often tried after him. As a temporary measure in a critical time, it might be of some use. As a general measure intended to last, it was certain to do great harm and to cause terrible bloodshed, without bringing any relief. Diocletian shared the pernicious belief of the ancient world in the omnipotence of the state, a belief which many modern theorists continue to share with him and with it."[21]

Although Diocletian's attempt to control the economy ended in complete failure and he was forced to abdicate, it was only sixty years later that his successor, Julian the Apostate, was back at the same old stand. Edward Gibbon, the brilliant historian of the period, ironically noted that

"the emperor ventured on a very dangerous and doubtful step, of fixing by legal authority, the value of corn [grain]. He enacted that, in a time of scarcity, it should be sold at a price which had seldom been known in the most plentiful years; and that his own example might strengthen his laws [he sent into the market a large quantity of his own grain at the fixed price]. The consequences might have been foreseen and were soon felt. The imperial wheat was purchased by the rich merchants; the proprietors of land, or of corn [grain] withheld from that city the accustomed supply, and the small quantities that appeared in the market were secretly sold at an advanced and illegal price."[22]

As a desperate measure, succeeding emperors tried to tie workers to the land or to their fathers' occupations in order to prevent workers from changing jobs as a means of evading the low wages prescribed for certain professions. This, of course, was the ultimate consequence of the attempt to control wages by law.

The only legal escape for many workers was to find a willing replacement and then to give up all their goods to him. The Emperor Aurelian had previously compared a man who left his profession to a soldier who deserted on the field of battle.[23]

The historian Levy concludes his survey of the economy of the empire by declaring that

"State intervention and a crushing fiscal policy made the whole empire groan under the yoke; more than once, both poor men and rich prayed that the barbarians would deliver them from it. In A.D. 378, the Balkan miners went over en masse to the Visigoth invaders, and just prior to A.D. 500 the priest Salvian expressed the universal resignation to barbarian domination."[24]


[1] Jean-Philippe Levy, The Economic Life of the Ancient World (Chicago: University of Chicago, 1967) p. 55.

[2] Ibid., pp. 68–69.

[3] Ibid., p. 72.

[4] Ibid., p. 89.

[5] Ibid., p. 94.

[6] See Roland Kent, "The Edict of Diocletian Fixing Maximum Prices," The University of Pennsylvania Law Review, 1920, p. 37.

[7] Ibid., pp. 37–38.

[8] H. Michell, "The Edict of Diocletian: A Study of Price-Fixing in the Roman Empire," The Canadian Journal of Economics and Political Science, February 1947, p. 3.

[9] Kent, op. cit., p. 39.

[10] Michell, op. cit., p.5.

[11] Kent, op. cit., p. 40.

[12] Ibid., pp. 41–42.

[13] Frank Abbot, The Common People of Ancient Rome (New York: Scribner, 1911), pp. 150–151.

[14] Kent, op. cit., p. 44.

[15] Ibid., p. 43.

[16] Ibid., pp. 45–47.

[17] L.C. F. Lactantius, A Relation of the Death of the Primitive Persecutors, translated by Gilbert Burnet (Amsterdam, 1697) pp. 67–68.

[18] Kent, op. cit., pp. 39–40.

[19] Michell, op. cit., p. 11.

[20] Ibid., p. 12.

[21] M. Rostovtzeff, The Social and Economic History of the Roman Empire (Oxford: Oxford University Press, 1957).

[22] Edward Gibbon, The History of the Decline and Fall of the Roman Empire (New York: Fred de Fau, 1906) Vol. 4, pp. 111–112.

[23] Levy, op. cit., p. 97.'

[24] Ibid., p. 99.

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#2) On June 22, 2009 at 1:40 PM, jstegma (28.61) wrote:

fascinating read.  thanks.

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#3) On June 22, 2009 at 2:15 PM, anchak (99.91) wrote:

I have still not read all....but wanted to show my appreciation.


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#4) On June 22, 2009 at 2:56 PM, ttboydxb (28.60) wrote:

Shukran Habibi!!!

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#5) On June 22, 2009 at 3:23 PM, 4everlost (28.93) wrote:

Awesome find!

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#6) On June 22, 2009 at 6:30 PM, caltex1nomad (< 20) wrote:

Fantastic Stuff, but you have to include the expanding of it's Empire. As with Alexander,Napolean, Hitler, etc. Their reach far exceded their grasp.

