The Ascent of Money Chapter 2: Bonds and Power

Throughout history, bond markets have been used as a means to gain power. Since bonds are so closely tied to the financial success, interest rates, and power of a government, investing heavily in bonds has helped several people throughout history become very rich and powerful. In my previous blog, I talked about how closely associated money and power are in the human mindset. Bonds associate them even further, because they are connected to the government, which is also closely associated with power. This association can be seen especially clearly when looking at the Rothschild family. 

During the reign of Napoleon Bonaparte, Nathan Rothschild made a lot of money off of gold. When Napoleon lost at Waterloo, however, he miscalculated how quickly the battle would end and was in a position to lose a lot of money. He proceeded to buy a huge amount of British government bonds, estimating a surge in prices. This paid off, and he made hundreds of millions of euros by selling them later. The power that the Rothschild family gained from this success on the bond market set them up to be a very powerful influence for just about everything for many years later. According to the book, they were important enough influences on the governments of most countries that wars did not happen if they were not set up to benefit and did not allow it. This is an incredible amount of power to be held by one family, thanks largely to the bond market. 

While the bond market gave power to individuals and families like the Rothschilds, it also gave power and financial support to governments. For example, during the american civil war, the south needed more funding, so they used the bond market (with cotton as a collateral) to get some of the money they needed.