Special | 55m 36s | Video has closed captioning.
Niall Ferguson documents the rise of modern finance in Europe and its expansion into the Far East, including the ascendancy of the Rothschilds and bond markets, and the decline of Europe's landed aristocracy.
Aired: 07/06/09
Problems Playing Video? | Closed Captioning
THE ASCENT OF MONEY HAS NEVER BEEN SMOOTH.
SO LONG AS HUMAN EXPECTATIONS OF THE FUTURE
VEER FROM THE OVER-OPTIMISTIC TO THE OVER-PESSIMISTIC,
FROM GREED TO FEAR,
STOCK PRICES WILL TEND TO TRACE A LINE
NOT UNLIKE THE JAGGED AND IRREGULAR PEAKS
OF THE ANDES.
AS AN INVESTOR, YOU JUST HAVE TO HOPE
THAT WHEN YOU HAVE TO COME DOWN FROM THE SUMMIT OF EUPHORIA,
IT'LL BE ON A NICE, SMOOTH SKI SLOPE.
YET IN THE PAST YEAR,
IT SEEMED AS IF PLANET FINANCE
HAS PLUNGED OVER A SHEER CLIFF.
SOME OF THE BIGGEST NAMES ON WALL STREET
AND IN OTHER FINANCIAL CENTERS AROUND THE WORLD
HAVE BEEN WIPED OUT.
I WANT TO EXPLAIN TO YOU JUST HOW MONEY ROSE
TO PLAY SUCH A TERRIFYINGLY DOMINANT ROLE
IN ALL OUR LIVES.
WHAT'S MORE, I WANT TO REVEAL FINANCIAL HISTORY
AS THE ESSENTIAL BACKSTORY BEHIND ALL HISTORY.
HOW THE BOND MARKET
DICTATED THE OUTCOME OF THE BATTLE OF WATERLOO
AND CREATED THE WORLD'S GREATEST FINANCIAL DYNASTY.
HOW IT ENSURED THE DEFEAT OF THE SOUTH
IN THE AMERICAN CIVIL WAR.
HOW IT WAS THAT MONETARY MELTDOWNS MADE REVOLUTIONS.
WE'VE JUST WITNESSED ONE OF THE GREATEST FINANCIAL CRISES
OF ALL TIME.
2008 WAS ONE OF THE 8 WORST YEARS
IN AMERICAN STOCK MARKET HISTORY.
BUT EVEN LAST YEAR'S CARNAGE PALES INTO INSIGNIFICANCE
ALONGSIDE WHAT HAPPENED IN FRANCE
NEARLY 300 YEARS AGO.
CAPTIONING MADE POSSIBLE BY FRIENDS OF NCI
[MEN YELLING]
T. ROWE PRICE IS PROUD TO SPONSOR "THE ASCENT OF MONEY," BECAUSE UNDERSTANDING THE CONNECTIONS
OF A COMPLEX GLOBAL ECONOMY
IS IMPORTANT TO US ALL.
T. ROWE PRICE: INVEST WITH CONFIDENCE.
Woman, voice-over: MY IDEA CREATED JOBS FOR 2,000 PEOPLE.
Man, voice-over: MY IDEA WILL BRING RENEWABLE ENERGY TO EVERYONE.
Announcer: AN ENTREPRENEUR WITH AN IDEA CAN CHANGE THE WORLD.
I HAVE AN IDEA.
KAUFFMAN: THE FOUNDATION OF ENTREPRENEURSHIP.
Announcer: AND BY...
AND BY...
[MEN YELLING]
THE MAN RESPONSIBLE
FOR THE FIRST STOCK MARKET CRASH IN HISTORY
WAS JOHN LAW,
A RENEGADE SCOTS MURDERER
WHO HAD ESCAPED FROM BRITAIN VIA HOLLAND
AND ARRIVED IN FRANCE TO SEEK HIS FORTUNE.
BY THE END OF 1719, HE HAD FOUND IT.
ENSCONCED IN HIS PALATIAL SUITE
HERE IN THE PLACE VENDOME,
THAT'S THE RITZ HOTEL OVER THERE,
LAW HAD ACHIEVED A GREATER CONCENTRATION
OF FINANCIAL POWER IN HIS HANDS
THAN ANY INDIVIDUAL IN ALL FRENCH HISTORY.
AS CONTROLLER GENERAL OF ALL FRENCH FINANCES,
HE WAS LITERALLY IN CHARGE OF THE COLLECTION
OF ALL FRANCE'S INDIRECT TAXES,
THE ENTIRE FRENCH NATIONAL DEBT,
THE 26 MINTS
THAT PRODUCED THE COUNTRY'S GOLD AND SILVER COINAGE,
THE COMPANY OF THE INDIES,
BETTER KNOWN AS THE MISSISSIPPI COMPANY,
WHICH HAD A MONOPOLY ON THE IMPORT OF TOBACCO,
ALL OF FRANCE'S TRADE WITH AFRICA AND ASIA,
OH, AND THE LOUISIANA COLONY,
WHICH COVERED AROUND A QUARTER OF WHAT IS TODAY THE UNITED STATES.
IN HIS OWN RIGHT,
LAW ALSO OWNED THE MASSERAN PALACE,
MORE THAN 1/3 OF THE BUILDINGS AROUND THE PLACE VENDOME,
MORE THAN 12 COUNTRY ESTATES,
SEVERAL PLANTATIONS IN LOUISIANA,
AND 100,000,000 LIVRE OF SHARES
IN THE MISSISSIPPI COMPANY.
NOT BAD GOING FOR A MAN WHO, WHEN HE'D FIRST COME HERE 12 YEARS BEFORE,
HAD BEEN IDENTIFIED AS A JOUEUR, A PROFESSIONAL GAMBLER,
AND A POSSIBLE SPY.
BY JANUARY 1720, LAW'S TRIUMPH SEEMED COMPLETE.
A SCOTS MURDERER WAS IN EFFECT PRIME MINISTER OF FRANCE.
LAW'S PROBLEM WAS THAT HE HAD NO CLEAR IDEA
WHERE TO STOP.
ON THE CONTRARY, HE HAD A STRONG PERSONAL INTEREST
IN PRINTING MORE MONEY,
WHICH HIS OWN BANK CONTROLLED,
TO DRIVE UP THE PRICE OF HIS OWN COMPANY'S SHARES.
FORTUNATELY FOR LAW, BOTH HIS BANK AND HIS COMPANY
WERE NOW OPERATING OUT OF THE VERY SAME BUILDING--
THE MASSERAN PALACE, WHICH HE HIMSELF HAPPENED TO OWN.
SO ALL HE HAD TO DO IN ORDER TO DRIVE UP THE COMPANY'S SHARE PRICE
WAS TO TAKE A WALK DOWN THE CORRIDOR
FROM THE OFFICE WHERE THE SHARES WERE ISSUED
TO THE OFFICE WHERE THE MONEY WAS PRINTED.
YOU COULD SAY THAT LAW HAD BECOME
THE ULTIMATE INSIDER TRADER.
AT ROOT, LAW'S SYSTEM WAS A SCAM.
A PONZI SCHEME LIKE THE ONE OPERATED BY BERNIE MADOFF.
IT TAKES ITS NAME FROM
THE LEGENDARY ITALIAN-AMERICAN CON MAN CHARLES PONZI.
TO PAY OUT THE GENEROUS RETURNS IT'S PROMISED
TO THE FIRST LOT OF SUCKERS,
A PONZI SCHEME NEEDS TO TAKE IN MORE MONEY
FROM THE NEXT LOT OF SUCKERS.
IN JOHN LAW'S SCHEME,
THE ACQUISITIONS OF OTHER COMPANIES
AND THE GENEROUS DIVIDENDS LAW PAID
WERE FINANCED, NOT FROM COMPANY PROFITS,
BUT SIMPLY BY SELLING NEW SHARES.
LIKE ALL PONZI SCHEMES, HOWEVER,
THE EFFECTS OF LAW'S SYSTEM WAS TO GENERATE
AN UNSUSTAINABLE BUBBLE.
LAW HAD REINFLATED THE FRENCH ECONOMY
WITH A COMBINATION OF PAPER MONEY AND PUBLIC CONFIDENCE.
NOW, UNFORTUNATELY,
HIS BUBBLE WAS ABOUT TO GO POP.
