The Rothschild Conspiracy Against France

Also, what's the deal with Niall Ferguson?

Hey Folks,

What you about to read is an excerpt from a book called The Ascent of Money by the leading British historian Niall Ferguson.

If you haven’t heard of Ferguson, he’s known for his work on the history of banking. He’s also the author of a book called The House of Rothschild, for instance.

Now, I must admit - I’m not quite sure what to make of Ferguson. I’d seen him cited favourably by Paul Cudenec and James Corbett, which is why I picked up one of his books.

Although I enjoyed The Ascent of Money, I couldn’t stop asking myself “Is this a joke?” Although full of fascinating historical vignettes, Ferguson’s political analysis was so piss-poor that I honestly found myself wondering whether the whole thing was an elaborate put-on.

Take a passage like this, for instance:

The life of a hunter-gatherer is indeed, as Thomas Hobbes said of the state of nature, "solitary, poor, nasty, brutish, and short."

[…]

Hunter-gatherers do not trade. They raid. Nor do they save, consuming their food as and when they find it. They therefore have no need of money.

I don’t know how any educated person could make such a ridiculous statement, but Ferguson makes numerous such statements throughout The Ascent of Money. He also focuses on the terrible effects of usury but ultimately concludes that we should ultimately be grateful to usurers because without them, we’d still be living in the Dark Ages.

Niall Ferguson is clearly a very intelligent man, and I find it hard to believe that he actually believes some of the things he says. I’m guessing that he knows what's good for him and is careful to frame things that allow him to remain one of the world’s leading mainstream historians.

Whatever the case might be, Ferguson is fun to read if you can take his ridiculous moments with a grain of salt.

The Ascent of Money is full of fascinating historical vignettes. One of the most interesting is his telling of the story of how the Rothschilds rose to their present position of supremacy in the arena of international finance (a.k.a. usury).

Keep in mind two things while you read it. First, this guy is a prominent historian who wrote a whole book about the Rothschild dynasty, so he really knows what he’s talking about. Second, he’s an establishment historian, meaning that we can safely assume this is a limited hangout version of the truth.

If anyone knows more of the real history, please share what you know in the comments!

Also, if anyone can help me out what the deal with Niall Ferguson is, I’m all ears.

for the wild,

Crow Qu’appelle

The Bonaparte of Finance

by Niall Ferguson, excerpted from The Ascent of Money

“Master of unbounded wealth, he boasts that he is the arbiter of peace and war, and that the credit of nations depends upon his nod; his correspondents are innumerable; his couriers outrun those of sovereign princes and absolute sovereigns; ministers of state are in his pay. Paramount in the cabinets of continental Europe, he aspires to the domination of our own.”

Those words were spoken in 1828 by the Radical MP Thomas Dunscombe. The man he was referring to was Nathan Mayer Rothschild, founder of the London branch of what was, for most of the nineteenth century, the biggest bank in the world. It was the bond market that made the Rothschild family rich—rich enough to build forty-one stately homes all over Europe, among them Waddesdon Manor in Buckinghamshire, which has been restored in all its gilded glory by the 4th Lord Rothschild, Nathan’s great-great-great-grandson.

His illustrious forebear, according to Lord Rothschild, was “short, fat, obsessive, extremely clever, wholly focused … I can’t imagine he would have been a very pleasant person to have dealings with.”

His cousin Evelyn de Rothschild takes a similar view. “I think he was very ambitious,” he says, contemplating Nathan Rothschild’s portrait in the boardroom at the offices of N.M. Rothschild in London’s St Swithin’s Lane, “and I think he was very determined. I don’t think he suffered fools lightly.”

Though the Rothschilds were compulsive correspondents, relatively few of Nathan’s letters to his brothers have survived. There is one page, however, that clearly conveys the kind of man he was. Written—as were all their letters—in almost indecipherable Judendeutsch (German transliterated into Hebrew characters), it epitomizes what might be called his Jewish work ethic and his impatience with his less mercurial brothers:

I am writing to you giving my opinion, as it is my damned duty to write to you … I am reading through your letters not just once but maybe a hundred times. You can well imagine that yourself. After dinner I usually have nothing to do. I do not read books, I do not play cards, I do not go to the theatre; my only pleasure is my business and in this way I read Amschel’s, Salomon’s, James’s and Carl’s letters … As far as Carl’s letter [about buying a bigger house in Frankfurt] is concerned … all this is a lot of nonsense because as long as we have good business and are rich everybody will flatter us and those who have no interest in obtaining revenues through us begrudge us for it all. Our Salomon is too good and agreeable to anything and anybody and if a parasite whispers something into his ear he thinks that all human beings are noble-minded; the truth is that all they are after is their own interest.

