BOOK REVIEW: FERGUSON, Niall - The House of Rothschild: Volume 1: Money's Prophets: 1798-1848
ASIN: B002VFPRVY
Read March, 26 - April 22, 2017
The Adventures of the Founding Family of Modern Capitalism.
This first of two volumes on the history of The House of Rothschild, written by Harvard historian Niall Ferguson, presents original use of then newly available collections of private correspondence, which the author manages to fuse into his own writing in a clear and readable style, sparking his enthusiasm for his story into his readers’s minds. The frequent quoting of letters not only conveys a sense of familiarity with each Rothschild family member but offers precious glimpses of their individual personalities.
In sixteen chapters grouped in three parts, this volume chronicles family history from the times of Father and Sons (chapters 1 to 2: the beginnings in the Frankfurt Ghetto; the dealings for William of Hesse during the Napoleonic Wars), through those of Brothers (chapters 3 to 11: the London House; dealings with treasury bonds; early Rothschild myths; the exodus from the Ghetto; relations with aristocratic society; political turmoil; financial effects of peace; the command of European finance; and Nathan’s sudden death), to the times of Uncles and Nephews (chapters 12 to 16: dynastic planning; Spain and America; diplomatic influence; railway investment in Continental Europe; and the 1848 Revolutions). The penultimate chapter, on railway expansion, particularly deserves praise for throwing new light upon the correct balance between the London and Paris Houses. The text is illustrated with graphs, tables, diagrams and figures; some sources are transcribed in the appendixes.
Yet, if Ferguson suceeds in unmasking tales of financial tricks and in debunking myths and conspiracy theories, he seems more at ease with conspicuity, architecture, diplomacy and dynastic politics than with finance, failing to grasp, as most Rothschild detractors, how the Rothschilds created value. Arbitrage between currency markets is pointed to as an early business touchstone, and bonds markets’ price fluctuations and crises are narrated somewhat extensively. But a reader who falsely assumed the Rothschilds could only thrive in a bullish market would probably remain mistaken. The family’s role in funding the long 19th century peace is amply discussed, but scant comparison to other banks allows almost no insights about the role played by the family in shaping 19th century finance.
Throughout the narrative, thrift updates of the partner’s agreements and the five banks’ capital increases are duly given, but explanations of operational structure and functioning are more frugal - many times, scarcity of sources is to blame. A sketch of the post-1815 diversification, one third in treasury bonds, one third in bills of exchange, leaves one third remaining, despite a brief mention of securities. Nothing is said about liquidity ratios, reserve policies, passive composition (whose was the money?), cash flows, liabilities and risks. Underwriting is mentioned, not explained; relationships with clients, almost forgotten; the servicing of European aristocracy and top bourgeoisie seems reduced to private banking for, and personal lending to, politicians.
Despite the unanswered questions, I do recommend the book.
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