“It takes a great deal of boldness and a great deal of caution to make a great fortune; and when you have got it, it requires ten times as much wit to keep it.”
Nathan Mayer Rothschild
(1777 – 1836)
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Last week on Methods of Prosperity: Nathan Mayer Rothschild, the third son of Mayer Amschel Rothschild, was a key figure in establishing the Rothschild family as one of the wealthiest and most powerful families in the world. Mayer Amschel sent Nathan to England in 1798, where his ability to exploit market inefficiencies and insider information allowed him to corner the clandestine gold market and become the top bullion broker in London. Nathan’s involvement in supplying gold coinage to Wellington’s troops contributed to the defeat of Napoleon at the battle of Waterloo.
The following is Methods of Prosperity newsletter number 15. It was originally deployed September 28, 2023. As of June 6, 2024, original subscribers have received up to issue number 51 (Sam Walton, conclusion).
Part 15: Nathan Mayer Rothschild (continued).
TL;DR
Elevated to Austrian nobility, the Rothschild family gained elite status in 1817. By 1822, the five Rothschild brothers established branches in major European cities. They excelled in arbitrage, increasing their wealth by exploiting market inefficiencies. They gained the trust of key Austrian officials during the Napoleonic wars. The Rothschild brothers handled British subsidy payments to Austrian allies. Salomon Mayer Rothschild relocated to Vienna. There he oversaw financing for the Austrian aristocracy.
The Rothschilds founded the Alliance Assurance Company in 1824. This entrance into the maritime insurance industry rivaled Lloyd’s of London. This company would merge and evolve into the RSA Group, acquired in 2021. Nathan Mayer Rothschild’s relationship with the Bank of England was crucial. In 1825, his family provided gold to prevent a financial crisis.
Mercury is essential for gold refining. The Rothschilds acquired Almadén mercury mines in 1835. This placed them in the dominant position of the global mercury market. They expanded their refining interests, acquiring the Royal Mint Refinery in London. The Rothschild family gained considerable influence over the gold market into the 1850s.
In 1873, the Spanish government bought the Almadén mercury mines from the Rothschilds. Operations ceased in 2003 due to environmental concerns.
Key lessons:
Don’t be greedy. There’s no need to over-charge for loans.
You will do well taking on the right amount of risk.
Find market inefficiencies and take advantage.
Lend as much as you can to nobility.
The Rothschild family received the title 'von' by Imperial Austrian decree in 1817. This title signified their status as akin to royalty. In 1822, the five Rothschild brothers at the head of the family established a financial institution to invest in business and provide banking services, with branches in London, Paris, Vienna, Naples, and Frankfurt. Nathan and his brothers granted attractive terms to loans provided to governments and officials, which paid commissions of eight percent. Masters of arbitrage, exchange rates and inefficiencies in the market gave the Rothschilds increasing accumulation of wealth. Being strategically positioned in five places, they could buy low in one market, let’s say Frankfurt for example, and sell high in London. They became known as the Five Arrows, a moniker derived from symbols ensconced in the family crest.
During and directly after the Napoleonic wars, the Rothschilds first became involved with Austrian finance through the handling of English subsidy payments to Britain’s allies. Prince Metternich, Austrian Minister for Foreign Affairs, and Count Stadion, Austrian Minister of Finance, were impressed with the reliability of the Rothschilds in remitting the subsidies without making undue profits, and he recommended the family for an elevation to the Austrian nobility. Metternich entered into negotiations with the House of Rothschild for a large loan. The complicated arrangements for this enormous loan demanded the presence of a Rothschild in Vienna, and thus Salomon Mayer, who had been handling Rothschild affairs with Austria, moved to the city and established a bank there.
The British Empire was the leading maritime power in the 1800s, with a large fleet of merchant ships and a vast network of ports and trading posts. Ships were the primary means of long-distance trade. The maritime industry played a vital role in the global economy. This was a major source of employment and wealth in many countries. Shipbuilding was a major industry, and sailors and dock workers were in high demand. Of course, out of this high demand, high risk comes with it. Taking on that risk at more competitive terms and options than the competition was offering meant advancing the House of Rothschild.
In March of 1824, Nathan Rothschild and his brother-in-law, Moses Montefiore, co- founded the Alliance Assurance Company to challenge the monopoly held by Lloyd’s of London in the maritime insurance industry. With a more influential Board of Directors than Lloyd’s, Rothschild and Montefiore’s company was in direct competition with Lloyd’s. The company was launched with a capital raise of £5 million. This refers to the amount of money that a company has available to invest in its operations or to use for other purposes, raised by issuing shares of stock or other securities.
In 1959, Sun Insurance paid an undisclosed sum in the acquisition of Alliance Assurance. The merger formed Sun Alliance, which merged with Royal Insurance in 1996 to form the RSA Group, which was acquired by Tryg and Intact in 2021.
As Nathan Mayer Rothschild gained popularity, he established a strong relationship with the Bank of England. In the early 1820s, Nathan borrowed gold and silver from the bank. In 1825, his family saved the bank from a financial crisis by providing a large supply of gold when the bank was running out of it. Britain’s payment system allowed banknotes to be exchanged for gold at the Bank of England, but the trade deficit and outflows of gold led to a sharp drop in the economy. This caused asset prices to fall, and there was a run on the bank. The Bank of England was almost out of gold reserves, and people feared a financial crisis. Thanks to the Rothschilds’ international operations, the bank was saved, which was quite an accomplishment.
During the Peninsular War (1808-1814), Spain was occupied by France, and the Spanish government defaulted on its loans, including loans from the Rothschilds. After the war, the Spanish government struggled to repay its debts. In 1835, the Spanish and British governments reached an agreement in which Spain would cede control of the Almadén mercury mines to the British government as part of a debt settlement. The British government then sold the mines to Nathan Mayer Rothschild.
The Almadén mines were the largest mercury mines in the world at the time, and they were a valuable asset for the Rothschilds. Mercury was used in a variety of industries, including gold mining, silver mining, and mirror making. The Rothschilds used their control of the Almadén mines to dominate the global mercury market.
During this time, mercury was an essential component in the process of refining gold. With control over these mines, the Rothschilds essentially had a worldwide monopoly and significant influence over the gold refining industry. Their involvement in refining can be traced back to 1827 when James de Rothschild established his own refinery in Paris. Their interests expanded even further in 1852 when they acquired the lease for the Royal Mint Refinery in London, which they held onto for over a century. The Royal Mint played a major role in refining the world's gold output, and this acquisition was perfectly timed as the discovery of gold in California and Australia resulted in a flood of new supplies to London in the 1850s.
The Rothschilds owned the Almadén mercury mines for over a century. In 1973, they sold the mines to the Spanish government. The mines continued to operate until 2003, when they were closed due to environmental concerns.
To be continued…
I like you,
– Sean Allen Fenn
