Making End$ Meet - Book Review, Rothschild History

Book Review
The World's Banker:
The History of the House of Rothschild
Published 1998 by Niall Ferguson
Reviewed 2021 by Kris Freeberg

Contact
Niall Ferguson's web site

I became interested in this book, and in the story of the Rothschild family, because they're one of the first and most successful family offices in the world.

The Family Office is the remedy to the "Shirtsleeves to Shirtsleeves in Three Generations" problem. I've learned it's the key to helping professional athletes keep and manage their wealth after their short but stellar careers. That's the conclusion of ESPN's "Broke" documentary:

Sections I & II: Fathers and Sons, Brothers

Chapters 1-11

As Jews who were confined to a ghetto, they began unable to own real estate. Instead, they began as merchants of textiles ("schmattas") and antiques ("tchotchkes"), then progressed to become merchant bankers.
Later, they were able to buy real estate, starting with a garden (Amchel's Garden, Chapter 6). But unlike many who swear by real estate as a wealth building vehicle, their means of wealth building continued to be a variety of debt instruments.
They invented the international bond market (gold is heavy, paper is light).
Robust written correspondence between themselves and with their clientele was the lubricant of their business. While wealth is measured with numbers - buy low, sell high - I am struck by the importance of the written word to them. Their grammar was excellent, their vocabulary impressive.
Tone mattered a lot to them. If a brother - say, Nathan - wrote to another brother or a nephew in a harsh or hurtful tone, the recipient felt it and objected. Their business was not cold, calculating, and quantitative. It was emotional. Language and feelings mattered. They could make or break a deal.
They worked hard: eleven hours per day, six days per week. Some complained of the complexity, of not having a life. It was all work. Amschel wrote, "The highest decoration . . . [is] a quiet life, God willing" (216). Eldest brother Nathan died unexpectedly from complications arising from a posterior wound. He accumulated vast wealth for his posterity and died before retirement age.
As their wealth grew, they had to deal with celebrity. It was a burden.
Of course, they had to deal with antisemitism, too.
Their accounting practices were initially "slap dash" and haphazard, but they necessarily improved over time. The spine of the business consisted always of letters and ledgers. Eventually, good bookkeeping became the focus of apprenticeship (299).
They were terrific networkers. They understood the importance of relationships. Money comes from people.
The brothers had formal written partnership agreements with each other that they updated every few years. They discouraged litigation by agreeing that, in the event of litigation between heirs, a third of the deceased's capital would be forfeit and donated to the poor (285).
They had communication tricks that gave them a competitive edge like color-coded envelopes, carrier pigeons, private couriers, and Judendeutch, a kind of German written with Hebrew characters - in effect, a secret code.
Since peace presents a more favorable investment climate than war, they preferred it and, most of the time, used their financial leverage with governments to encourage it.
They were sometimes in debt themselves, and sometimes uncertain or confused about their own financial position. Back in the day, accounting was not prompt, especially with geographically far-flung deals and interests like theirs.
Re: the Rothschild attitude toward snobbery, we have the "two chairs" joke (page 210): "An eminent visitor is shown into Rothschild's office; without looking up from his desk, Rothschild casually invites him to 'take a chair.' 'Do you realize whom you are addressing?' exclaims the affronted dignitary. Rothschild still does not look up: 'So take two chairs.'"
They positioned themselves to benefit from human foibles. "There is some money to be made . . . We must take things as they are and profit from the folly of the world" (268). For example the tendency to live beyond one's means presents an [albeit risky] opportunity to lenders. But they were also exasperated by the tendencies of countries to make war with one another, or by the caprice of the general public. James once complained to Nathan, " . . . the people never know what they want" (239).
They really did retain their earnings in the family business, taking modest compensation for themselves, while their competitors took distributions that were comparatively excessive.
Underlying goods and services in which they invested included cotton, tobacco, sugar, copper, mercury, iron, wool, wine, insurance, and railroads.
Classic Rothschild advice: "Listen to everything and say little in reply" (297).
As Jews, they were often suspected of swindling, fraud, and theft; in reality, they were more often the victims of it. "For what more tempting target did the nineteenth century have to offer its aspirant crooks than the world's bankers" (308)?
In the 1840s, during an agricultural crisis, they bought land when it was at the bottom of the market, employing an ROI criterion of 3.5%. In the 1850s, they built mansions on it, primarily to inspire awe and command respect. These mansions served as centers for corporate hospitality, as hotels, and as art galleries. Once the buildings were built, they concentrated in the 1850s-1860s on cultivating the surrounding gardens.
Eldest brother Nathan died in 1836 from complications arising from a boil on his posterior (317). He did not survive to enjoy the fruits of his labors. The richest man in the world, able to afford the best medical care in the world, wasn't able to get care good enough to cure such a simple affliction. Though the richest man in the world, because of this I think of him as "Poor Nathan."
In the 1840s, during an agricultural crisis, they bought land when it was at the bottom of the market, employing an ROI criterion of 3.5%. In the 1850s, they built mansions on it, primarily to inspire awe and command respect. These mansions served as centers for corporate hospitality, as hotels, and as art galleries. Once the buildings were built, they concentrated in the 1850s-1860s on cultivating the surrounding gardens.