BY THE BEGINNING OF 1720,
FRANCE WAS IN THE GRIP OF A MANIA--
THE MISSISSIPPI BUBBLE.
BUT THE MAN RESPONSIBLE,
THE RENEGADE SCOTS MURDERER AND GAMBLER, JOHN LAW,
WHO'D RISEN TO BECOME MASTER OF THE ENTIRE FRENCH ECONOMY,
WAS ABOUT TO DISCOVER AN INVIOLABLE LAW OF FINANCE--
TREES DON'T GROW TO THE SKY.
ACCORDING TO LAW'S P.R.
CAMPAIGN,
THE HUGE PROFITS HE WAS PROJECTING
WOULD COME FROM THE FRENCH COLONY OF LOUISIANA,
WHICH HE PAINTED AS A VERITABLE GARDEN OF EDEN,
INHABITED BY FRIENDLY NOBLE SAVAGES
WILLING TO EXCHANGE A CORNUCOPIA OF EXOTIC GOODS.
THESE WOULD FLOW TO FRANCE THROUGH A NEW CITY
AT THE MOUTH OF THE MISSISSIPPI--
NEW ORLEANS,
NAMED TO FLATTER THE ALWAYS-SUSCEPTIBLE FRENCH REGENT--
THE DUKE OF ORLEANS.
ALL THE COLONY LACKED WAS SETTLERS.
GRASPING THAT FRENCHMEN WERE MORE INTERESTED
IN STOCK MARKET SPECULATION
THAN THE HARD GRAFT OF COLONIZATION,
LAW LAUNCHED A RECRUITMENT DRIVE
IN THE FRANCO-GERMAN BORDERLANDS.
SEVERAL THOUSAND BOLD GERMANS SIGNED UP
AND SET SAIL TO THE PROMISED LAND.
THEY ENDED UP HERE.
THIS WAS THE UNFORTUNATE IMMIGRANT'S FIRST GLIMPSE OF LOUISIANA,
AN INSECT-INFESTED SWAMP.
WITHIN A YEAR, 80% OF THEM HAD DIED OF STARVATION
OR TROPICAL DISEASES LIKE YELLOW FEVER.
SADLY FOR LAW, THE MISSISSIPPI COMPANY'S PRINCIPLE ASSET,
ITS MONOPOLY ON TRADE WITH LOUISIANA,
LOOKED LIKE BEING, MORE OR LESS, WORTHLESS.
AS THE INSCRIPTION ON THIS DUTCH CARTOON PUT IT,
"THIS IS THE WONDROUS MISSISSIPPI LAND
"MADE FAMOUS BY HER SHARE DEALINGS,
"WHICH THROUGH DECEIT AND DEVIOUS CONDUCT,
"HAS SQUANDERED COUNTLESS TREASURES.
"HOWEVER MEN REGARD THE SHARES,
IT IS WIND AND SMOKE AND NOTHING MORE."
TO LAW, ECONOMIC SUCCESS WAS ALL ABOUT CONFIDENCE.
BUT THIS WAS A CONFIDENCE TRICK.
IN PARIS, THE FIRST RUMORS BEGAN TO CIRCULATE
THAT ALL WAS NOT WELL WITH LAW'S SYSTEM.
THE SHARE PRICE OF THE MISSISSIPPI COMPANY
BEGAN TO SLIDE.
[MEN YELLING]
IN A DESPERATE BID TO AVERT MELTDOWN,
LAW CALLED ON THE DUKE OF ORLEANS
TO CUT THE OFFICIAL SHARE PRICE
FROM 9,000 LIVRE TO 5,000.
THIS WAS WHEN THE LIMITS OF ROYAL ABSOLUTISM,
THE FOUNDATION OF LAW'S SYSTEM, SUDDENLY BECAME APPARENT.
WITHIN WEEKS, THE SHARE PRICE WAS IN FREEFALL.
ANGRY CROWDS GATHERED OUTSIDE LAW'S BANK.
STONES WERE THROWN.
WINDOWS BROKEN.
BY DECEMBER, THE SHARES HAD LOST MORE THAN 90% OF THEIR VALUE.
THIS FRENCH MAP FROM 1730
GIVES AN ABSOLUTELY WONDERFUL VISUAL REPRESENTATION
OF THE WORLD'S FIRST STOCK MARKET BUBBLE.
HERE AT THE TOP IS THE GODDESS FORTUNA
POURING DOWN GOODIES FROM HER HORN OF PLENTY.
HERE ARE THE HAPPY INVESTORS RECEIVING THEIR SHARES
IN THE MISSISSIPPI COMPANY FROM FLYING CHERUBS,
BUT DOWN BELOW, THERE ARE SOME OTHER CHERUBS
CHOPPING UP THE SHARES BESIDE A SHATTERED PRINTING PRESS,
AND THERE ARE 2 MORE CHERUBS BLOWING BUBBLES.
TO THE RIGHT, THERE ARE 4 VERY UNHAPPY-LOOKING MEN,
ONE OF WHOM IS PREPARING TO COMMIT SUICIDE
BY FALLING ON HIS SWORD.
AS IF PRICKED BY A SWORD,
THE MISSISSIPPI BUBBLE HAD NOW BURST.
IT WAS AT THIS MOMENT THAT LAW,
VILIFIED BY THE FRENCH PEOPLE,
FLED THE COUNTRY.
HE NEVER SAW HIS WIFE AND DAUGHTER AGAIN.
HE SPENT THE REST OF HIS LIFE IN VENICE,
DIVIDING HIS TIME BETWEEN
WRITING LONG SELF-JUSTIFYING LETTERS
AND GAMBLING.
HE DIED IN 1729.
IN FRANCE, HOWEVER,
HIS DEVASTATING LEGACY LIVED ON.
LAW'S BUBBLE AND BUST
FATALLY SET BACK FRANCE'S FINANCIAL DEVELOPMENT,
PUTTING FRENCHMEN OFF PAPER MONEY
AND STOCK MARKETS FOR MORE THAN A GENERATION.
THE FRENCH MONARCHY'S FISCAL CRISIS WENT UNRESOLVED,
AND FOR THE REST OF THE REIGN OF LOUIS XV AND LOUIS XVI,
THE CROWN LIVED FROM HAND TO MOUTH.
EVENTUALLY, FRANCE WAS DRIVEN BY ROYAL BANKRUPTCY
TO REVOLUTION.
THE REVOLUTION OF 1789
NOT ONLY TOPPLED THE FRENCH MONARCHY,
IT ALSO PLUNGED EUROPE INTO A SUCCESSION
OF BLOODY WARS THAT LASTED FROM 1792 UNTIL 1815.
THE MAN WHO EMERGED AS THE GREATEST WARLORD OF THE AGE
WAS A DIMINUTIVE CORSICAN NAMED NAPOLEON BONAPARTE.
LESS WELL KNOWN IS THE MAN WHO HELPED FINANCE
BONAPARTE'S ULTIMATE DOWNFALL.
THIS HOUSE WAS BUILT BY THE FINANCIAL DYNASTY
THAT HELPED DECIDE THE BATTLE OF WATERLOO.
THE DYNASTY THAT PRODUCED
THE MAN THEY CALLED THE BONAPARTE OF FINANCE--
THE EMPEROR OF THE 19TH-CENTURY BOND MARKET.
"HE IS MASTER OF UNBOUNDED WEALTH,
"HE BOASTS THAT HE IS THE ARBITER OF PEACE AND WAR
"AND THAT THE CREDIT OF NATIONS DEPENDS UPON HIS NOD.
MINISTERS OF STATE ARE IN HIS PAY."
THOSE WORDS, SPOKEN IN 1828
BY THE RADICAL MEMBER OF PARLIAMENT, THOMAS DUNSCOMBE,
WERE DESCRIBING NATHAN ROTHSCHILD,
BOND TRADER EXTRAORDINAIRE
AND FOUNDER OF THE LONDON BRANCH OF WHAT BECAME
THE BIGGEST BANK IN THE WORLD.
THE BOND MARKET
MADE THE ROTHSCHILDS STUPENDOUSLY RICH.
SO RICH THAT THEY COULD AFFORD TO BUILD
41 STATELY HOMES ALL OVER EUROPE.
THIS IS NUMBER 29,
WADDESDON MANNER IN BUCKINGHAMSHIRE,
WHICH HAS BEEN RESTORED IN ALL ITS GILDED GLORY
BY JACOB ROTHSCHILD,
NATHAN'S GREAT-GREAT-GREAT GRANDSON.