Small wonder his brothers called Nathan “the general in chief.” “All you ever write,” complained Salomon wearily in 1815, “is pay this, pay that, send this, send that.” It was this phenomenal drive, allied to innate financial genius, that propelled Nathan from the obscurity of the Frankfurt Judengasse to mastery of the London bond market. Once again, however, the opportunity for financial innovation was provided by war.

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On the morning of 18 June 1815, 67,000 British, Dutch, and German troops under the Duke of Wellington’s command looked out across the fields of Waterloo—not far from Brussels—towards an almost equal number of French troops commanded by the French Emperor, Napoleon Bonaparte. The Battle of Waterloo was the culmination of more than two decades of intermittent conflict between Britain and France. But it was more than a battle between two armies; it was also a contest between rival financial systems: one, the French, which under Napoleon had come to be based on plunder (the taxation of the conquered); the other, the British, based on debt.

Never had so many bonds been issued to finance a military conflict. Between 1793 and 1815 the British national debt increased by a factor of three, to £745 million—more than double the annual output of the UK economy. But this increase in the supply of bonds had weighed heavily on the London market. Since February 1792, the price of a typical £100 3 per cent consol had fallen from £96 to below £60 on the eve of Waterloo, at one time (in 1797) sinking below £50. These were trying times…

According to a long-standing legend, the Rothschild family owed the first millions of their fortune to Nathan’s successful speculation about the effect of the outcome of the battle on the price of British bonds.

In some versions of the story, Nathan witnessed the battle himself, risked a Channel storm to reach London ahead of the official news of Wellington’s victory and, by buying bonds ahead of a huge surge in prices, pocketed between £20 and £135 million. It was a legend the Nazis later did their best to embroider.

In 1940 Joseph Goebbels approved the release of Die Rothschilds, which depicts an oleaginous Nathan bribing a French general to ensure the Duke of Wellington’s victory, and then deliberately misreporting the outcome in London in order to precipitate panic selling of British bonds, which he then snapped up at bargain-basement prices. Yet the reality was altogether different. Far from making money from Wellington’s victory, the Rothschilds were very nearly ruined by it. Their fortune was made not because of Waterloo, but despite it.

After a series of miscued interventions, British troops had been fighting against Napoleon on the Continent since August 1808, when the future Duke of Wellington—then Lieutenant-General Sir Arthur Wellesley—led an expeditionary force to Portugal, invaded by the French the previous year. For the better part of the next six years there would be a recurrent need to get men and matériel to the Iberian Peninsula. Selling bonds to the public had certainly raised plenty of cash for the British government, but banknotes were of little use on distant battlefields. To provision the troops and pay Britain’s allies against France, Wellington needed a currency that was universally acceptable. The challenge was to transform the money raised on the bond market into gold coins and to get them to where they were needed. Sending gold guineas from London to Lisbon was expensive and hazardous in time of war. But when the Portuguese merchants declined to accept the bills of exchange that Wellington proffered, there seemed little alternative but to ship cash.

The son of a moderately successful Frankfurt antique dealer and bill broker, Nathan Rothschild had arrived in England only in 1799 and had spent most of the next ten years in the newly industrializing North of England, purchasing textiles and shipping them back to Germany. He did not go into the banking business in London until 1811. Why, then, did the British government turn to him in its hour of financial need? The answer is that Nathan had acquired valuable experience as a smuggler of gold to the Continent—in breach of the blockade that Napoleon had imposed on trade between England and Europe. (Admittedly, it was a breach the French authorities tended to wink at, in the simplistic mercantilist belief that outflows of gold from England must tend to weaken the British war effort.)

In January 1814, the Chancellor of the Exchequer authorized the Commissary-in-Chief, John Charles Herries, to “employ that gentleman [Nathan] in the most secret and confidential manner to collect in Germany, France and Holland the largest quantity of French gold and silver coins, not exceeding in value £600,000, which he may be able to procure within two months from the present time.” These were then to be delivered to British vessels at the Dutch port of Helvoetsluys and sent on to Wellington, who had by now crossed the Pyrenees into France. It was an immense operation, which depended on the brothers’ ability to tap their cross-Channel credit network and to manage large-scale bullion transfers. They executed their commission so well that Wellington was soon writing to express his gratitude for the “ample … supplies of money.”