Section III: Uncles and Nephews

Chapter 12: Love and Debt

The Rothschilds used endogamy to keep their fortune in the family (341). I found this aspect of their way of life surreal and difficult to read.
After Nathan's death, the four surviving brothers and their families invested in real estate (gilded Renaissance style mansions and estates), art (especially Dutch), social events (an early kind of corporate hospitality), hunting and horses, patronage of musicians, poets, and authors; and piano lessons (". . . the piano was perhaps the nearest thing the nineteenth century had to the television, with the difference that it required skill to operate") (363). They formed interesting relationships with the musicians and authors.

Chapter 13: Quicksilver and Hickory (1834-1839)

From trial and error investing in Portugal and Spain (Iberia), Brazil and Cuba, they learned that commodities like mercury, copper, and tobacco proved to be the best kind of security for loans to unstable states (384). Of Portugal James wrote, ". . . we are dealing here with thoroughly disreputable people and with a minster who speculates on the demise of his own country" (377).
They did not invest in the United States because its central banking system at the time (The Bank of the United States, or BUS), opposed as it was by then President Andrew Jackson, failed. Another obstacle to their involvement was American traditional suspicion of foreign and Jewish banks (391).

Chapter 14: Between Retrenchment and Rearmament (1840)

With respect to government borrowers, the Rothschild's optimal lending position was "armed peace." Governments would borrow from them to prepare for war, but wouldn't actually wage it (425). They had strong opinions about certain governments. Belgians were "asses" (410) while Turks were shameful for their double-dealing, and detestable (416).

Chapter 15: 'Satan Harnessed': Playing at Railways (1830-1846)

In 1830-1846, they got involved in railway development across Europe, making them much more visible to the general public than they had been as lenders to governments. With both lives and money at stake, it was a hazardous business. There were accidents that aroused public scorn, suspicion, accusations, and of course antisemitism (Ch. 15, 429-460).

Chapter 16: 1848

"The most widespread revolutionary wave in European history" occurred in 1848; and as international bankers, the Rothschilds were at the center of the fray. Although family members held a variety of opinions and views about it, they managed to hold the family together, and that unity was a key to their survival. Another key was negotiating skill using a "too big to fail" argument to reschedule payments.
They were vulnerable to assault, vandalism, and confiscation of property, and the value of government securities they held dropped 22% - 62%, rendering three of the five houses insolvent and confused, each house thinking the other owed it money, none in a position to repay (489).
Trauma from the revolutions rattled intergenerational trust. The London partners became selective about which letters they'd share with their uncles, compromising what had been the life blood of their partnerships (499).
Family unity outlasted the revolutions' various internal differences over ideology, governing models, economic systems, and language.
They didn't mince words about what was going on, sprinkling their internal correspondences about their adversaries with profanity.
During the turmoil and dissent that followed the 1848 revolutions, James was most instrumental in holding the family together: "It is easier to break up a thing than to put it back together again" (514).
Owing to disunity within the Jewish community and of course with Christian neighbors, the Rothschilds gave expression to their religious impulses mainly through charitable work. Initially they handled it on their own, reading letters themselves and copying them verbatim into a book. After a while philanthropy became an overwhelming chore that they delegated to the women in the family (522-523). They donated all five mansions in the below video to charity.