WELL, HE WAS SHORT, FAT,
OBSESSIVE, EXTREMELY CLEVER,
WHOLLY FOCUSED,
A VERY PLEASANT PERSON TO HAVE HAD DEALINGS WITH.
BETWEEN AROUND 1810 AND 1836,
THE 5 SONS OF MAYER AMSCHEL ROTHSCHILD
ROSE FROM THE OBSCURITY OF THE FRANKFURT GHETTO
TO OBTAIN A POSITION OF UNEQUALED POWER
IN INTERNATIONAL FINANCE.
IT WAS THE THIRD SON, NATHAN,
WHO ORCHESTRATED THIS FAMILY TRIUMPH FROM LONDON.
EVELYN ROTHSCHILD IS NATHAN'S GREAT-GREAT GRANDSON.
HE RECENTLY RETIRED AS CHAIRMAN OF ROTHSCHILDS,
THE BANK THAT NATHAN BUILT.
HE WAS VERY AMBITIOUS, AND HE MOVED TO LONDON
AND I THINK HE WAS DETERMINED.
I DON'T THINK HE SUFFERED FOOLS LIGHTLY.
MAYBE THAT'S A FAMILY TRAIT.
THIS IS ONE OF THE FEW SURVIVING LETTERS FROM NATHAN ROTHSCHILD
TO HIS BROTHERS, WRITTEN, AS ALWAYS, IN JUDEN-DEUTSCH,
THAT WAS GERMAN TRANSLITERATED INTO HEBREW CHARACTERS,
AND IT GIVES YOU AN IDEA WHAT AN EXTRAORDINARY WORK ETHIC THE MAN HAD
AND HOW HE TRIED TO IMPOSE IT ON HIS POOR LONG-SUFFERING BROTHERS.
JUST LISTEN TO THIS--
"DEAR AMSCHEL, I'M WRITING YOU MY OPINION
"BECAUSE IT'S MY DAMN DUTY TO DO SO.
"I READ YOUR LETTERS, NOT ONCE, BUT OFTEN A HUNDRED TIMES
"BECAUSE YOU CAN WELL IMAGINE THAT AFTER DINNER,
"I DON'T READ BOOKS, I DON'T PLAY CARDS,
"I DON'T GO TO THE THEATER.
MY ONLY PLEASURE IS MY BUSINESS."
[OVERLAPPING CHATTER]
IT WAS THIS PHENOMENAL DRIVE,
ALLIED WITH INNATE FINANCIAL GENIUS,
THAT PROPELLED NATHAN FROM OBSCURITY
TO MASTERY OF THE LONDON BOND MARKET.
BUT THE OPPORTUNITY FOR A FINANCIAL BREAKTHROUGH
CAME FROM WAR.
[DRUMS BEATING]
[MAN, INDISTINCT]
ON THE MORNING OF JUNE THE 18TH, 1815,
67,000 BRITISH, DUTCH, AND GERMAN TROOPS
UNDER THE DUKE OF WELLINGTON'S COMMAND
LOOKED OUT ACROSS THE FIELDS OF WATERLOO,
NOT FAR FROM BRUSSELS,
TOWARDS AN ALMOST-EQUAL NUMBER OF FRENCH TROOPS
COMMANDED BY THE FRENCH EMPEROR, NAPOLEON BONAPARTE.
THE BATTLE OF WATERLOO WAS THE CULMINATION
OF MORE THAN 2 DECADES OF INTERMITTENT CONFLICT
BETWEEN BRITAIN AND FRANCE.
BUT IT WAS MORE THAN JUST A BATTLE BETWEEN 2 ARMIES.
IT WAS ALSO A CONTEST BETWEEN RIVAL FINANCIAL SYSTEMS.
ONE THE FRENCH BASED ON PLUNDER,
THE OTHER THE BRITISH BASED ON DEBT.
TO PAY FOR THE WAR,
THE BRITISH GOVERNMENT HAD SOLD
AN UNPRECEDENTED AMOUNT OF BONDS.
ACCORDING TO A LONGSTANDING LEGEND,
THE ROTHSCHILD FAMILY MADE THEIR FIRST MILLIONS
BY SPECULATING ON HOW THE OUTCOME THE BATTLE OF WATERLOO
WOULD AFFECT THE PRICE OF THESE BONDS.
FIRE!
IT WAS THIS LEGEND OF JEWISH PROFITEERING
THAT A CENTURY LATER THE NAZIS DID THEIR BEST
TO EMBROIDER.
IN 1940, JOSEPH GOEBBELS APPROVED THE RELEASE OF THIS FILM,
"DIE ROTHSCHILDS."
[SPEAKING GERMAN]
NATHAN IS SEEN BRIBING A FRENCH GENERAL
TO ENSURE THE DUKE OF WELLINGTON'S VICTORY
AND THEN DELIBERATELY MISREPORTING
THE OUTCOME OF THE BATTLE IN LONDON.
THIS TRIGGERS PANIC SELLING OF BRITISH BONDS
WHICH NATHAN THEN SNAPS UP AT BARGAIN-BASEMENT PRICES.
WHAT HAPPENED HERE IN 1815 WAS ALTOGETHER DIFFERENT.
FAR FROM MAKING MONEY FROM WELLINGTON'S DEFEAT OF NAPOLEON,
THE ROTHSCHILDS WERE VERY NEARLY RUINED BY IT.
THERE FORTUNE WAS MADE, NOT BY WATERLOO,
BUT DESPITE IT.
THIS IS HOW IT REALLY HAPPENED.
SELLING BONDS TO THE PUBLIC
HAD RAISED PLENTY OF CASH FOR THE BRITISH GOVERNMENT,
BUT NEITHER BONDS NOR BANK NOTES
WERE ANY USE TO WELLINGTON.
TO PROVISION HIS TROOPS AND PAY BRITAIN'S ALLIES
AGAINST FRANCE,
HE NEEDED A CURRENCY THAT WAS UNIVERSALLY ACCEPTABLE.
NATHAN ROTHSCHILD WAS GIVEN THE JOB
OF TAKING THE MONEY RAISED IN THE BOND MARKET
AND DELIVERING IT TO WELLINGTON AS GOLD.
THE SUCCESS OF THIS OPERATION
WOULD DETERMINE THE FATE OF THE WARRING EMPIRES
AND OF ALL EUROPE.
THIS LETTER MARKS A TURNING POINT IN THE HISTORY
OF BOTH THE ROTHSCHILD FAMILY AND THE BRITISH GOVERNMENT.
IT'S DATED THE 11TH OF JANUARY 1814,
AND IT'S AN ORDER FROM THE CHANCELLOR OF THE EXCHEQUER
TO THE COMMISSARY-IN-CHIEF
TELLING HIM TO APPOINT NATHAN ROTHSCHILD, MR. ROTHSCHILD,
AS A BRITISH GOVERNMENT AGENT.
NATHAN'S JOB WAS TO GATHER TOGETHER
AS MUCH GOLD AND SILVER AS HE COULD FIND
ON THE EUROPEAN CONTINENT
AND MAKE SURE IT GOT TO THE DUKE OF WELLINGTON AND HIS ARMY,
WHO HAD JUST FOUGHT THEIR WAY OUT OF SPAIN
INTO THE SOUTH OF FRANCE.
IT WAS AN OPERATION THAT RELIED HEAVILY
ON THE ROTHSCHILD'S UNIQUE PAN-EUROPEAN CREDIT NETWORK
AND ALSO NATHAN'S ABILITY TO MOBILIZE GOLD
THE WAY WELLINGTON COULD MOBILIZE TROOPS.
SHIFTING SUCH VAST AMOUNTS OF GOLD IN THE MIDDLE OF A WAR
WAS HUGELY RISKY, OF COURSE,
YET FROM THE ROTHSCHILD'S POINT OF VIEW,
THE HEFTY COMMISSIONS THEY WERE ABLE TO CHARGE
MORE THAN JUSTIFIED THE RISKS.
THE ROTHSCHILDS SOON BECAME INDISPENSABLE
TO THE BRITISH WAR EFFORT.
IN THE WORDS OF THE BRITISH COMMISSARY-IN-CHIEF,
"ROTHSCHILD OF THIS PLACE
"HAS EXECUTED THE VARIOUS SERVICES ENTRUSTED TO HIM IN THIS LINE
"ADMIRABLY WELL.