As Herries put it: “Rothschild of this place has executed the various services entrusted to him in this line admirably well, and though a Jew [sic], we place a good deal of confidence in him.” By May 1814 Nathan had advanced nearly £1.2 million to the government—double the amount envisaged in his original instructions.

Mobilizing such vast amounts of gold even at the tail end of a war was risky, no doubt. Yet from the Rothschilds’ point of view, the hefty commissions they were able to charge more than justified the risks. What made them so well suited to the task was that the brothers had a ready-made banking network within the family—Nathan in London, Amschel in Frankfurt, James (the youngest) in Paris, Carl in Amsterdam, and Salomon roving wherever Nathan saw fit. Spread out around Europe, the five Rothschilds were uniquely positioned to exploit price and exchange rate differences between markets, the process known as arbitrage.

If the price of gold was higher in, say, Paris than in London, James in Paris would sell gold for bills of exchange, then send these to London, where Nathan would use them to buy a larger quantity of gold. The fact that their own transactions on Herries’s behalf were big enough to affect such price differentials only added to the profitability of the business.

In addition, the Rothschilds also handled some of the large subsidies paid to Britain’s continental allies. By June 1814, Herries calculated that they had effected payments of this sort to a value of 12.6 million francs. “Mr. Rothschild,” remarked the Prime Minister, Lord Liverpool, “has become a very useful friend.” As he told the Foreign Secretary Lord Castlereagh, “I do not know what we should have done without him …” By now his brothers had taken to calling Nathan the master of the Stock Exchange.

After his abdication in April 1814, Napoleon had been exiled to the small Italian island of Elba, which he proceeded to rule as an empire in miniature. It was too small to hold him. On 1 March 1815, to the consternation of the monarchs and ministers gathered to restore the old European order at the Congress of Vienna, he returned to France, determined to revive his Empire. Veterans of the Grande Armée rallied to his standard.

Nathan Rothschild responded to this “unpleasant news” by immediately resuming gold purchases, buying up all the bullion and coins he and his brothers could lay their hands on, and making it available to Herries for shipment to Wellington. In all, the Rothschilds provided gold coins worth more than £2 million—enough to fill 884 boxes and fifty-five casks. At the same time, Nathan offered to take care of a fresh round of subsidies to Britain’s continental allies, bringing the total of his transactions with Herries in 1815 to just under £9.8 million. With commissions on all this business ranging from 2 to 6 per cent, Napoleon’s return promised to make the Rothschilds rich men. Yet there was a risk that Nathan had underestimated. In furiously buying up such a huge quantity of gold, he had assumed that, as with all Napoleon’s wars, this would be a long one. It was a near-fatal miscalculation.

Wellington famously called the Battle of Waterloo “the nearest run thing you ever saw in your life.” After a day of brutal charges, counter-charges, and heroic defence, the belated arrival of the Prussian army finally proved decisive. For Wellington, it was a glorious victory. Not so for the Rothschilds.

No doubt it was gratifying for Nathan Rothschild to receive the news of Napoleon’s defeat first—thanks to the speed of his couriers, nearly forty-eight hours before Major Henry Percy delivered Wellington’s official despatch to the Cabinet. No matter how early it reached him, however, the news was anything but good from Nathan’s point of view. He had expected nothing as decisive so soon. Now he and his brothers were sitting on top of a pile of cash that nobody needed—to pay for a war that was over. With the coming of peace, the great armies that had fought Napoleon could be disbanded, the coalition of allies dissolved. That meant no more soldiers’ wages and no more subsidies to Britain’s wartime allies. The price of gold, which had soared during the war, would be bound to fall. Nathan was faced not with the immense profits of legend but with heavy and growing losses.

But there was one possible way out: the Rothschilds could use their gold to make a massive and hugely risky bet on the bond market. On 20 July 1815 the evening edition of the London Courier reported that Nathan had made “great purchases of stock,” meaning British government bonds. Nathan’s gamble was that the British victory at Waterloo, and the prospect of a reduction in government borrowing, would send the price of British bonds soaring upwards. Nathan bought more and, as the price of consols duly began to rise, he kept on buying. Despite his brothers’ desperate entreaties to realize profits, Nathan held his nerve for another year. Eventually, in late 1817, with bond prices up more than 40 per cent, he sold. Allowing for the effects on the purchasing power of sterling of inflation and economic growth, his profits were worth around £600 million today. It was one of the most audacious trades in financial history—one which snatched financial victory from the jaws of Napoleon’s military defeat. The resemblance between victor and vanquished was not lost on contemporaries. In the words of one of the partners at Barings, the Rothschilds’ great rivals, “I must candidly confess that I have not the nerve for his operations. They are generally well planned, with great cleverness and adroitness in execution—but he is in money and funds what Bonaparte was in war.”