Chapter 17: Charlotte's Dream (1849-1858)

They worked for Jewish emancipation. As Jews they couldn't swear the customary oath of Parliamentary office that included the phrase " . . . upon the true faith of a Christian." Participation in Christian rites was also an issue in education, as universities required chapel attendance. By 1858, with Benjamin Disraeli's help (an ethnic Jew who had converted to Christianity and was therefore a member of Parliament), Lionel gained membership in Parliament.

Chapter 18: The Era of Mobility (1849-1858)

This chapter's title refers to railroads, the telegraph, fluid and changing government structures (especially in France), increased precious metals production occasioned by discoveries of gold in California and Australia (578), and experiments like the Crédit Mobilier (a sort of French bank) to make capital more mobile, which presented competition to private bankers like the Rothschilds.
The Crédit Mobilier, which ultimately failed in scandal, was promoted by the Periere brothers using ". . . their old Saint-Simonian rhetoric about the collective benefits of industrial investments, even as they speculated in rentes [French bonds] and railway shares and pocketed the profits for themselves" (565).
Throughout this book so far, I have been struck by how ignorant people in powerful positions were about Economics, focusing instead on ego, titles, status, prestige, outward show like mansions, uniforms and medals; and of course war, which only worsened economic matters for them, as war inevitably disrupts productivity, bloats expenses, and increases debt. The Rothschilds were dismayed by this, and were depended upon by them to explain economic events. One place where this dismay is summarized is on page 579: " . . . even the heads of government are grossly ignorant of their business and upon more than one occasion I [Rothschild agent Jeffrey Cullen] have been sent [for by] the Treasury to explain some trifling matter of monetary affairs."
With respect to precious metals and the growing supply thereof at the time (1849-1858), the Rothschilds did not appear to ascribe any importance to a relationship between them and the money supply. A precious metal standard for currency did not seem to matter to them, as they dealt in multiple national currencies, and learned to profit from exchange rate fluctuations. What did matter were things like demand (for anything), productivity, and infrastructure like railroads that facilitated it. As far as precious metals are concerned, rather than hoarding them for themselves, they focused on refining them (which depended upon other commodities like mercury and sulphuric acid) and conveying them to those who wanted them.
The Crimean War broke out in 1854. Reading about its sickening absurdity led me to understand why some people abandon religion altogether in disgust. While it had a depressing effect on value of debt of the countries involved, it also increased military spending and consequential borrowing, even for noncombatant but precautionary countries like Austria (585). The Rothschilds figured out how to position themselves to survive.
The Papacy had a ". . . record of insolvency and instability" (590). Nonetheless, the Rothschilds lent to the Pope and used their position as lender to work for Jewish emancipation.
Aside from the Perieres' own corruption, advantages that gave the Rothschilds the upper hand in their competition with them included international reach, networking and partnerships, and intel. Intangible assets like news, relationships, and knowhow were of vital importance to them. Tangible assets were consequences thereof.
Other observations from this chapter and the whole book so far: I'm struck by how the Rothschilds did not have a grand plan; but they did have a plan in their periodic partnership agreements about how they'd share whatever they got. They were opportunistic and pragmatic. They couldn't control circumstances, but they could control their own positions. They figured out how to position themselves favorably in most situations. One might say they learned to master The Art of Positioning.
I'm also struck by how governments tended to rob Peter to pay Paul. The Rothschilds understood this tendency, and navigated it to their own advantage.

Chapter 19: Nationalism and the Multinational (1859-1863)

Countries on both sides of the Atlantic sought Federalism (603). The American experience of this quest for Federalism was the Civil War.
While the Rothschilds didn't like war, the fact remains that warring countries suffer deficits and need to borrow. Consequently 1852-1882 was their most profitable period.
During this time, they had more competition from joint-stock banks. Debtor countries had more borrowing options.
National borders became fluid. They viewed the map of Europe more in terms of railways than of borders.
The Vatican was chronically insolvent. The Rothschilds became reluctant to lend to Italy, describing Italians as rabble, asses, imbeciles, and rogues (614).
Spain was worse than Italy, with a longer history of insolvency. In dealing with both countries (and others like them), the Rothschilds focused on underlying assets (collateral) like railroads and precious metals.
They did what they could to pacify relations between England and France. For comic relief when tensions ran high, they resorted to puns in French: "L'Empire, c'est la baisse" (vs. "la paix") (623-625). ("Baisse" means falling market. "Paix" means peace. It was a sardonic way of throwing a little shade on Napoleon's regime.)
America was so disunited by the Civil War that the Rothschilds focused on relating to the central government (versus states), lobbying President Grant for the chance to assist in the stabilization of federal finances (630).
French, British, and Spanish expeditions to Mexico proved to be wasteful fiascos. The Rothschilds had high but dashed hopes for prospects in Mexico; but on the bright side they viewed it as a distraction for France from central Europe, where more of their interests were. With France focused on and committed to Mexico, it was less likely to make trouble in Europe.
They believed the French harbored a frivolous attitude about foreign and domestic policy, an attitude which resulted in malaise and uncertainty about the future (632).