"AND THOUGH A JEW,
WE PLACE A GOOD DEAL OF CONFIDENCE IN HIM."
THE ROTHSCHILDS WERE SO EFFECTIVE AS WAR FINANCIERS
BECAUSE THEY HAD A READY-MADE BANKING NETWORK
WITHIN THE FAMILY.
NATHAN IN LONDON, AMSCHEL IN FRANKFURT,
JAMES IN PARIS, CARL IN AMSTERDAM,
AND SALOMON ROVING WHEREVER NATHAN SAW FIT.
[SPEAKING FRENCH]
IF THE PRICE OF GOLD WAS HIGHER IN, SAY, PARIS THAN IN LONDON,
JAMES IN PARIS WOULD SELL...
AND NATHAN IN LONDON WOULD BUY.
I THINK THEIR EDGE OVER FAMILIES LIKE THE BARINGS,
WITH WHOM THEY WERE COMPETING,
WAS THAT THEY HAD THEIR BROTHERS
IN VERY IMPORTANT FINANCIAL CENTERS AND COUNTRIES.
NOW, WHETHER THAT WAS PREMEDITATED,
WHETHER THEY THOUGHT THAT THROUGH AS THEY GOT OUT OF THE GHETTOS,
HARD TO BELIEVE THEY WENT AS FAR AS THAT,
BUT THAT'S WHAT HAPPENED, AND ONCE THEY SAW THAT IT WAS AN ADVANTAGE,
I THINK THEY WORKED ON THAT ADVANTAGE.
IN MARCH 1815, NAPOLEON RETURNED TO PARIS
FROM EXILE IN ELBA
DETERMINED TO REVIVE HIS IMPERIAL AMBITIONS.
THE ROTHSCHILDS IMMEDIATELY RAMPED UP THEIR GOLD OPERATION,
BUYING UP ALL THE BULLION AND COINS
THEY COULD LAY THEIR HANDS ON.
NATHAN'S REASON FOR BUYING THIS HUGE STOCK OF GOLD WAS SIMPLE--
HE ASSUMED THAT, AS WITH ALL NAPOLEON'S WARS,
THIS WOULD BE A LONG ONE.
HIS GOLD WOULD BE MORE AND MORE SOUGHT AFTER,
AND IT WOULD RISE IN VALUE.
IT PROVED TO BE A NEAR-FATAL MISCALCULATION.
WELLINGTON FAMOUSLY CALLED THE BATTLE OF WATERLOO,
"THE NEAREST RUN THING YOU EVER SAW IN YOUR LIFE."
AFTER A DAY OF BRUTAL CHARGES, COUNTER-CHARGES,
AND HEROIC DEFENSE, THE LATE ARRIVAL OF THE PRUSSIAN ARMY
FINALLY PROVED DECISIVE.
FOR WELLINGTON, IT WAS A GLORIOUS VICTORY.
BUT NOT FOR THE ROTHSCHILDS.
NO DOUBT IT WAS GRATIFYING TO NATHAN ROTHSCHILD
TO BE THE FIRST TO HEAR THE NEWS OF NAPOLEON'S DEFEAT.
THANKS TO THE SWIFTNESS OF THE ROTHSCHILD COURIERS,
HE HEARD IT FULLY 48 HOURS BEFORE MAJOR HENRY PERCY
DELIVERED WELLINGTON'S OFFICIAL DISPATCH
TO THE BRITISH CABINET.
BUT NO MATTER HOW EARLY HE HEARD IT,
THE NEWS FROM WATERLOO WAS ANYTHING BUT GOOD
FROM NATHAN'S POINT OF VIEW.
NOW HE AND HIS BROTHERS WERE SITTING ON TOP OF A PILE OF CASH
THAT NOBODY WANTED TO PAY FOR A WAR THAT WAS OVER.
WITH THE COMING OF PEACE, THE GREAT ARMIES THAT HAD FOUGHT NAPOLEON
COULD BE DISBANDED.
THAT MEANT NO MORE GOLD FOR SOLDIERS' WAGES
AND IT MEANT THE PRICE OF GOLD, WHICH HAD SOARED DURING THE WAR,
WOULD FALL.
NATHAN WAS FACED WITH HEAVY AND GROWING LOSSES.
[HORNS HONK]
THERE WAS ONLY ONE POSSIBLE WAY OUT--
NATHAN COULD USE THE ROTHSCHILD GOLD
TO MAKE A MASSIVE AND HUGELY RISKY BET
ON THE BOND MARKET.
ON JULY THE 20TH, 1815,
THE EVENING ADDITION OF "THE LONDON COURIER"
REPORTED THAT NATHAN HAD MADE GREAT PURCHASES OF STOCK,
MEANING BRITISH GOVERNMENT BONDS.
NATHAN'S GAMBLE WAS THAT THE BRITISH VICTORY AT WATERLOO
WOULD SEND THE PRICE OF BRITISH BONDS SOARING UPWARDS.
NATHAN BOUGHT, AND AS THE PRICE OF BONDS BEGAN TO RISE,
HE KEPT ON BUYING.
DESPITE HIS BROTHERS' DESPERATE ENTREATIES TO SELL,
NATHAN HELD HIS NERVE...
FOR ANOTHER YEAR.
EVENTUALLY, IN JULY 1817,
WITH BOND PRICES UP BY 40%, HE SOLD HIS HOLDING.
HIS PROFITS WERE WORTH
APPROXIMATELY 600 MILLION POUNDS TODAY.
THE ROTHSCHILDS HAD SHOWN THAT BONDS WERE MORE THAN JUST A WAY
FOR GOVERNMENTS TO FUND THEIR WARS,
THEY COULD ALSO BE BOUGHT AND SOLD IN A WAY
THAT GENERATED SERIOUS MONEY.
AND WITH MONEY CAME POWER.
MAYER AMSCHEL ROTHSCHILD
HAD REPEATEDLY ADMONISHED HIS 5 SONS,
"IF YOU CAN'T MAKE YOURSELF LOVED,
MAKE YOURSELF FEARED."
AS THEY BESTRODE THE MID-19TH CENTURY FINANCIAL WORLD
AS MASTERS OF THE BOND MARKET,
THE ROTHSCHILDS WERE ALREADY MORE FEARED THAN LOVED.
BUT NOW THEY HAD BECOME HATED, TOO.
THE FACT THAT THE ROTHSCHILDS WERE JEWISH
GAVE A NEW IMPETUS
TO DEEP-ROOTED ANTI-SEMITIC PREJUDICE.
JUST A FEW MONTHS AGO, A COLLEAGUE OF MINE IN MY OFFICE
WHO COLLECTS POSTERS
FOUND THESE--
WELL, THIS PARTICULAR, RATHER EXTRAORDINARY
EXAMPLE OF ANTI-SEMITISM IN A STARK FORM
ABOUT THE ROTHSCHILDS,
WHO WERE SORT OF EPITOMIZED TO THEM AND OTHERS AT TIMES
THE MOST EXTREME FORMS OF UNDESIRABLE CAPITALISM
AS PRACTICED BY JEWS.
IT WAS ABOVE ALL THE ROTHSCHILDS' SEEMING ABILITY
TO PERMIT OR PROHIBIT WARS
THAT AROUSED THE MOST INDIGNATION.
YOU MIGHT HAVE THOUGHT THAT THE ROTHSCHILDS
ACTUALLY NEEDED WAR.
AFTER ALL, SOME OF NATHAN'S BIGGEST DEALS
HAD BEEN PRODUCED BY WAR,
AND IF IT HADN'T BEEN FOR WAR, 19TH-CENTURY STATES
WOULDN'T HAVE NEEDED TO ISSUE ANY BONDS
FOR THE ROTHSCHILDS TO BUY AND SELL.
BUT THE TROUBLE WITH WAR,
AND EVEN MORE SO WITH REVOLUTION,
WAS THAT IT INCREASED THE RISK THAT A DEBTOR STATE
MIGHT FAIL TO MEET ITS COMMITMENTS,
AND THAT HIT THE PRICE OF EXISTING BONDS.
BY THE MID-19TH CENTURY, THE ROTHSCHILDS
WERE NO LONGER MERE TRADERS, THEY WERE FUND MANAGERS,
CAREFULLY TENDING TO A VAST PORTFOLIO
OF THEIR OWN GOVERNMENT BONDS.
