#28 The Battle of Waterloo

I promise my constant history lessons are always economically relevant. Fear can be created and perpetuated by information asymmetry and is often very profitable when used correctly.

In 1815, Napoleon Bonaparte was finally defeated in the Battle of Waterloo. After nearly 20 years of successful conquest, known as the Napoleonic Wars, a British and Prussian army finally dealt and swift and decisive defeat to the French. This single event carried massive political and economic implications throughout all of Europe.

Had Napoleon won the Battle of Waterloo, England who at the time was already under considerable economic duress, would have been in danger of total collapse. Not only would she have lost her significant international power and prestige, but English citizens would’ve had their personal liabilities pushed to the breaking point. Defeat at the hands of the French surely would’ve resulted in the lack England’s ability to repay her debts incurred from the costs of the war. Thus, financial markets at the time were acting in anxious trepidation around the outcome of the Battle of Waterloo.

Enter Mr. Nathan Rothschild. A surname you’re likely familiar with to some degree. It was well known that the Rothschild’s were able to move considerable amounts of cargo around the battle lines via their private courier services. This also gave them a unique advantage when it came to the movement and dissemination of new information, which at the time, was an invaluable resource for international finance and trade.

The news of Napoleon’s defeat at Waterloo arrived to the Rothschild’s on the early morning of June 20, 1815. This was approximately a full 24 hours before the Duke of Wellington’s own personal courier arrived with the same news.

Upon market open that morning, Nathan hurriedly took up his post at the London Stock Exchange, and every eye in the marketplace turned to him, in expectation of what was to come. Nathan, with a somber demeanor, began to sell all of his English Bonds. What happened next could only be described as hysterical. The Englishmen obviously assumed (as was Nathan’s intentions) that the French had been victorious and English bonds were soon to be entirely worthless.

The market took an immediate downturn and bond prices plummeted, and Nathan continued to sell. Prices collapsed to rock bottom and in one swift move, he reversed his action, and purchased nearly the entire market of English bonds for pennies on the pound. In a single moment, the Rothschild’s had become the dominant holders of England’s entire bond market for a small fraction of their real value.


Book of the Month:

The Ethics of Money Production by Jorg Guido Huulsman

-“One cannot tell on a priori grounds what the natural money of a society is. The only way to find this out is to let people freely associate and choose the best means of exchange out of the available alternatives”

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