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#7) On June 22, 2009 at 10:51 PM, binve (< 20) wrote:

Fantastic read! Thanks for the post!!

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#8) On June 22, 2009 at 11:23 PM, whereaminow (< 20) wrote:

Thanks to all for the rec's. It's thrilling that so many people would be interested in Roman monetary policy, but I think we can see clear parallels between their fiscal policies and America's, such as.

debt forgiveness leading to unintended consequences,

welfare programs that expand way beyond their original scope,

currency debasement to finance military conquest and public works projects,

the resulting inflation is blamed on evil "market forces,"

each government intervention causing more problems, leading to greater government intervention, until the entire economy is centrally planned,

complete market breakdown as the currency implodes and the middle class is obliterated.

Let's hope we see the error of our ways before it is too late.

David in Qatar


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#9) On June 23, 2009 at 12:40 AM, tonylogan1 (27.67) wrote:

rec 47

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#10) On June 23, 2009 at 12:53 AM, Tastylunch (28.66) wrote:

Well we are intentionally patterned after Rome's republic model, so it's not terribly surprising we are making the same choices.

I juts hope we don't choose to reflect their empire model as well...

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#11) On June 23, 2009 at 1:12 AM, checklist34 (98.71) wrote:

hmmm... it seems that it could be said that 'twas welfare that broke Romes back.  :)

same choices indeed

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#12) On June 23, 2009 at 1:15 AM, SintUniversal (< 20) wrote:

Economy is very fluid, ever changing, influenced by the leaders of the country, character of the peoples (pardon me to say Americans in 1950 - 60 s were much better than the ones now, low fighting spirit, weakened by porn culture and bad social values), standard of education (American students lack far behind Asians, just look who are the top graduates in US top league colleges and universities!) and many other factors.

But a Republic is always better than a monarchy, or dictatorship in republic banana countries or dictatorship before the Roman Empire. America certainly have bright future under such hard working President and capable team. But it would be painful before the recovery. This is now the time for all American to call up their patriotism to rebuild the nation. 

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#13) On June 23, 2009 at 1:26 AM, AdirondackFund (< 20) wrote:

Well, well, well, I suppose it's true.  Nothing quite beats a Classical Education.  We have been through this before.  Isn't it interesting how the same principles apply.  What Jesse Livermore would describe as the principle cause of all Depressions in Markets, an over discounting of value.  Huh, imagine that. 

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#14) On June 24, 2009 at 12:41 AM, dcstrade (50.33) wrote:

1) Diocletian blaming inflation on avarice of merchants and speculators... replace Diocletian with most popular economists and politicians today.

2) free wheat for all then = free healthcare for all now?

3) "There certainly was a steep rise in taxes, some of it justifiable for the defense of the empire but some of it spent on grandiose public works of questionable value. As taxes rose, however, the tax base shrank and it became increasingly difficult to collect taxes, resulting in a vicious circle." 

Yes, this is a parallel.  We have had the luxury of foreign credit as a temporal buffer to tax hikes, and/or flat-out hitting the printing presses, but all this has done is further infect the "global empire" with devalued reserve holdings, if not similar inflationary policies.  The buffer is wearing thin.


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#15) On June 24, 2009 at 10:39 PM, MattH42004 (28.33) wrote:

This is great. Thanks for taking the time to put this up! Rec 55.

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#16) On June 24, 2009 at 11:10 PM, booyahh (< 20) wrote:

Great article, I love reading about Romnan history, but the analysis misses one major thing: the Romans did not experience a credit bubble as we are now experiencing, and as we also experienced in 1929. The massive implosion of credit is causing trillions of dollars to disappear from the overall money supply. So the money that the govt is printing is barely replacing the money that is disappearing. The Consumer Price Index was negative in May. i.e. mild deflation is currently taking place, not inflation.

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#17) On June 26, 2009 at 5:52 PM, ReadEmAnWeep (87.13) wrote:

"The middle class was almost obliterated and the proletariat was quickly sinking to the level of serfdom. Intellectually the world had fallen into an apathy from which nothing would rouse it."

Huh... Sounds familar...

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#18) On June 26, 2009 at 6:25 PM, ReadEmAnWeep (87.13) wrote:


"(pardon me to say Americans in 1950 - 60 s were much better than the ones now, low fighting spirit, weakened by porn culture and bad social values), "

What do you mean by that? I know the whole credit situation is bad right now, most americans (acting like idiots) not getting the education they need, and people are lazy... But can you expand?

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