The following is Methods of Prosperity newsletter number 6. It was originally deployed July 27, 2023. As of April 4, 2024, original subscribers have received up to issue number 42.
Previously on Methods of Prosperity: During the Dutch Golden Age in the 17th century, the Dutch Republic rose to prominence after gaining sovereignty from Spain. The Dutch East India Company (VOC) played a crucial role in trade with Asia, establishing a powerful trading empire. At the same time, the Bank of Amsterdam issued stable and widely accepted banknotes, becoming the world's first reserve currency. This made Amsterdam the global financial center, solidifying the Dutch Republic’s position as a major economic power and marking the first instance of a world reserve currency.
Part 6. Mansa Musa.
Let’s go on a side quest, back to the fourteenth century. Cairo was the leading gold market at the time. One day, a wealthy king and his entourage passed through Cairo, flooding the city with an excessive amount of gold. This led to hyperinflation, with the price of goods skyrocketing. The sudden influx of gold into the market created an oversupply of the precious metal, leading to a devaluation of the currency. Prices began to skyrocket, driving inflation to alarming levels. Traders and merchants took advantage of the situation, manipulating prices and exacerbating the economic turmoil. As a result, the general population struggled to afford basic goods and services, deepening the economic crisis. Cairo’s delicate balance of the local financial system had been ruined by generosity.
While the Renaissance was about to emerge out of one far away land, the Ghana empire of West Africa was falling. At the battle of Kirina in 1235 C.E., Sundiata Keita, whose name means Lion Prince, defeated Ghana’s king, Sumanguru. Keita’s victory over Sumanguru marked the beginning of the Mali Empire. The Mali Empire grew wealthy due to its control of trade routes as well as its significant gold and copper resources. Sundiata Keita’s grand nephew was Mansa Musa. Mansa Musa took power in 1312. He gained the throne after his predecessor, Mansa Abu Bakr II, went on an expedition and never returned. Much of his early reign was in preparation for his famous hajj pilgrimage to Mecca, a spectacle the magnitude of which Cairo would never forget.
During his hajj pilgrimage, Mansa Musa displayed his opulence by generously distributing gold to locals and engaging in extravagant spending. His excessive wealth and extravagant behavior created a distorted perception of gold’s value. It’s impossible to measure how much gold he brought with his enormous entourage, but even his slaves made Mr.T look like a regular fool. Gold poured and flung every which way, seeming to appear out of thin air and spilling into the streets. The extravagance and gregarious demeanor of Mansa Musa became legendary.
Even 12 years after his journey, the markets couldn’t fully recover in Cairo. The impact of Mansa Musa’s generosity was not limited to Cairo, but also affected Medina and Mecca, where he gave out gold to the people. His opulence and abundance of resources attracted traders and adventurers from near and far, all hoping to capitalize on the riches of the Mali Empire. His acts of generosity provided immediate relief and support to those in need, giving to the poor and those he encountered along the way to Mecca. He left a lasting cultural and educational legacy, with the institutions he founded becoming important centers of intellectual growth.
The story of Mansa Musa is interesting not because, as a king, he possessed unlimited wealth. It was the phenomenon of how he advanced his kingdom. Instead of war, he advanced his kingdom through trade and education. An unexpected consequence of his spectacular generosity was hyperinflation. In a sense, he killed Cairo’s economy with kindness. Mansa Musa may have simply been a very generous king. As an unintentional second order consequence of his generosity, he gave away so much gold that it had the opposite effect from which he probably intended. Which just goes to show, there is such a thing as over-sharing your wealth.
Stay tuned for next week, when we jump ahead to the first American billionaires.
–Sean Allen Fenn