Chapter 20: Blood and Silver (1863-1867)

As I read this chapter, I wondered at Prussia's obnoxious military aggression, how it may have set the stage for both Germany's and America's, insofar as Baron Von Steuben, the man who trained the Continental Army and wrote its field manual, was also Prussian.
The mood throughout this chapter is Rothschild exasperation with the capricious, impulsive, belligerent, bellicose, irascible, and dishonorable (in the sense of plundering and violating treaties) behavior of the leaders of France, Austria, Prussia, Germany, Italy, and Denmark. The Rothschilds wanted peace and tried to keep it; but in the case of the war of 1866 between Prussia and Austria, they couldn't.
Countries were spending beyond their means and needed the borrow. The Rothschild struggle was to lend without financing war directly. In their loan agreements they would normally insert the ". . . clause that the loan should be conditional on peace being maintained" (647). " . . . we cannot give money to make war" (654).
I also marveled at Rothschild restraint. They could have raised their own army or security force. They had the money to afford it, whereas the countries who wanted to borrow from them to finance theirs, obviously didn't. For a family in genuine need of physical security, I am impressed by their nonviolence.
Amid the vicissitudes of war, their approach was pragmatic. "In a war there is money to be made from having money." "[James' first principle was] not peace at any price, but profits under any circumstance, peace or no peace" (664).
To the victor go the spoils. Prussia established a pattern of "piratical" plunder (666), thereby managing to keep its finances under control and maintain independence from the Rothschilds (668).

Chapter 21: Bonds and Iron (1867-1870)

On 11/15/1868 James, the last of Mayer Amschel's five sons, died. His parting remarks in his will were about fraternal unity which along with ". . . love of work and practice of probity, [had] been the source of [their] prosperity and public reputation" (672). He also advised them to keep some of their property in real estate and liquid securities, and to keep their religion (673).
Regarding the political situation in France, in 1867 James wrote, ". . . unfortunately [a country's] finances cannot progress without liberties, but [they progress] even less with too many . . . . unfortunately France is a country of vanity, where an orator can address the house to show off his talent in pretty speeches without thinking about the real interest of the nation" (676).
During this period, patterns of capital formation in Europe became more regional. Joint-stock banks proliferated. ". . . international financial markets grew larger, more competitive, and better integrated . . . " (675).
In Spain, site of their valuable Almadén mercury mines, there was a revolution in 1868, the outcome of which was the seating of Italian Prince Amadeo of Savoy. Meanwhile in Italy there was conflict between the state and the Papacy over sale of church lands which, of course, required financing, but which the Rothschilds, as Jews, avoided (685-687).
Regionalization of capital formation, combined with political pressures, led to friction and a "war of words" between the Rothschild houses. Communication between them began to break down (688-692).
Pogroms broke out in Rumania. Consequently the Rothschilds became more politically active. In February 1867, Mayer Carl was elected almost unanimously (5,300 / 5,600 votes) as a member of parliament in the North German Confederation (694), becoming a colleague of Prussia's Bismark (694-697). He got involved in the finances of both Prussia and other German states (700).
The Rothschilds were apprehensive about doing business with Russia. When they tried, they felt " . . . like mustard [arriving] after dinner is over . . ." (701). German bankers, however, got involved. Much of this lending had to do with the construction of Russian railroads, hence the chapter title "Bonds and Iron."