NOW THEY STOOD TO LOSE MUCH MORE THAN TO GAIN FROM CONFLICT.
THE ROTHSCHILDS HAD HELPED DECIDE THE OUTCOME
OF THE NAPOLEONIC WARS
BY PUTTING THEIR FINANCIAL WEIGHT BEHIND BRITAIN.
NOW THEY WOULD HELP DECIDE THE OUTCOME
OF THE AMERICAN CIVIL WAR...
Man: FIRE!
...BY CHOOSING TO SIT ON THE SIDELINES.
FIFTY YEARS AFTER THE BATTLE AT WATERLOO
AND ON THE OTHER SIDE OF THE WORLD,
ANOTHER GREAT WAR WOULD BE DECIDED
BY THE POWER OF THE BOND MARKET,
BUT THIS TIME IT WOULD BE THE VANQUISHED
WHO MADE THE BIG BET AND LOST.
Man: FIRE!
THERE IS A VIEW THAT THE KEY TURNING POINT
IN THE AMERICAN CIVIL WAR CAME IN MID-1863,
WHEN UNION FORCES CAPTURED JACKSON,
THE MISSISSIPPI STATE CAPITAL,
AND FORCED A CONFEDERATE ARMY
TO RETREAT WESTWARD TO VICKSBURG,
THEIR BACKS TO THE MISSISSIPPI RIVER.
THERE, SURROUNDED BY A UNION ARMY
AND WITH UNION GUNBOATS BOMBARDING THEIR POSITIONS
FROM THE RIVER,
THE SOUTHERNERS HELD OUT FOR A MONTH
BEFORE FINALLY LAYING DOWN THEIR ARMS ON JULY THE 4th.
AFTER VICKSBURG,
THE MISSISSIPPI WAS FIRMLY IN THE HANDS OF THE NORTH.
THE SOUTH WAS LITERALLY SPLIT IN TWO.
YET, THIS MILITARY SETBACK WASN'T THE DECISIVE FACTOR
IN THE SOUTH'S ULTIMATE DEFEAT.
THE REAL TURNING POINT CAME EARLIER,
AND IT WAS FINANCIAL.
200 MILES DOWNSTREAM FROM VICKSBURG,
WHERE THE MISSISSIPPI JOINS THE GULF OF MEXICO,
LIES THE PORT OF NEW ORLEANS.
THIS IS FORT PIKE,
BUILT AFTER 1812 TO PROTECT NEW ORLEANS
FROM A FUTURE BRITISH ATTACK.
BUT 50 YEARS LATER, IT WASN'T ABLE TO PROTECT THE SOUTH
FROM A NORTHERN ATTACK
WHEN CAPTAIN DAVID FARRAGUT SEIZED NEW ORLEANS
ON APRIL THE 28th, 1862.
IT WAS A CRUCIAL MOMENT IN THE CIVIL WAR,
BECAUSE NEW ORLEANS WAS THE PRINCIPAL OUTLET
FOR THE SOUTH'S MOST IMPORTANT EXPORT...
...COTTON.
WITHOUT CONTROL OVER THE COTTON TRADE,
THE SOUTH'S CAUSE WAS DOOMED,
BECAUSE COTTON HAD BECOME THE ESSENTIAL INGREDIENT
IN AN AMBITIOUS SCHEME
TO BRING THE BOND MARKET INTO THE WAR.
LIKE THE ITALIAN CITY-STATES 500 YEARS BEFORE,
THE CONFEDERATE TREASURY
HAD INITIALLY RAISED MONEY FOR THE WAR
BY SELLING BONDS TO ITS OWN CITIZENS.
BUT THERE WAS A FINITE AMOUNT OF CAPITAL AVAILABLE IN THE SOUTH.
TO SURVIVE, THE CONFEDERACY LOOKED TO EUROPE
IN THE HOPE THAT THE WORLD'S GREATEST FINANCIAL DYNASTY
MIGHT HELP THEM BEAT THE NORTH,
AS THEY HAD HELPED WELLINGTON BEAT NAPOLEON.
INITIALLY THE CONFEDERACY HAD GROUNDS FOR OPTIMISM.
IN NEW YORK, THE ROTHSCHILDS' AGENT WAS A NORTHERN DEMOCRAT,
AUGUST BELMONT, WHO OPPOSED THE REPUBLICAN ABRAHAM LINCOLN
IN THE PRESIDENTIAL ELECTION OF 1860
AND WOULD DO SO AGAIN 4 YEARS LATER.
BUT STILL THE ROTHSCHILDS HESITATED.
LENDING TO THE BRITISH GOVERNMENT
TO HELP DEFEAT NAPOLEON HAD BEEN ONE THING,
BUT BUYING BONDS FROM A BUNCH
OF BREAKAWAY SOUTHERN SLAVE STATES
SEEMED A RISK TOO FAR.
THE ROTHSCHILDS DECIDED
TO STAY OUT.
YET, DESPITE THIS SETBACK,
THE CONFEDERATE GOVERNMENT HAD AN INGENIOUS TRICK
UP THEIR SLEEVES.
THE TRICK, LIKE THE SLEEVES THEMSELVES,
WAS MADE OF COTTON.
THE SOUTH'S IDEA WAS TO USE COTTON AS COLLATERAL
TO BACK ITS BONDS.
INVESTORS WOULD BE COMFORTED
TO KNOW THAT EVEN IF THE INTEREST PAYMENTS DRIED UP,
THEY COULD STILL DEMAND THEIR COTTON INSTEAD.
THE SOUTH'S AGENTS WENT TO WORK SELLING THE BONDS
IN THE FINANCIAL CENTERS OF EUROPE.
WHEN THE CONFEDERACY TRIED TO MARKET CONVENTIONAL BONDS
IN EUROPEAN FINANCIAL CENTERS LIKE AMSTERDAM'S,
INVESTORS WOULDN'T TOUCH THEM WITH A BARGE POLE.
BUT WHEN AN OBSCURE FRENCH FIRM NAMED EMILE ERLANGER AND COMPANY
OFFERED COTTON-BACKED BONDS,
IT WAS A COMPLETELY DIFFERENT STORY.
THE KEY TO THE SUCCESS OF THE ERLANGER BONDS
WAS THAT THEY COULD BE CONVERTED INTO COTTON
AT THE PRE-WAR PRICE OF 6 PENCE A POUND.
THESE COTTON BONDS FORMED THE BASIS
OF THE SOUTH'S NEW FINANCIAL STRATEGY.
IF THEY COULD RESTRICT THE SUPPLY OF COTTON,
ITS VALUE AND THE VALUE OF THE BONDS WOULD INCREASE.
AT THE SAME TIME, THE CONFEDERATES SET OUT
TO USE COTTON TO BLACKMAIL
THE MOST POWERFUL COUNTRY IN THE WORLD--BRITAIN.
Woman: THE GROWTH OF THE UNITED STATES OF AMERICA
PROVIDED LIVERPOOL WITH GROWING BONDS OF TRADE...
[CONTINUES, INDISTINCT]
...DURING THE 1800s.
Ferguson: IN 1860, THE PORT OF LIVERPOOL
WAS THE PRINCIPAL GATEWAY FOR IMPORTS OF COTTON
TO THE BRITISH TEXTILE INDUSTRY,
THEN THE MAINSTAY OF THE VICTORIAN INDUSTRIAL ECONOMY.
MORE THAN 80% OF THE COTTON CAME FROM THE SOUTHERN UNITED STATES.
NOW, THAT GAVE THE CONFEDERATE LEADERSHIP HOPE
THAT THEY HAD THE LEVERAGE TO BRING IN BRITAIN
ON THEIR SIDE IN THE CIVIL WAR.
TO RATCHET UP THE PRESSURE,
THEY DECIDED TO IMPOSE AN EMBARGO
ON ALL SHIPMENTS OF COTTON TO LIVERPOOL.
FOR A WHILE, THE SOUTH'S STRATEGY WORKED BRILLIANTLY.
COTTON PRICES SOARED.
SO DID THE VALUE OF THE CONFEDERATES'
COTTON-BACKED BONDS.
AND THE COTTON EMBARGO DEVASTATED THE BRITISH ECONOMY.
MILLS WERE FORCED TO LAY OFF WORKERS.
