The following is Methods of Prosperity newsletter number 7. It was originally deployed August 3, 2023. As of April 11, 2024, original subscribers have received up to issue number 43.
Last week on Methods of Prosperity, we took a detour back in time to study the wealthiest individual of the 14th century. During his famous hajj pilgrimage to Mecca in 1324 A.D., Mansa Musa’s extravagant spending and generous distribution of gold created a distorted perception of value, impacting markets in Cairo, Medina, and Mecca. Despite his acts of generosity, the economic repercussions of his opulence lasted for years. Mansa Musa also left a cultural and educational legacy through the institutions he founded.
Sure, being king of Mali obviously contributed to his wealth. While that doesn’t provide a prescription for us to accumulate wealth the same way, understand that it was unrealistic for an independent individual who was not descended from royalty to accumulate this level of wealth. That won’t happen until the merchant class gains upward mobility. What’s significant is that Mansa Musa became the wealthiest person on the planet by peaceful and gracious means. Unlike his predecessor, he expanded his kingdom, importing gold into the Middle East. This gives us insight into how too much money in circulation causes inflation, which is another instance of the influx of silver, the rapid increase of which caused the Spanish Price Revolution in the 15th century.
Now, let’s go forward in time to study the first American billionaire, Stephen Girard.
Reminder: this newsletter is intended to share ideas and build relationships. For those curious to learn more, my reasoning for writing this is explained here.
Part 7. Stephen Girard.
A thriving port city during the late 18th and early 19th centuries, Philadelphia was experiencing rapid economic development as a major center for trade and commerce in early America. After gaining independence from British rule in 1776, America was in the process of establishing itself as a sovereign nation. Economically, America was transitioning from an agricultural society to one that was increasingly industrialized. The country was experiencing growth in industries such as manufacturing, shipping, and banking. This created a demand for goods and services, providing opportunities for entrepreneurs like Stephen Girard, a French-born American citizen of Philadelphia.
Born in Bordeaux, France on May 20, 1750, Girard was the son of a common sailor. This early exposure to the shipping industry may have sparked his interest in trade. He transported goods such as tobacco, sugar, and other commodities between Philadelphia and other ports in the United States, as well as destinations in Europe and the Caribbean. He provided financing to ship owners and merchants, often using his own vessels as collateral for the loans. After landing in Philadelphia in 1776, he established a successful mercantile business. Girard’s store, located at the intersection of Second and Chestnut Streets, grew over time, eventually becoming one of the largest, most prosperous enterprises in the city. Girard expanded his business empire in various sectors, including shipping, banking, real estate, and possibly as an arms dealer.
In 1793, Yellow Fever hit Philadelphia. The disease rapidly spread throughout the city, resulting in a high mortality rate, inciting panic and uncertainty. Most of the city officials fled. During this time, Stephen Girard played a crucial role in assisting the affected population. He converted his own building, the Mansion House, into a hospital to accommodate patients. This facility, known as the Mansion House Hospital, became one of the primary treatment centers for the sick.
Keep in mind that the First Bank of the United States in 1791 did not have the same kind of authority that The Federal Reserve has today. Girard Bank, the private bank established by Stephen Girard in 1811 operated separately from the First Bank of the United States. When disputes over trade restrictions, impressment of American sailors, and British support for Native American tribes resisting American westward expansion led to another war with Britain in 1812, the United States had to borrow from Girard Bank. Stephen Girard lent the United States government $8 million during the war of 1812. This was a tremendous risk for Girard as it was more than he had reserves for, and he didn’t demand any concessions in return. Girard’s loan helped keep the government solvent until the Treaty of Ghent in 1814 ended the war. Gerard covered around 95 percent of the government’s debt to finance the war. Understand that, without Girard, the United States would be bankrupt.
After the war, Girard became a large stockholder in and one of the directors of the Second Bank of the United States, established in 1816. Banknotes issued by this new central bank were backed by gold and silver reserves held by the bank. Girard Bank would cease operations after his death.
Girard College was founded in 1833. Having no heirs, Girard instructed his namesake institution to provide free education, housing, and care to destitute orphan boys. This initiative aimed to provide underprivileged children with opportunities for intellectual and moral development. Girard College continues to exist to this day, serving as a testament to Girard's commitment to education and social welfare.
Stay tuned for next week when we meet the next American billionaire who made his fortune in the fur trade and real estate. Who do you think that is?
–Sean Allen Fenn