Section IV: Cousins

Chapter 22: Reich, Republic, Rentes (1870-1873)

During the Franco-Prussian war of 1870-71 over Austria, which the French lost, the Rothschilds found themselves on both sides of it, with Mayer Carl in Frankfurt and Alphonse in Paris.
Financially, the outcome was that France was obliged to pay a tribute, or indemnity, of 5 billion francs to Germany.
"Rente" is a French bond, and/or interest income from it. The French sold rentes to pay their tribute. The Rothschilds helped them do it.
" . . . the payment of the German indemnity remains one of the great financial feats of modern times" (722).
They paid it in only two years. Payments accounted for 8% of gross domestic product in the first year, and 13% in the second. Their motive for such speed was to end Prussian occupation.
Upon the fall of France, Prussians occupied the Rothschilds' mansion at Ferrières but did little damage, just drank a lot of the wine and soiled a few carpets.
One very sad outcome of France's defeat was the subsequent chaos and revolution in Paris that culminated in the Bloody Week of May 21 - 28, 1871, in which 20,000 people died.
Alphonse was determined to exclude German bankers, including the Frankfurt House, from financing the tribute.
A key point in his negotiation was that the French set their own payment schedule (726).
Reading about the far left Paris Commune reminded me on a smaller scale of the Chaz/Chop incident in Seattle in the summer of 2020, and left me feeling grateful that it ended much more peaceably.
A striking irony about how the political tide in France had turned in less than 80 years: "This time, however, the Terror (referring to The Reign of Terror of 1793-94) was inflicted on the revolutionaries rather than by them" (727).
The Rothschilds profited from both commissions on rente transactions, and from capital gains, buying low and selling high themselves.
Arranging the rentes took a lot of exasperating work. Alphonse wrote, "I confess it's a veritable muddle" (731).
In hindsight, the French regime could have raised 5 billion francs in war bonds and perhaps have won the war; but because of their own political dysfunction, waited to raise the money until after they had lost (735).
The Germans didn't know what to do with their tribute money. Alphonse wrote, "Where then are the 5 milliards we have paid to these gentlemen? It is said no profit derives from ill-gotten wealth" (735).
In Frankfurt, Mayer Carl agreed. He didn't like the proliferation of joint stock banks in Germany, and he observed also how the banks didn't know how or where to invest. He regarded this proliferation as a "mania", a "nuisance", and "rubbish."
Counter-intuitively, the glut of cash in the German economy resulted in inflation and economic collapse in 1873. More money isn't always a good thing.

Chapter 23: 'The Caucasian Royal Family'

The fourth generation of Rothschilds (in all, forty-four children) showed signs of slipping into decadence and complacency.
They became distracted by things like higher education for its own sake, art collections, horse racing, and building & adorning lavish houses ("from ascetic to aesthete"), to include a private circus ring, bowling alley, ice skating rink, indoor swimming pool, and Indian pavilion (749).
Natty, Alphonse, and Albert were the effective ones who held things together (755).
They closed the Naples house in 1863.
They began taking dividends, causing their capital balance to level out at an average of 5M - 6M nominal pounds for more than four decades (1860s - 1910s).
They didn't wait to pay off debt to distribute dividends. Their debt to asset ratio during these four decades ranged 50% - 75%. Capital peaked in 1904 at 8.4M pounds (25.5M in assets versus 17.M in liabilities, a debt to asset ratio of 67%). By 1918 it was 3.6M (12.7M, 9.1M, and 71% respectively).
As relations between the houses deteriorated, partnership agreement renewals became more frequent, settling on an annual frequency. Taxation on inheritances also necessitated more frequent and regular accounting.
They had trouble keeping talent because their competitors, joint stock banks, offered more opportunities for upward mobility.
Employing fellow Jews presented its own challenges. In 1873 Mayer Carl wrote, "Jews with their terrible ambition are the worst employees" (761).
They ended their practice of Endogamy because their attitude toward society's elite changed, from superiority to a desire to belong.
In 1885, after much opposition from Queen Victoria, Natty was elevated to the peerage (767).