EVENTUALLY, IN LATE 1862,
PRODUCTION ALL BUT CEASED.
THIS COTTON MILL IN STYAL, SOUTH OF MANCHESTER,
EMPLOYED AROUND 400 WORKERS,
BUT THAT WAS JUST A FRACTION OF THE 500,000 PEOPLE EMPLOYED
BY KING COTTON ACROSS LANCASHIRE.
OBVIOUSLY, WITH NO COTTON,
THERE WAS NOTHING FOR PEOPLE TO DO.
BY THE END OF 1862,
HALF THE ENTIRE WORKFORCE OF LANCASHIRE HAD BEEN LAID OFF.
A QUARTER OF THE POPULATION WAS ON POOR RELIEF.
THEY CALLED IT "THE COTTON FAMINE,"
BUT THIS REALLY WAS A MANMADE FAMINE.
BRITAIN WAS IN THE DOLDRUMS,
AND THE SOUTH'S COTTON BONDS WERE RIDING HIGH.
YET THE SOUTH'S ABILITY TO MANIPULATE THE BOND MARKET
DEPENDED ON ONE OVERRIDING CONDITION--
THAT INVESTORS COULD BE SURE OF TAKING PHYSICAL POSSESSION
OF THE COTTON WHICH UNDERPINNED THE BONDS
IF THE SOUTH FAILED TO MAKE ITS INTEREST PAYMENTS.
AND THAT'S WHY THE FALL OF NEW ORLEANS
ON APRIL THE 28th, 1862,
WAS THE REAL TURNING POINT IN THE AMERICAN CIVIL WAR.
NOW THAT THE SOUTH'S MAIN PORT WAS IN UNION HANDS,
ANY INVESTOR WHO WANTED TO LAY HIS HANDS ON SOUTHERN COTTON
HAD TO RUN THE UNION'S FORMIDABLE NAVAL BLOCKADE.
[EXPLOSIONS]
THE CONFEDERATES HAD OVERPLAYED THEIR HAND.
THEY HAD TURNED OFF THE COTTON TAP
BUT THEN LOST THE ABILITY TO TURN IT BACK ON.
BY 1863, THE MILLS OF LANCASHIRE
HAD FOUND NEW SOURCES OF COTTON
IN CHINA, EGYPT AND INDIA,
AND INVESTORS WERE RAPIDLY LOSING FAITH
IN THE SOUTH'S COTTON-BACKED BONDS.
THE CONSEQUENCES FOR THE CONFEDERATE ECONOMY
WERE DISASTROUS.
WITH ITS DOMESTIC BOND MARKETS EXHAUSTED
AND ONLY 2 PALTRY FOREIGN LOANS,
THE CONFEDERACY REALLY HAD NO ALTERNATIVE
BUT TO PRINT PAPER DOLLARS LIKE THESE ONES HERE
IN THE LOUISIANA STATE MUSEUM
TO PAY FOR THE WAR,
IN ALL, $1.7 BILLION WORTH.
NOW, IT'S TRUE THAT THE NORTH ALSO PRINTED PAPER MONEY,
BUT BY THE END OF THE WAR,
ITS GREENBACKS WERE STILL WORTH AROUND 50 PRE-WAR CENTS,
WHEREAS A SOUTHERN GRAYBACK WAS DOWN TO JUST 1 CENT.
WHAT'S MORE, WITH MORE AND MORE OF THIS CASH
CHASING FEWER AND FEWER GOODS,
INFLATION IN THE SOUTH SIMPLY EXPLODED.
BY JANUARY 1865, THE PRICE OF SOME GOODS
WAS UP BY A FACTOR OF 90.
THE ROTHSCHILDS, MEANWHILE,
WHO HAD REFUSED TO BACK THE CONFEDERATE BONDS
AND SO HASTENED THE SOUTH'S DEMISE,
HAD AMASSED SO MUCH MONEY
THAT THEIR WEALTH HAD BECOME PROVERBIAL.
AS THE POET HEINRICH HEINE OBSERVED,
"MONEY IS THE GOD OF OUR TIME,
AND ROTHSCHILD IS HIS PROPHET."
HEINE WAS ALSO STRUCK BY THE WAY THAT FINANCIAL WEALTH,
PERSONIFIED BY THE ROTHSCHILDS,
POSED A REVOLUTIONARY CHALLENGE
TO THE OLD WEALTH OF THE EUROPEAN ARISTOCRACY.
PROPERTY OWNERSHIP WAS ONCE THE PRESERVE
OF AN ARISTOCRATIC ELITE.
ESTATES WERE PASSED DOWN FROM FATHER TO SON
ALONG WITH TITLES AND POLITICAL PRIVILEGES.
EVERYONE ELSE WAS A MERE TENANT
PAYING RENT TO THEIR LANDLORD.
EVEN THE RIGHT TO VOTE IN ELECTIONS
WAS ORIGINALLY A FUNCTION OF PROPERTY OWNERSHIP.
IN ONE RESPECT, NOT MUCH HAS CHANGED IN BRITAIN
SINCE THOSE DAYS.
OF 60 MILLION ACRES OF BRITISH LAND,
AROUND 40 MILLION ARE OWNED BY JUST 189,000 FAMILIES.
THE DIFFERENCE IS THAT THEY NO LONGER MONOPOLIZE
THE POLITICAL SYSTEM.
INDEED, THANKS TO REFORM OF THE HOUSE OF LORDS,
THE HEREDITARY PEERAGE IS BEING PHASED OUT OF PARLIAMENT.
NOW, YOU CAN EXPLAIN THE DECLINE OF THE ARISTOCRACY IN MANY WAYS,
BUT AS FAR AS I'M CONCERNED, THE MAIN DRIVER WAS FINANCE.
UNTIL THE 1830s, FORTUNE SMILED
ON THE BRITISH LAND-OWNING ELITE,
THE 30 OR SO FAMILIES
WITH GROSS ANNUAL INCOME FROM THEIR LANDS
ABOVE ££60,000 A YEAR,
ROUGHLY ££150 MILLION TODAY.
WITH SUCH VAST PROPERTY ASSETS BACKING THEM
AND INCOME FROM AGRICULTURE BOOMING, IT WAS HARD TO SEE
HOW THE ARISTOCRACY COULD FAIL TO FLOURISH.
YET, BY IGNORING A FUNDAMENTAL TRUTH ABOUT PROPERTY,
THEY ENSURED THEIR OWN DECLINE.
[GUNSHOT]
[CROWS CAWING]
LIKE MANY OF US TODAY,
THE GREAT MAGNATES SAW THE VALUE OF THEIR PROPERTY
AS A CASH COW
AND USED IT TO BORROW TO THE HILT,
OFTEN MORE THAN THE PROPERTY WAS WORTH.
WHAT THEY'D FAILED TO UNDERSTAND
IS THAT PROPERTY IS ONLY A SECURITY
TO THE PERSON WHO LENDS YOU MONEY.
AS A BORROWER, YOU STILL HAVE TO EARN THE MONEY
TO PAY BACK THE LOAN.
AND FOR THE GREAT LANDOWNERS OF VICTORIAN BRITAIN,
THAT SUDDENLY BECAME A VERY DIFFICULT THING TO DO.
NOWHERE WAS THE PAIN MORE ACUTE
THAN HERE IN THE HEART
OF RURAL BUCKINGHAMSHIRE.
THERE'S SOMETHING UNDENIABLY MAGNIFICENT
ABOUT THIS HUGE NEOCLASSICAL PALACE,
STOWE HOUSE, ARGUABLY THE GREATEST PRIVATE RESIDENCE
BUILT IN ENGLAND IN THE 18th CENTURY.
JUST LOOK AT THESE EXTRAORDINARY SCAGLIOLA PILLARS
OR THE STUNNING ELLIPTICAL PLASTER CEILING.
AND YET THERE SEEMS TO BE SOMETHING MISSING,
OR RATHER, MANY THINGS,
BECAUSE ONCE, IN EACH OF THESE ALCOVES,
THERE WAS A ROMAN STATUE.
THE EXQUISITE GEORGIAN FIREPLACES
HAVE BEEN RIPPED OUT AND REPLACED
BY BOX STANDARD ONES LIKE THIS.
WHY?
HOW DID THIS MOST STATELY OF STATELY HOMES
BECOME A MERE SHELL OF ITS FORMER SELF?
