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Last week on Methods of Prosperity: In 1452, the Jews of Frankfurt were subjected to restrictions called the Judensatzungen, which banned them from owning land, practicing certain professions, and living outside of the Jewish quarter. Mayer Amschel Rothschild, born in the Judengasse (Jews Lane), the Jewish ghetto of Frankfurt, managed to escape poverty and persecution by securing an apprenticeship in a banking firm. Starting as a dealer in rare coins, he eventually became a prominent banker, earning the patronage of Prince Wilhelm of Hesse. Rothschild established an international banking business and married into a financially well-off family. During the Napoleonic Wars, Rothschild helped protect the wealth of Wilhelm IX of Hesse by investing funds in British government securities and bullion. The Rothschilds gained a reputation for their financial management skills and trustworthiness.
The following is Methods of Prosperity newsletter number 14. It was originally deployed September 21, 2023. As of May 16, 2024, original subscribers have received up to issue number 48 (Sam Walton, continued).
Part 14: Nathan Mayer Rothschild (1777-1836).
TL;DR
One family’s wealth and influence on the global economy of the 18th century was in the balance. One of five sons born into the second generation of the Rothschild dynasty on September 16, 1777, in Frankfurt am Main, Germany would tip the scales. Nathan Mayer Rothschild was sent by his father, Mayer Amschel Rothschild in 1798, to England to lay the groundwork for an international banking network, initially settling in Manchester with a textile business before moving into banking in London. Suddenly, Emperor Napoleon Bonaparte went to war against Prussia and Russia, leaving turmoil in his wake. Wilhelm IX of Hesse, a close ally of Prussia, was forced to go into exile. His assets could have been seized by Napoleon. The House of Rothschild was chosen to secure the assets of Wilhelm IX, leveraging the opportunity to engage in profitable gold arbitrage amidst the Continental Blockade, thus outmaneuvering Napoleon’s economic strategies.
The Rothschild network’s ability to move capital and gold across Europe discreetly allowed them to support Britain’s military efforts against Napoleon, including funding the Duke of Wellington’s troops. Nathan Rothschild’s financial acumen established the family as premier bankers, culminating in their role as the British government’s key supplier of bullion and their involvement in critical financial transactions for the war effort. Their success was amplified by their insightful exploitation of market inefficiencies and superior access to information, which together with their political connections, gave them a significant advantage over competitors. The defeat of Napoleon at the Battle of Waterloo was a turning point that solidified the Rothschild banking dynasty's prominence in international finance.
Key lessons:
The golden rule is: he who has the gold makes the rules.
Where there is distress, there is profit to be made.
Use leveraged debt to expand your business.
Your network is your net worth.
Arbitrage is leverage.
As part of the second generation of the Rothschild dynasty, Nathan Mayer Rothschild was born on 16 September 1777 in Frankfurt am Main, Germany. Nathan would play a key role in establishing the Rothschild family as one of the wealthiest and most powerful families in the world.
Mayer Amschel sent his son Nathan to England in 1798, the first step to establishing their international banking network. Nathan made his first home in Manchester. After he set up a textile wholesale business there, war erupts.
The Coup of 18 Brumaire of 1799 was a bloodless coup d'état led by Napoleon Bonaparte in France that overthrew the government of the French Directory and replaced it with the French Consulate.
Wilhelm I, Elector of Hesse (1743-1821), who later became Wilhelm IX, Landgrave of Hesse-Kassel upon the death of his father, Frederick II, wanted to protect his assets from the occupying forces during the French Revolution. His financial adviser, Carl Friedrich Buderus, recommended that all his stock be confided to the House of Rothschild because they were best placed to protect his funds, and he thus entrusted part of his vast fortune to Mayer Amschel Rothschild for safekeeping.
The House of Rothschild now has a network in which Wilhelm IX could anonymously move and invest his fortune in an effort to protect it from confiscation by Napoleon. Mayer turned to his son, Nathan, in London to invest that £550,000 on behalf of Wilhelm IX. These investments prove extremely lucrative and, by the time Wilhelm IX returns from exile, they’ve accrued considerable interest.