Chapter 24: Jewish Questions

They broadened their marriage pool to include other wealthy Jews of comparable social standing.
Their practice of religion was mainly practical: organization and function of the Jewish community (778). They worked for Jewish unity, and enjoyed partial success.
Anti-Semitic publication was greatest in France because Jews had enjoyed the greatest emancipation there, and therefore also experienced the greatest resistance, by way of reaction.
The public lacked a proper appreciation for the value of financial infrastructure. Two popular metaphors among anti-Semites were the parasite or tapeworm: the notion that financial services, lending, foreign currency exchange, brokering and so on were worthless, and that anyone who was paid to perform such services was essentially stealing.
The Rothschilds' neighbors resented them but liked their wealth. It was ordinary for dinner party guests to entertain anti-Semitic attitudes and views before and after the event, but wear a friendly face during it (788).
They were targets of violence and sometimes considered dueling on "the field of honor" to face their assailants. However they realized they couldn't duel with every anti-Semite (792).
Sometimes they blamed anti-Semitism on other Jews. Sometimes their assailants were Jews themselves.
The long-standing family view about how best to deflect or mitigate anti-Jewish feelings was through philanthropy (793), focusing on health care, education, and affordable housing.
Europe became crowded with Jewish immigrants. The Rothschilds got involved in helping them settle or relocate, including relocating to Palestine; but this should not be viewed as Zionism. Again, they were quite practical.
In fact, they saw Zionism as a threat to their own position because it implied that they should pull up stakes, abandon their property and positions, and move to Palestine themselves.

Chapter 25: 'On the Side of Imperialism' (1874-1885)

This chapter addresses another aspect of anti-Semitic paranoid conspiracy theories: that Jewish international bankers are inherently imperialist.
It presents highly detailed evidence to the contrary. To play it safe, the Rothschilds often shied away from imperialist investment opportunities. Their profit margins were much lower than their competitors', but their longevity was much greater (809).
They did invest heavily in British government securities, but that is because they viewed them as relatively safe and secure, not necessarily imperial. They avoided getting enmeshed in imperial politics.
Natty's feelings about the risk of investing in private equity (businesses): "To say 'Yes' is like putting your finger in a machine: the whirring wheels may drag your whole body in after the finger" (815).
They only got involved in politics if bond performance were jeopardized by political instability in the borrowing country (816).
The most conspicuous example of supposedly imperialist investing was Egypt and the Suez Canal, about which the book delves into great detail, in particular about the Middle East debt crisis (817-826).
"Far from promoting Middle Eastern economic development, however, the hapless bondholders were merely bankrolling chronically profligate governments" (819). The Rothschilds saw this hazard for what it was, and avoided it most of the time.
However, they served as lenders of last resort to help the British government pay for the Suez Canal after Turkey declared bankruptcy (820-826).
Perception of the Rothschilds' involvement in "imperialism" was influenced by shifts in government leadership. In 1880, William Ewart Gladstone succeeded Benjamin Disraeli as Prime Minister of England, a position he held altogether for four different terms. His 1880 election was the second. A controversial figure, the Rothschilds viewed him as arrogant, passionate, and irritable (832).
By comparison, the belligerent Bismark now seemed tame. "Bismark, once the bane of financial stability, became in the 1880s its apparent guarantor" (833). Gladstone attacked Alexandria militarily in 1882.
At the same time, French competitor Union Générale crashed. Convicted fraudster and former Rothschild employee Paul Eugène Bontoux fled to Spain and from there fomented anti-Semitic gossip, presumably to divert attention from his own manifest guilt (835). This event eliminated an option for debtor nations, creating the appearance of Rothschild monopolization/domination when in fact it was due to U.G.'s own internal mismanagement and corruption.
Egypt was a sticky problem for England. Between 1882 and 1922, Britain promised and failed to extricate itself from Egypt 66 times (839).
As it turns out, Gladstone had invested personally in the Ottoman Egyptian Tribute Loan, enjoying capital gain of more than 130% between 1875 and 1891 (840), perhaps accounting for why he described Egyptian finance as "a holy subject" (836).
"It had been heroic hypocrisy on his [Gladstone's] part to denounce the purchase of the Suez Canal shares by Disraeli on behalf of the government when he was making one of the most profitable private speculations of his career on the back of it" (840).

Chapter 26: Party Politics

Major political figures in the latter decades of the 19th century included Benjamin Disraeli, William Gladstone, and Lord Randolph Churchill, father of Winston Churchill.
To the Rothschilds, Disraeli was like a family member, while they found Gladstone irascible and Churchill erratic (857).
The Rothschilds remained politically ambiguous (850). More than loyalty to parties, players, or ideologies, the main things that seemed to drive their involvement in politics were their interests in property and capital.
Ferguson summarizes the Rothschilds' political view that capital is labor as complacent and isolated (862).