THE ANSWER IS THAT THIS HOUSE BELONGED
TO THE PRINCIPAL VICTIM
OF THE FIRST MODERN PROPERTY CRASH--
RICHARD PLANTAGENET TEMPLE-NUGENT-BRYDGES- CHANDOS-GRENVILLE,
2nd DUKE OF BUCKINGHAM.
STOWE WAS ONLY PART
OF THE DUKE'S VAST EMPIRE OF REAL ESTATE.
IN ALL, HE OWNED AROUND 67,000 ACRES
IN ENGLAND, IRELAND AND JAMAICA.
THESE IMMENSE PROPERTIES SEEMED MORE THAN ADEQUATE
TO BACK HIS EXTRAVAGANT LIFESTYLE,
AND HE SPENT MONEY AS IF IT MIGHT GO OUT OF FASHION,
ON MISTRESSES, ON ILLEGITIMATE CHILDREN,
WELL, ANYTHING THAT HE THOUGHT WAS COMPATIBLE
WITH HIS STANDING AS A DUKE OF THE REALM.
[PEACOCK CALLS]
BY 1845, THE JIG WAS UP.
GRAIN PRICES HAD BEGUN THEIR LONG SLIDE DOWNWARDS
AND SO HAD THE INCOME FROM AGRICULTURAL LAND.
RURAL PROPERTY PRICES PLUMMETED.
SUDDENLY THE ARISTOCRACY FOUND THAT THEIR BORROWINGS
HAD OUTRUN THE VALUE OF THEIR ESTATES.
THE DUKE WAS SPENDING FAR MORE THAN HIS INCOME,
AND MOST OF THAT WAS BEING ABSORBED
BY INTEREST PAYMENTS.
BUT THERE WAS TO BE ONE FINAL BOUT
OF CONSPICUOUS CONSUMPTION.
IN PREPARATION FOR A VISIT
BY QUEEN VICTORIA AND PRINCE ALBERT,
THE DUKE DECIDED TO SPLASH OUT
AND REFURBISH STOWE HOUSE FROM TOP TO BOTTOM.
FIFTEEN SALOONS WERE STUFFED FULL
OF THE MOST EXPENSIVE FURNITURE THAT MONEY COULD BUY.
THE FLOORBOARDS WERE GROANING UNDER THE WEIGHT
OF GENOA VELVET, EMBROIDERED SATIN
AND GOLD BROCADE.
WHEN THE QUEEN SAW THE RESULTS,
SHE COMMENTED RATHER WASPISHLY,
"I AM SURE I HAVE NO SUCH SPLENDID APARTMENTS
IN EITHER OF MY PALACES."
SADLY, THE COST OF THIS MEGA-MAKEOVER
PROVED TO BE THE FINAL STRAW FOR THE DUCAL FINANCES.
IN AUGUST 1848, TO THE DUKE'S HORROR,
HIS SON HAD THE ENTIRE CONTENTS OF STOWE HOUSE AUCTIONED OFF.
NOW HIS ANCESTRAL STATELY HOME WAS THROWN OPEN
FOR THRONGS OF BARGAIN HUNTERS
TO BID FOR THE SILVER, THE WINE, THE CHINA.
TODAY, STOWE IS A PRIVATE BOARDING SCHOOL.
IT'S A POIGNANT SYMBOL
OF THE TRANSIENCE OF LANDED WEALTH.
IN THE MODERN WORLD, IT TURNED OUT,
A REGULAR JOB AND A STEADY INCOME
MATTERED MORE THAN AN INHERITED TITLE,
NO MATTER HOW MANY ACRES YOU OWNED.
DIVORCED BY HIS LONG-SUFFERING AND MUCH-BETRAYED SCOTTISH WIFE,
WHOSE ENTIRE WARDROBE HAD BEEN SEIZED
BY SHERIFF'S OFFICERS IN LONDON,
THE DUKE WAS FINALLY FORCED TO RELINQUISH STOWE
AND MOVE INTO RENTED ACCOMMODATION.
HE EKED OUT HIS DAYS AT HIS CLUB, THE CARLTON,
WRITING A SUCCESSION OF HIGHLY UNRELIABLE MEMOIRS
AND INCORRIGIBLY CHASING ACTRESSES
AND OTHER MEN'S WIVES.
THE FALL OF THE DUKE OF BUCKINGHAM
WAS A KIND OF HARBINGER FOR A NEW DEMOCRATIC AGE
IN WHICH EVERY ADULT WOULD BE GIVEN THE VOTE
WHETHER THEY OWNED A STATELY HOME
OR PAID RENT FOR A HUMBLE FLAT.
AS ARISTOCRATIC FORTUNES FROM AGRICULTURE DECLINED,
SO THE FRANCHISE WAS WIDENED.
YET, THE RISE OF NEW MONEY IN PLACE OF OLD LANDED WEALTH
WAS ONLY ONE OF THE CHANGES BROUGHT ABOUT BY FINANCE
IN THE 19th CENTURY.
ALMOST AS IMPORTANT WAS THE DRAMATIC OVERSEAS EXPANSION
OF THE EUROPEAN EMPIRES.
IT USED TO BE SAID THAT EMERGING MARKETS
WERE PLACES WHERE THEY HAVE EMERGENCIES.
INVESTING IN FARAWAY PLACES CAN MAKE YOU RICH,
BUT WHEN THINGS GO WRONG,
IT'S OFTEN BEEN A FAST TRACK TO FINANCIAL RUIN.
THAT'S WHY MANY OF TODAY'S
APPARENTLY UNSTOPPABLE EMERGING MARKETS
ARE REALLY RE-EMERGING MARKETS.
THESE DAYS, OF COURSE,
THE ULTIMATE RE-EMERGING MARKET IS CHINA.
TO TALK TO SOME PEOPLE, THERE'S SIMPLY NO LIMIT
TO THE AMOUNT OF MONEY TO BE MADE HERE.
AND IT'S CERTAINLY TRUE THAT OVER THE PAST 20 YEARS,
THE MAINLAND HAS FOLLOWED
THE EXAMPLE SET HERE IN HONG KONG AND BOOMED.
AND YET, THIS ISN'T THE FIRST TIME
THAT FOREIGN INVESTORS HAVE PILED INTO CHINA
AIMING TO MAKE MEGABUCKS
FROM THE WORLD'S MOST POPULOUS NATION,
AND THE LAST TIME, THOSE FOREIGN INVESTORS
LOST ALMOST AS MANY SHIRTS AS THE LOCAL TAILORS HERE
CAN STITCH TOGETHER IN A WEEK.
THE KEY PROBLEM WITH OVERSEAS INVESTMENT,
THEN AS NOW,
IS THAT IT'S HARD FOR AN INVESTOR IN LONDON OR NEW YORK
TO SEE WHAT A FOREIGN GOVERNMENT OR COMPANY IS UP TO
WHEN THEY'RE AN OCEAN OR MORE APART.
IF THE FOREIGNER BORROWER DECIDES TO FAULT ON ITS DEBTS,
WHAT'S AN INVESTOR TO DO?
THE ANSWER BEFORE 1914 WAS BRUTALLY SIMPLE
BUT EFFECTIVE.
GET YOUR GOVERNMENT TO SEND IN THE NAVY.
BY GUARANTEEING EUROPEAN POLITICAL CONTROL,
GUNBOAT DIPLOMACY PROVIDED REASSURANCE
FOR BRITISH INVESTORS EVEN AT THE REMOTEST EXTREMITIES
OF THE WORLD ECONOMY.
THE ROYAL NAVY PROVIDED THE FIREPOWER
THAT UNDERWROTE THE FIRST AGE OF GLOBALIZATION
AND ITS PIONEERS, LIKE WILLIAM JARDINE
AND JAMES MATHESON.
JARDINE AND MATHESON WERE BUCCANEERING SCOTS
WHO'D SET UP A TRADING COMPANY
IN THE SOUTHERN CHINESE PORT OF CANTON IN 1832.
NOT TO PUT TOO FINE A POINT ON IT,
THEIR MOST PROFITABLE LINE OF BUSINESS WAS DRUG DEALING.
THEY SHIPPED OPIUM
PRODUCED UNDER BRITISH GOVERNMENT CONTROL IN INDIA
TO CHINA'S POPULATION OF ADDICTS,
A TRADE THAT CHINA'S EMPEROR HAD BANNED.
