Chapter Eleven: The Rothschild Formula

The rise of the House of Rothschild in Europe; the tradition among financiers of profiting from both sides of armed conflict; the formula by which war is converted into debt and debt converted back into war.

So far we have adhered closely to the subject of money and the history of its manipulation by political and monetary scientists. Now we are going to take a short detour along a parallel path and view some of the same historical scenery from a different perspective. As we progress, it may seem that we have lost our way, and you may wonder what connection any of this can possibly have with the Federal Reserve System. Please be assured, however, it has everything to do with it, and, when we finally return to that topic, the connection will have become painfully clear.

The Profits of War

The focus of this chapter is on the profits of war and, more specifically, the tendency of those who reap those profits to manipulate governments into military conflicts, not for national or patriotic reasons, but for private gain. The mechanism by which this was accomplished in the past was more complex than simply lending money to warring governments and then collecting interest, although that was part of it The real payoff has always been in the form of political favoritism in the market place. Writing in the year 1937, French historian Richard Lewinsohn explains:

Although often called bankers, those who financed wars in the pre-capitalist period … were not bankers in the modern sense of the word. Unlike modern bankers who operate with money deposited with them by their clients [or, in more recent times, created out of nothing by a central bank — E.G.], they generally worked with the fortune which they themselves had amassed or inherited, and which they lent at a high rate of interest Thus those who risked the financing of a war were for the most part already very rich, and this was the case down to the seventeenth century.

When they agreed to finance a war, these rich lenders did not, however, always attach great importance to the rate of interest In this respect they often showed the greatest compliance to their august clients. But in return they secured for themselves privileges which could be turned into industrial or commercial profit, such as mining concessions, monopolies of sale or importation, etc. Sometimes even they were given the right to appropriate certain taxes as a guarantee of their loans. So though the loan itself carried a very real risk and often did not bring in much interest, the indirect profits were very considerable, and the lenders’ leniency well rewarded.

The Rothschild Dynasty

No discussion of banking as a mechanism for financing wars would be complete without turning eventually to the name Rothschild. It was Mayer Amschel Rothschild who is quoted as saying: Let me issue and control a nation’s money and I care not who writes the laws. Biographer Frederic Morton concluded that the Rothschild dynasty had: … conquered the world more thoroughly, more cunningly, and much more lastingly than all the Ceasars before or all the Hitlers after them. The dynasty was begun in Frankfurt, Germany, in the middle of the eighteenth century by Mayer Amschel Bauer, the son of a goldsmith. Mayer became a clerk in the Oppenheimer Bank in Hanover and was eventually promoted to junior partner. After his father’s death, he returned to his home in Frankfurt to continue the family business. Over the door hung a red shield with an eagle as a sign to identify the establishment. The German words for red shield are roth schild, so he changed his name from Bauer to Rothschild and added five gold arrows held in the talons of the eagle to represent his five sons.

The Rothschild fortune began when Mayer adopted the practice of fractional-reserve banking. As we have seen, he was not alone in this, but the House of Rothschild greatly surpassed the competition. That was due to his sharp business acumen and also because of his five most unusual sons, all of whom became financial power centers of their own. As they matured and learned the magic of converting debt into money, they moved beyond the confines of Frankfurt and established additional operations in the financial centers, not only of Europe, but of much of the civilized world.

Throughout the first half of the nineteenth century, the brothers conducted important transactions on behalf of the governments of England, France, Prussia, Austria, Belgium, Spain, Naples, Portugal, Brazil, various German states, and other smaller countries. They were the personal bankers of many of the crowned heads of Europe. They made large investments, through agents, in markets as distant as the United States, India, Cuba, and Australia. They were financiers to Cecil Rhodes, making it possible for him to establish a monopoly over the diamond fields of South Africa. They are still connected with the de Beers.

Biographer Derek Wilson writes:

Those who lampooned or vilified the Rothschilds for their sinister influence had a considerable amount of justification for their anger and anxiety. The banking community had always constituted a fifth estate whose members were able, by their control of royal purse strings, to affect important events. But the house of Rothschild was immensely more powerful than any financial empire that had ever preceded it. It commanded vast wealth. It was international. It was independent. Royal governments were nervous of it because they could not control it. Popular movements hated it because it was not answerable to the people. Constitutionalists resented it because its influence was exercised behind the scenes — secretly.

Secrecy, of course, is essential for the success of a cabal, and the Rothschilds perfected the art. By remaining behind the scenes, they Were able to avoid the brunt of public anger which was directed, instead, at the political figures which they largely controlled. This is a technique which has been practiced by financial manipulators ever since, and it is fully utilized by those who operate the Federal Reserve System today. Wilson continues:

Clandestinity was and remained a feature of Rothschild political activity. Seldom were they to be seen engaging in open public debate on important issues. Never did they seek government office. Even when, in later years, some of them entered parliament, they did not feature prominently in the assembly chambers of London, Paris or Berlin. Yet all the while they were helping to shape the major events of the day: by granting or withholding funds; by providing statesmen with an official diplomatic service; by influencing appointments to high office; and by an almost daily intercourse with the great decision makers.