Chapter 27: The Risks and Returns of Empire (1885-1902)

To modernize Buenos Aires' water and sewage systems, the Rothschilds' major competitor Barings Bank invested heavily ( 2M pounds) in Argentina's Buenos Aires Water and Drainage Company.
While investment in utilities may seem like a safe and conservative risk, householders there (who may have been unaccustomed to paying utility bills) proved unwilling to pay the utilities' rates, which were in turn supposed to guarantee shareholders a respectable dividend (865).
Ferguson describes Barings' investment as a haphazard folly on a grand scale. One of its effects was to reduce Barings' ratio of capital to liabilities to 14%, versus the Rothschilds' 39%.
When news of the Barings' Argentine difficulties reached their Russian depositors, in 1890 it caused a Russian bank run. The Russian government withdrew its deposits from Barings, and placed some of them with Rothschild.
Barings was "too big to fail"; so with Rothschild help, a syndicate was formed that created a guarantee fund to absorb the Barings loss and spread its risk. 7.5M pounds were needed, and 17M was raised (868).
Comparisons have been made between the Barings' investment in Argentina and the Rothschilds' investment in Brazil. However the Rothschilds were more diversified (only 2.4% of the London house's assets was in Brazil), less leveraged proportionately, and in absolute terms had much more capital than Barings. The London house alone had more than twice Barings' capital (870).
The Rothschilds were in the business of mining gold, silver, copper, mercury, lead, nickel, petroleum, diamonds, and jewels - that is, any element that had market value. They favored an international gold standard for currency because of the stabilizing and facilitating effect it had on the international bond market (874). However, they were willing to be flexible in international negotiations, like the 1892 International Monetary Conference in Brussels.
Through their mining interests in South Africa, they encountered Cecil Rhodes, of the De Beers mining company. Natty Rothschild helped Rhodes find financing for De Beers. By 1899, Rothschilds was De Beers second largest shareholder (883).
Rhodes aspired not only to mine and sell gold and diamonds at a profit, but also to buy and sell at a massive profit the land from which they were mined, as news of the gold in the land would skyrocket its price (885).
Rhodes had a volatile personality (888).
These ambitions for (British) territorial expansion posed a threat to both native Africans and the Dutch Boers, resulting in atrocities toward the Africans and war with the Boers.
The war necessitated British borrowing, in which Rothschilds participated.

Chapter 28: Finances and Alliances (1885-1906)

Throughout their history, the Rothschilds have served behind-the-scenes roles in peace making, like pouring oil on troubled waters (925). This was certainly the case in the events preceding World War One. The early parts of this chapter discuss in great and lengthy detail their efforts to keep peace between France, England, Germany, Italy, Turkey, Japan, Austria, and Russia, and the role imperialism played, or did not play as the case may be, in the war's beginning (895-901).
Because of worsening anti-Semitism there, they continued to distance themselves from Russia. In August 1890 Walter Rothschild wrote that Russia had "old cruel and senseless laws . . . which are so harsh and oppressive that they may be the cause of many Jews becoming violent Nihilists" (903-910). " . . . when the Russian Jew has liberty & equal rights, Russian finances would improve & the Treasury difficulties would be considerably less" (931).
The author suggests that making peace between England and Germany failed because of personalities (920). This goes to show how regardless how careful one might be about aligning interests between one group of people and another, the ultimate outcome can be determined not by the groups themselves, but by individuals, whose behavior can sometimes be irrational, self-defeating, impulsive, belligerent, and contrary to their own group's interests.
"In the final analysis, there were economic forces at work which at least made some combinations of powers more likely than others. . . . there was an important difference between countries which were net creditors (Britain and France), those which were self-financing but not capital exporting (Austria-Hungary, Germany), and those which had to borrow large amounts from abroad (Russia, Italy)" (938).

Chapter 29: The Military-Financial Complex (1906-1914)