To the Austrian Chancellor Prince Metternich’s secretary, the Rothschilds were simply die Finanzbonaparten. Others went still further, though not without a hint of irony. “Money is the god of our time,” declared the German poet Heinrich Heine in March 1841, “and Rothschild is his prophet.”

To an extent that even today remains astonishing, the Rothschilds went on to dominate international finance in the half century after Waterloo. So extraordinary did this achievement seem to contemporaries that they often sought to explain it in mystical terms.

According to one account dating from the 1830s, the Rothschilds owed their fortune to the possession of a mysterious “Hebrew talisman” that enabled Nathan Rothschild, the founder of the London house, to become “the leviathan of the money markets of Europe.” Similar stories were being told in the Pale of Settlement, to which Russian Jews were confined, as late as the 1890s. As we have seen, the Nazis preferred to attribute the rise of the Rothschilds to the manipulation of stock market news and other sharp practices. Such myths are current even today. According to Song Hongbing’s best-selling book Currency Wars, published in China in 2007, the Rothschilds continue to control the global monetary system through their alleged influence over the Federal Reserve System.

The more prosaic reality was that the Rothschilds were able to build on their successes during the final phase of the Napoleonic Wars to establish themselves as the dominant players in an increasingly international London bond market. They did this by establishing a capital base and an information network that were soon far superior to those of their nearest rivals, the Barings. Between 1815 and 1859, it has been estimated that the London house issued fourteen different sovereign bonds with a face value of nearly £43 million—more than half the total issued by all banks in London. Although British government bonds were the principal security they marketed to investors, they also sold French, Prussian, Russian, Austrian, Neapolitan, and Brazilian bonds. In addition, they all but monopolized bond issuance by the Belgian government after 1830.

Typically, the Rothschilds would buy a tranche of new bonds outright from a government, charging a commission for distributing these to their network of brokers and investors throughout Europe, and remitting funds to the government only when all the instalments had been received from buyers. There would usually be a generous spread between the price the Rothschilds paid the sovereign borrower and the price they asked of investors (with room for an additional price “run up” after the initial public offering). Of course, as we have seen, there had been large-scale international lending before, notably in Genoa, Antwerp, and Amsterdam. But a distinguishing feature of the London bond market after 1815 was the Rothschilds’ insistence that most new borrowers issue bonds denominated in sterling rather than their own currency, and make interest payments in London or one of the other markets where the Rothschilds had branches. A new standard was set by their 1818 initial public offering of Prussian 5 per cent bonds, which—after protracted and often fraught negotiations—were issued not only in London but also in Frankfurt, Berlin, Hamburg, and Amsterdam. In his book On the Traffic in State Bonds (1825), the German legal expert Johann Heinrich Bender singled out this as one of the Rothschilds’ most important financial innovations:

“Any owner of government bonds … can collect the interest at his convenience in several different places without any effort.”

Bond issuance was by no means the only business the Rothschilds did, to be sure—they were also bond traders, currency arbitrageurs, bullion dealers, and private bankers, as well as investors in insurance, mines, and railways. Yet the bond market remained their core competence. Unlike their lesser competitors, the Rothschilds took pride in dealing only in what would now be called investment-grade securities. No bond they issued in the 1820s was in default by 1829, despite a Latin American debt crisis in the middle of the decade (the first of many).

With success came ever greater wealth. When Nathan died in 1836, his personal fortune was equivalent to 0.62 per cent of British national income. Between 1818 and 1852, the combined capital of the five Rothschild “houses” (Frankfurt, London, Naples, Paris, and Vienna) rose from £1.8 million to £9.5 million. As early as 1825 their combined capital was nine times greater than that of Baring Brothers and the Banque de France. By 1899, at £41 million, it exceeded the capital of the five biggest German joint-stock banks put together.

