This week’s book learning is part 5 of a 12 part series on The Ascent of Money by Niall Ferguson. (Parts 1, 2, 3, 4)
The Rothschild family’s success, culmination of decades of financial experience of the Jews, was a huge talking point in Europe. No war could be fought without their backing. Their own thinking had, however, changed. While war had helped them get very rich, they had transitioned to becoming fund managers carefully watching their own collection of government bonds. So, war was not helpful to them.
This was a problem because of the civil war in the United States. The south were in need of financial backing because their supply of money was running out. They tried salvaging it by selling cotton based bonds and then controlling supply of cotton (=rise in value) which was 80% of the raw material for Britain s textile industry. This worked very well until the fall of New Orleans – the last key port to move into Northern hands.
With both sides courting Rothschild support, they made a significant move – they sat out.
This was a disaster for the south – without ports, the south could no longer guarantee supply of cotton as collateral (i.e. the basis for their bonds – if they failed to meet their debt repayment, cotton would be paid to their investors). That was the beginning of a slippery slope that resulted in the fall of the confederacy 1 year later.
Sketch by EB
A few additional notes –
– Most of the world’s public museum art collection has been donated anonymously by the Rothschild family
– The south of the US lost the English market forever as the British moved onto other cotton sources – China and India
– The Rothschild owned the largest private collection of wealth, ever, at the peak of their powers. They gave away large amounts and some were even elevated to royalty.
– The Rothschild’s were the godfathers of modern investment banking and led the way for Messrs Goldman, J.P.Morgan, et al.
A Learning a Day 