In 1888, the London house began direct military investment, something the Rothschilds had historically eschewed (940-41).
Governments across Europe were increasing their military spending, both in absolute terms and in proportion to net national product (942-46).
Natty had become politically partisan. "He had become so overtly partisan that he was effectively cut off from both intelligence and influence under a Liberal administration" (947).
He believed that Socialism depressed the prices of government securities, because their holders had no faith in it.
"Time and again, the markets refused to back up Natty's condemnation of Liberal fiscal policies by falling when they were supposed to" (954).
"The key to the ultimate failure of Natty's opposition to Liberal finance lies here: . . . it was entirely orthodox in that the aim of increased taxation was to balance the budget and indeed to reduce the national debt" (954-55).
Eventually the absurdity of Natty's position made him a laughingstock, expressed in Chancellor Lloyd George's roast at the Holborn Restaurant (957).
He also felt that Britain and Germany should be allies (960), and was thus surprised by the outbreak of war. Serbia wasn't on his radar.
Once war broke out, he put political enmity with Lloyd George behind him and did what he could to support the government, including agreeing to higher taxation (965).
N. M. Rothschild & Sons lost close to £1.5M, 23% of its capital, to the war.
The key to the financing of the war lay in New York, with J. P. Morgan. ". . . that transatlantic shift of the financial centre of gravity which had been first intimated during the Boer War now became a reality" (967).
The outbreak of WWI marked a period of decline for the Rothschilds which would last half a century.

Chapter 30: Deluges (1915-1945)

Natty died in 1915. Combined with the deaths of many others around the same time, his loss amounted to a crisis for the family (968).
The firm had become "sclerotic" (970). At the time of Natty's death, it was still using a single-entry accounting system, and documents were handwritten. "Banker's Hours" (10:30-2:00) were kept by some (985).
Surviving family members had little interest in the banking business and tended to be profligate and prodigal, living ". . . not to make money, but to spend it" (972).
WWI occupied the family's attention. Many in their 30s fought in it; in some cases, on opposite sides as the family still had an office in Frankfurt.
The anti-Capitalist Bolshevik Revolution and Zionism were divisive forces that ran through the Jewish community.
The origins of the state of Israel can be traced back to the Balfour Declaration, a letter addressed to Lord Rothschild (979).
Rothschild competitors fared better during the war years. Midland was consistently profitable and by 1918 had twice the London Rothschilds' capital.
Cooperation between London, Paris, and Vienna houses declined. In 1933 the Paris house (Edmond) refused to bail out the Vienna house (Louis) (994).
The Rothschilds lent heavily to Brazil and Chile, both of which went through periods of default lasting 20-30 years.
Wartime insecurity prompted governments to fixate on a gold standard for their currencies, versus developing productive economies. Consequences were seldom favorable.
Leading up to WWII, the Nazis confiscated the Rothschild's property, especially the art collections (998-1,001).
Residing beyond Nazi control, the Rothschilds tried with mixed results to help cope with mass migration of Jewish refugees (1,002 - 1,004).
They also encountered anti-Semitism in France's Vichy regime (1,005-1,006).

Epilogue

Anthony de Rothschild dedicated himself to conserving the Rothschild heritage (1,009).
He suffered a stroke in 1955 and died six years later, succeeded by his son Evelyn (1,013).
In July 1960, a century and a half of tradition ended when David Colville became the first non-family member to be made a formal partner (1,013).
In 1965 Jacob declared, "We must try to make ourselves as much a bank of brains as of money." They subsequently broadened into investment banking, asset management, and corporate finance (1,014).
Above all, the bank focused on the developing European Economic Community, leading the way toward the construction of the "Chunnel" and development of the Euro (1,016).
During the 1970s-80s, British and French approaches toward banking operated at cross-purposes to each other. While privatization was the trend under the Conservative Thatcher government in England, Communists and Socialists in France worked in the opposite direction, toward nationalization. Experiencing both gave the Rothschilds expertise in the process of transitioning assets and liabilities in either direction (1,021-1,027).
In the mid 1980s Evelyn instituted an effort to "get back together as a family", creating Rothschild Continuation Holdings AG as the Swiss based parent company for an expanding Rothschild merchant banking group. "For the first time since before the First World War, formal steps were being taken to unite the disparate family interests which three quarters of a century of political instability had fragmented" (1,028).
"Today (1998) six members of the family have between them a total of thirty-seven board seats" with Evelyn as the key figure (1,030).
In 1991-1992, in the wake of nationalization, the Zurich bank failed, losing more than its entire capital (270 million Swiss francs vs. capital of 185M. Thanks to the wider multinational Rothschild structure the bank was saved and most of the loss was subsequently recovered (1,030 - 1,031).
". . . no amount of corporate rhetoric can turn a widely dispersed multitude of shareholders, directors, executives, and employees into a family" (1,032).
". . . may they [children & descendants] ] remain as mindful as we of the hallowed precept of our noble ancestor and present to posterity the godly image of united love and work" (1,033).