Increasingly the firm became a multinational asset manager for the wealth of the managers’ extended family. As their numbers grew from generation to generation, familial unity was maintained by a combination of periodically revised contracts between the five houses and a high level of intermarriage between cousins or between uncles and nieces. Of twenty-one marriages involving descendants of Nathan’s father, Mayer Amschel Rothschild, that were solemnized between 1824 and 1877, no fewer than fifteen were between his direct descendants. In addition, the family’s collective fidelity to the Jewish faith—at a time when some other Jewish families were slipping into apostasy or mixed marriage—strengthened their sense of common identity and purpose as “the Caucasian [Jewish] royal family.”

Old Mayer Amschel had repeatedly admonished his five sons: “If you can’t make yourself loved, make yourself feared.” As they bestrode the mid-nineteenth-century financial world as masters of the bond market, the Rothschilds were already more feared than loved. Reactionaries on the Right lamented the rise of a new form of wealth, higher-yielding and more liquid than the landed estates of Europe’s aristocratic elites. As Heinrich Heine discerned, there was something profoundly revolutionary about the financial system the Rothschilds were creating:

The system of paper securities frees … men to choose whatever place of residence they like; they can live anywhere, without working, from the interest on their bonds, their portable property, and so they gather together and constitute the true power of our capital cities. And we have long known what it portends when the most diverse energies can live side by side, when there is such centralization of the intellectual and of social authority.

In Heine’s eyes, Rothschild could now be mentioned in the same breath as Richelieu and Robespierre as one of the “three terroristic names that spell the gradual annihilation of the old aristocracy.” Richelieu had destroyed its power; Robespierre had decapitated its decadent remnant; now Rothschild was providing Europe with a new social elite by raising up the system of government bonds to supreme power … [and] endowing money with the former privileges of land. To be sure, he has thereby created a new aristocracy, but this is based on the most unreliable of elements—on money … [which] is more fluid than water and less steady than the air.

Meanwhile, Radicals on the Left bemoaned the rise of a new power in the realm of politics, which wielded veto power over government finance and hence over most policy. Following the success of Rothschild bond issues for Austria, Prussia, and Russia, Nathan was caricatured as the insurance broker to the “Hollow Alliance,” helping to protect Europe against liberal political fires. In 1821 he even received a death threat because of “his connexion with foreign powers, and particularly the assistance rendered to Austria, on account of the designs of that government against the liberties of Europe.” The liberal historian Jules Michelet noted in his journal in 1842:

“M. Rothschild knows Europe prince by prince, and the bourse courtier by courtier. He has all their accounts in his head, that of the courtiers and that of the kings; he talks to them without even consulting his books. To one such he says: ‘Your account will go into the red if you appoint such a minister.’”

Predictably, the fact that the Rothschilds were Jewish gave new impetus to deep-rooted anti-Semitic prejudices. No sooner had the Rothschilds appeared on the American scene in the 1830s than the governor of Mississippi was denouncing “Baron Rothschild” for having “the blood of Judas and Shylock flow[ing] in his veins, and … unit[ing] the qualities of both his countrymen.” Later in the century, the populist writer “Coin” Harvey would depict the Rothschild bank as a vast, black octopus stretching its tentacles around the world.

Yet it was the Rothschilds’ seeming ability to permit or prohibit wars at will that aroused the most indignation. As early as 1828, Prince Piickler-Muskau referred to “Rothschild … without whom no power in Europe today seems able to make war.” One early-twentieth-century commentator posed the pointed question:

“Does anyone seriously suppose that a great war could be undertaken by any European state, or any great state loan subscribed, if the house of Rothschild and its connexions set their face against it?”

It might indeed be assumed that the Rothschilds needed war. After all, it was war that had generated Nathan Rothschild’s biggest deal. Without wars, nineteenth-century states would have had little need to issue bonds. As we have seen, however, wars tended to hit the price of existing bonds by increasing the risk that (like sixteenth-century Venice) a debtor state would fail to meet its interest payments in the event of defeat and loss of territory. By the middle of the nineteenth century, the Rothschilds had evolved from traders into fund managers, carefully tending to their own vast portfolio of government bonds. Now, having made their money, they stood to lose more than they gained from conflict. It was for this reason that they were consistently hostile to strivings for national unity in both Italy and Germany. And it was for this reason that they viewed with unease the descent of the United States into internecine warfare. The Rothschilds had decided the outcome of the Napoleonic Wars by putting their financial weight behind Britain. Now they would help decide the outcome of the American Civil War—by choosing to sit on the sidelines…