Most of you know that America revolted from the British and became an independent country in 1776. We Americans celebrate this with fireworks and parades and shit. Because, despite our differences, after the American Revolution we generally agree that something resembling a democratic system of government was formed and then for a long-ass time, shit worked itself out under the rules of that system. But in France, shit wasn’t quite so democratic after their revolution. In 1799, shit was a little crazy. And into this craziness stepped Napoleon, who seized control of the government and pretty much ran shit for 15 years. Napoleon was a general and generals like to fight battles and seize shit, so Napoleon did just that during his reign, expanding the French empire throughout Europe while vying to stay in control of France. And all this shit came to a head at the Battle of Waterloo (in what is now Belgium).
But what made this battle interesting in the history of finance, was that global bankers loaned money to the governments to fight this war, which tilted the course of history and created the foundation of the modern global banking system. Fuck.
The story stats with Mayer Amschel Rothschild, born in a small and crowded flat above the family’s textile shop in the Jewish ghetto of Frankfurt, Germany in 1744. Back then, most people were poor as fuck. But Mayer was really poor. Mayer’s father was a small time trader of textiles and shit but that was a low-growth, low-margin hustle, because back then, getting a line of credit to build a business was hard as fuck. In fact, since the days of the flood, loaning money for interest was forbidden in the Christian and Jewish faiths (it’s still technically forbidden in the Islam). But as the European economies grew and became more complex, folks took another look at the scriptures, and it turns out, they found some loopholes that made charging interest fair game, so long as it didn’t delve to the depths of usury (what is now known as credit card or pay day interest).
Seeing all this, Mayer recognized that he could grow his trading business by extending lines of credit to his customers. And in so doing, he could not only sell more stuff, but collect interest on sales. And fuck, over time, he realized that interest was where the real money was. And as he was figuring this out, he started to develop relationships of trust with the local aristocracy who saw that they could make money in the interest game, which, with all the warring and shit going on, seemed safer than taxing crops on land that some other motherfucker could quickly conquer.
And the shit takes off for Mayer, and he quickly becomes a respected member of that whole old-world aristocratic Euro-thing. But Mayer saw shit for what it was. He knew these motherfuckers would eventually try kill each other and his money and his family would never be safe kissing rings and shit. So he decided to break with all the bullshit, and go global. He figured, only by untethering his family from any given Euro-state and dealing in financial instruments outside of the reach of the land-grabbing, old-money Euro-emperors could he protect his family. So he set about to distribute his assets, so to speak, and he sent his five sons across Europe — to London, Paris, Frankfurt, Vienna and Naples — to set up shop trading in interest and metals and shit. And before he sends them off, he breaks the shit down for them in a few simple lessons: 1. All those aristocratic connections, that’s some valuable shit. Forge that shit. 2. Keep it global and out of reach of these war-loving peacock euro-generals. 3. The interest hustle pays like a motherfucker.
By the time of Mayer’s death in 1812, Napoleon invades Frankfurt and the Grand Duke of Hesse (Mayer’s primary aristocratic connect and the lord of all that shit) goes into exile. He leaves most of his fortune to Mayer to protect which Mayer transfers to his third son, Nathan, who is finding his stride following the old man’s rules in London. And that brings us back to Waterloo.
At the time, England hated the fucking French and so they enter into an alliance with Prussia to stop Napoleon from taking over the whole fucking continent. But wars cost shitloads of money and not only that, getting the money and supplies to the troops scattered all over Europe required a complex network of trusted agents to transfer supplies and gold and shit between traders and sword-makers and field troops and intermediaries. The British had tried and failed to set up just such a network on their own. And meanwhile, Napoleon just had France to deal with and France was his bitch. So shit was looking good for his little gangster ass.
Enter Nathan Rothschild. By then, Nathan and his brothers had set up a network of trade and foreign exchange, so that was not a problem for them. And Nathan’s firm in London, NM Rothschild, had developed a robust business lending to foreign governments, so he knew the ropes and he saw the big picture, just like his old man had taught him. So he figures, kicking in for England at Waterloo might result in some historical shit.
So one night in 1814, Nathan meets with members of the British government and proposes a comprehensive plan to fund the British and the Prussian war effort, involving the foreign currency transfer of English money to troops and suppliers on the continent via the Rothschild network, and a Prussian capital raise through bonds issued in England with interest and principle paid in Sterling at fixed exchange rates to local bondholders. Never before had a single global bank orchestrated the distribution of global capital like this. And lacking a better idea, the English are like, ok, cool. And Nathan gets the deal.
So what happened next? Napoleon lost at Waterloo. And the Rothschild’s made a fortune in the process, building banking relationships with the big European governments and laying the foundation for the modern global commercial banking system. Oh, and to this day, they make a really fucking good Bordeaux.
But there’s this trade…
As the story goes, Nathan had advance news of the British victory at Waterloo and traded this knowledge on the London Stock Exchange, making profits of historical proportions. If true, this is the mother of all trades. According to some accounts, he had a network of carrier pigeons sent across the English Channel to give him the inside scoop. Other rumors actually had him physically present at Waterloo during the victory, which I guess presume he had some fast path back to London to trade what he saw before anyone else. And whatever the path of information, there are rumors that he was physically present on the floor that day (which kinda calls into questions the rumors he was at Waterloo), selling like mad into a panicked market, the goal of which was to depress prices before buying like a motherfucker.
But as far as I can tell, that’s all bullshit. There are verifiable reports of at least one other dude who arrived in England on June 21st and broke the news of the French defeat before Wellington’s messenger returned (Wellington was England’s General running the shit in Waterloo). This was reported in several newspapers prior to the official government announcement. As the story goes, Rothschild and other MP’s heard about this early, which, if true, would have left us with some evidence of the trades. But check it out yourself, there is not unusual spikes on either side of the trade on the days prior for the official announcement.
But who cares. In a 1829 interview, Nathan Rothschild called Waterloo “The best business I ever did.” History has an agenda and I don’t know if that’s a real quote or some old-world clickbait, but trade or no trade, it’s one fuck of a story.
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