ON MARCH THE 10th, 1839,
AN IMPERIAL OFFICIAL NAMED LIN ZEXU
ARRIVED IN CANTON UNDER ORDERS FROM THE EMPEROR
TO STAMP OUT THE TRADE.
HE BESIEGED THE BRITISH OPIUM WAREHOUSES,
BLOCKING ANY FURTHER IMPORTS.
20,000 CHESTS OF OPIUM VALUED AT ££2 MILLION
WERE CONFISCATED
AND LITERALLY THROWN IN THE SEA.
FACED WITH CATASTROPHIC LOSSES,
JARDINE HURRIED TO LONDON
TO LOBBY THE BRITISH GOVERNMENT
TO SEND A GUNBOAT.
WELL, JARDINE GOT HIS WISH GRANTED.
ON AUGUST THE 23rd, 1840,
BRITISH GUNSHIPS LANDED HERE ON HONG KONG ISLAND.
THE QING EMPIRE WAS ABOUT TO FEEL THE FULL FORCE
OF HISTORY'S MOST SUCCESSFUL NARCO STATE.
AS JARDINE HAD PREDICTED,
THE ROYAL NAVY MADE SHORT WORK OF THE CHINESE DEFENSES.
WITH SOUTHWESTERN CHINA UNDER BRITISH CONTROL,
THE OPIUM TRADE WAS GIVEN FREE REIGN.
DRUG ADDICTION EXPLODED.
LARGE TRACTS OF THE COUNTRY SLID
INTO REBELLION AND ANARCHY.
BUT FOR JARDINE, MATHESON,
WITH THEIR HEAD OFFICE NOW ESTABLISHED IN HONG KONG,
THE GLORY DAYS OF VICTORIAN GLOBALIZATION
HAD ARRIVED.
BY 1900, THE FIRM HAD DIVERSIFIED
INTO MORE RESPECTABLE LINES OF BUSINESS.
IT HAD ITS OWN BREWERIES, ITS OWN COTTON MILLS,
ITS OWN INSURANCE COMPANY
AND ITS OWN RAILWAYS,
LIKE THE ONE THEY BUILT FROM KOWLOON TO CANTON.
BACK IN 1913, AN INVESTOR IN LONDON
HAD AN EXTRAORDINARY RANGE OF FOREIGN OPPORTUNITIES,
AND NOTHING ILLUSTRATES THAT BETTER
THAN THE LEDGERS OF N.M. ROTHSCHILD AND SONS.
JUST A SINGLE PAGE FROM 1913
LISTS NO FEWER THAN 20 DIFFERENT FOREIGN SECURITIES,
INCLUDING BONDS ISSUED BY CHILE, EGYPT,
GERMANY, HUNGARY, ITALY,
NOT FORGETTING 11 DIFFERENT RAILWAY COMPANIES,
INCLUDING 4 FROM ARGENTINA, 2 FROM CANADA, AND DOWN HERE,
THE GOOD OLD KOWLOON TO CANTON RAILWAY LINE.
FOR THE FIRST TIME IN HISTORY,
THE WORLD ECONOMY WAS TRULY UNITED
BY A COMBINATION OF LOW TRADE
AND HIGH FINANCE.
YET, THIS FIRST ERA OF FINANCIAL GLOBALIZATION
WAS TO BE BROUGHT TO A VIOLENT HALT
BY THE WORLD'S FIRST TRULY GLOBAL CONFLICT.
ON JUNE THE 28th, 1914,
THE HEIR TO THE AUSTRIAN THRONE, THE ARCHDUKE FRANZ FERDINAND,
WAS ASSASSINATED IN THE BOSNIAN CAPITAL, SARAJEVO.
INITIALLY, FINANCIAL MARKETS SHRUGGED OFF THE NEWS
AS JUST ANOTHER BOUT OF BALKAN BLOODSHED.
IN REALITY, THE ASSASSINATION HAD SPARKED OFF A CHAIN REACTION
IN THE WORLD'S FINANCIAL MARKETS.
AS INVESTORS BELATEDLY GRASPED THE LIKELIHOOD
OF A FULL-SCALE EUROPEAN WAR,
LIQUIDITY--THE ABILITY TO BORROW MONEY OR SELL ASSETS--
WAS SUCKED OUT OF THE WORLD ECONOMY
AS IF THE BOTTOM HAD DROPPED OUT OF A BATH.
THE RESULTING DISRUPTION TO INTERNATIONAL FINANCE
SHATTERED GLOBALIZATION.
IT'S ABSOLUTELY FASCINATING TO FOLLOW THE OUTBREAK
OF THE FIRST WORLD WAR
THROUGH THE FINANCIAL PAGES OF "THE LONDON TIMES."
IT WASN'T UNTIL JULY THE 22nd, 1914,
THAT ANYBODY APPRECIATED THAT THE ASSASSINATION
OF THE ARCHDUKE FRANZ FERDINAND
IN SARAJEVO 3 WEEKS BEFORE
MIGHT HAVE SOME FINANCIAL REPERCUSSIONS.
JUST 10 DAYS LATER, ON AUGUST THE 1st, 1914,
"THE TIMES" HAD TO REPORT
THE CLOSURE OF THE STOCK EXCHANGE,
AND CLOSED IT REMAINED UNTIL JANUARY THE 4th, 1915.
WHY WERE INVESTORS SO SEEMINGLY OBLIVIOUS
TO ARMAGEDDON JUST DAYS BEFORE THE OUTBREAK OF WORLD WAR?
WELL, THE ANSWER IS THAT A COMBINATION
OF FINANCIAL INNOVATION AND GLOBAL INTEGRATION
HAD MADE THE WORLD SEEM REASSURINGLY SAFE.
THE LIGHTS IN FINANCIAL MARKETS WERE FLASHING GREEN, NOT RED,
UNTIL THE VERY EVE OF DESTRUCTION.
THERE MAY BE A LESSON HERE FOR OUR TIME, TOO.
FINANCIAL GLOBALIZATION MARK I
TOOK A GENERATION TO ENGINEER,
BUT IT WAS BLOWN APART IN A MATTER OF DAYS,
AND IT WOULD TAKE MORE THAN A GENERATION
TO REPAIR THE DAMAGE DONE BY THE GUNS OF AUGUST 1914.
SO IS NOTHING WE CAN DO TO PROTECT OURSELVES
FROM THE THREAT OF FINANCIAL DISASTER?
NEXT TIME ON "THE ASCENT OF MONEY,"
WE'LL SEE THAT FINANCE IS AS MUCH ABOUT RISK
AS IT IS ABOUT RETURN.
THE BIG QUESTION IS, ARE YOU INSURED,
OR ARE YOU HEDGED?
NEXT TIME ON "THE ASCENT OF MONEY,"
SAVING UP FOR THE PROVERBIAL RAINY DAY
IS THE FIRST PRINCIPLE OF INSURANCE.
HOW SHOULD WE DEAL WITH THE RISKS AND UNCERTAINTIES
OF THE FUTURE?
THIS WALL OF WATER
HAD TO BE MAYBE 15 TO 20 FEET TALL.
AND MOVING FAST.
MOVING QUICKLY, JUST COMING DOWN THIS BOULEVARD
AND JUST TAKING EVERYTHING WITH IT AS IT WOULD COME.
THE WORLD CAN BE A DANGEROUS PLACE.
ARE YOU INSURED?
"THE ASCENT OF MONEY--
A FINANCIAL HISTORY OF THE WORLD."
TO FIND OUT MORE ABOUT "THE ASCENT OF MONEY"
AND WATCH THE FILM, VISIT...
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WAS PROVIDED BY...
MY IDEA CREATED JOBS Woman, voice-over: MY IDEA CREATED JOBS FOR 2,000 PEOPLE.
Man, voice-over: MY IDEA WILL BRING RENEWABLE ENERGY TO EVERYONE.
Announcer: AN ENTREPRENEUR WITH AN IDEA CAN CHANGE THE WORLD.
I HAVE AN IDEA.
KAUFFMAN: THE FOUNDATION OF ENTREPRENEURSHIP.
T. ROWE PRICE IS PROUD TO SPONSOR "THE ASCENT OF MONEY," BECAUSE UNDERSTANDING THE CONNECTIONS
OF A COMPLEX GLOBAL ECONOMY
IS IMPORTANT TO US ALL.
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