Napoleon Bonaparte was the leader of France in 1800. Previously, Napoleon served as a general in the French Revolutionary Wars, but he became the head of state after the coup of 18 Brumaire in 1799. The French Revolutionary Wars resulted in the overthrow of the monarchy and the establishment of the First French Republic. As the First Consul of France, he launches a War of the Second Coalition against Austria, Britain, and their allies. By 1804, Napoleon crowned himself as Emperor of the French.
In 1805, Prussia and Russia formed an alliance against France. Napoleon defeats the Prussian and Russian armies at the Battle of Austerlitz in December 1805. After the battle, Prussia is forced to withdraw from the alliance and to sue for peace. Wilhelm IX of Hesse, being a close ally of Prussia, provides financial and military support to the Prussian war effort. Now, Napoleon invades Hesse in response to Wilhelm IX’s support for Prussia. On the advance of Napoleon’s army, Wilhelm IX is forced to go into exile in 1806.
The British had already imposed a naval blockade of the French and French-allied coasts since 16 May 1806. Now, Napoleon issues the Berlin Decree on 21 November 1806, establishing the Continental System. This blockade is essentially an economic weapon. Napoleon has the idea that preventing trade will weaken Britain’s economy, giving his forces the upper hand.
During the Continental Blockade in 1806, Napoleon wanted to prevent not only goods and services, but the supply of gold into Britain. Their extensive network of couriers, dealers, brokers, and bankers across Europe allows the Rothschilds to corner the clandestine gold market, despite Napoleon. Arbitrage is exploiting price differences in different geographic locations, and differences over time. The Rothschilds are becoming masters of profit out of the delta from these market inefficiencies. They know how to take advantage of the fluctuations in supply and demand caused by the war. Their network, political influence, and connections will contribute to inside information which gives the Rothschild banking dynasty the edge over their competitors.
From 1807, under Buderus’ influence, Wilhelm IX’s extensive financial transactions are exclusively handled by the House Rothschild, and until the expulsion of the French army from the Electorate of Hesse in 1813, Buderus, on behalf of Wilhelm IX, uses the services of the Rothschilds to discreetly carry out financial transactions throughout Europe. In the early years of the 19th century, Mayer Amschel Rothschild consolidated his position as principal international banker to Wilhelm IX and began to issue his own international loans, borrowing capital from the Landgrave.
In 1809, Nathan acquired the lease of No.2, New Court for his banking business in London. N.M. Rothschild Bank was founded at New Court, St. Swithins Lane in the city. By January 1814, Nathan M. Rothschild had established himself as the top bullion broker in London.
Again, in 1815 Nathan secures gold to fund war against Napoleon, who has escaped from Elba. J.C. Herries is the Commissary in Chief to the British government. He commissions Nathan Rothschild to fund the Wellington, English, Dutch, and Prussian soldiers assembled in Belgium. His remarkable successes in bullion and foreign exchange earned him the contract from the British Government to supply Wellington’s troops with gold coins in 1814 and 1815, leading up to the Battle of Waterloo.
It’s the network of the Rothschilds that makes them so effective, and the money isn’t bad, either. When the British Government needs money for the Duke of Wellington to pay his troops, they come to Nathan Rothschild. So the Rothschild brothers rapidly raise capital through their exclusive network, buying clandestine gold where it’s available, until amassing enough to convey for Wellington’s troops in Southern France.
Napoleon underestimated Wellington’s forces, likely expecting them to break under his initial attacks. He failed to coordinate his attacks and communicate effectively with his subordinates. Wellington’s army defeated Napoleon’s cavalry led by commander Marshal Ney, who acted recklessly and impulsively. Napoleon overestimated the loyalty and morale of his army. Many of his soldiers deserted or surrendered during the battle. When the Prussian soldiers arrived to defeat Napoleon’s weakened and disoriented soldiers, it was game over.
To be continued…
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– Sean Allen Fenn