A Fortune in Smuggling

Continual war in Europe created excellent opportunities for profit from smuggling scarce consumer goods past military blockades. Since the Rothschilds often financed both sides in a conflict and were known to have great political influence, the mere sight of the red shield on a leather pouch, a carriage, or a ship’s flag was sufficient to insure that the messenger or his cargo could pass through check points in either direction. This immunity allowed them to deal in a thriving black market for cotton goods, yarn, tobacco, coffee, sugar, and indigo; and they moved freely through the borders of Germany, Scandinavia, Holland, Spain, England, and France. This government protection was one of those indirect benefits that generated commercial profits far in excess of the interest received on the underlying government loans.

It is generally true that, one man’s loss is another man’s gain. And even the friendliest of biographers admit that, for more than two centuries, the House of Rothschild profited handsomely from wars and economic collapses, the very occasions on which others sustained the greatest losses.

Napoleon vs the Bankers

If one picture is worth a thousand words, then one example surely must be worth a dozen explanations. There is no better example than the economic war waged by the financiers of nineteenth-century Europe against Napoleon Bonaparte. It is an easily forgotten fact of history that Napoleon had restored law and order to a chaotic, post-revolutionary France and had turned his attention, not to war, but to establishing peace and improving economic conditions at home. He was particularly anxious to get jus country and his people out of debt and out of the control of bankers. R. McNair Wilson, in Monarchy or Money Power, says:

It was ordained by him that money should not be exported from France on any pretext whatever except with the consent of the Government, and that in no circumstance should loans be employed to meet current expenditure whether civil or military … One has only to consider, Napoleon remarked, what loans can lead to in order to realize their danger. Therefore, I would never have anything to do with them and have always striven against them

The object was to withhold from finance the power to embarrass the Government as it had embarrassed the Government of Louis XVI. When a Government, Bonaparte declared, is dependent for money upon bankers, they and not the leaders of that Government control the situation, since the hand that gives is above the hand that takes

Money, he declared, has no motherland; financiers are without patriotism and without decency: their sole object is gain.

One of Napoleon’s first blows against the bankers was to establish an independent Bank of France with himself as president. But even this bank was not trusted, and government funds were never placed into it It was his refusal to borrow, however, that caused the most concern among the financiers. Actually, to them this was a mixture of both bad and good news. The bad news was that they were denied the benefit of royalty payments on fractional money. The good news was that, without resorting to debt, they were confident Napoleon could not militarily defend himself. Thus, he easily could be toppled and replaced by Louis XVI of the old monarchic dynasty who was receptive to banker influence. Wilson continues:

They had good hope of compassing his downfall. None believed that he could finance war on a great scale now that the resource of paper money had been denied him by the destruction of the Assignaf: Where would he obtain the indispensable gold and silver to feed and equip a great army? Pitt [the Prime Minister of England] counted already on a coalition of England, Austria, Prussia, Russia, Spain, Sweden, and numerous small states. Some 600,000 men would be put into the field. All the resources of England’s wealth — that is to say, of the world’s wealth — would be placed at the disposal of this overwhelming force. Could the Corsican muster 200,000? Could he arm them? Could he feed them? If the lead bullets did not destroy him, the gold bullets would soon make an end. He would be forced, like his neighbors, to come, hat in hand, for loans and, like them, to accept the banker’s terms …

He could not put his hands on £2,000,000, so empty was the Treasury and so depleted the nation’s stock of metallic money. London waited with interest to see how the puzzle would be solved.

Napoleon solved the puzzle quite simply by selling off some real estate. Those crazy Americans gave him £3,000,000 for a vast swamp called Louisiana.

A Plan to Destroy the United States

Napoleon did not want war, but he knew that Europe’s financial rulers would not settle for peace — unless, of course, they were forced into it by the defeat of their puppet regimes or unless, somehow, it would be to their monetary advantage. It was in pursuit of the latter tactic that he threatened to take direct possession of Holland, which then was ruled by his brother, King Louis. Napoleon knew that the Dutch were heavily in debt to the English bankers. If Holland were to be annexed by France, this debt would never be repaid. So Napoleon made a proposal to England’s bankers that, if they would convince the English government to accept peace with France, he would agree to leave Holland alone.

The negotiations were handled by the banker, Pierre-Cesar Labouchere, who was sent by the Dutch, and the English banker, Sir Francis Baring who was Labouchere’s father-in-law. Although this was an attractive proposal to the bankers, at least on a short-term basis, it was still against their nature to forego the immense profits of war and mercantilism. They revised the proposal, therefore, to include a plan whereby both England and France would combine forces to destroy the newly independent United States and bring at least half of it — the industrial half — back under the domination of England. The incredible plan, conceived by the French banker, Ouvard, called for military invasion and conquest followed by division of the spoils. England would receive the northern states, united with Canada, while the southern states would fall to France. Napoleon was to be tempted by offering him the awesome title of King of America. McNair Wilson tells us:

Labouchere wrote to Baring on March 21, and enclosed a note for [British Foreign Secretary] Wellesley dictated by Ouvrard which ran:

From a conqueror he (Napoleon) is becoming a preserver; the first result of his marriage with Marie Louise will be that he will make an offer of peace to England. It is to this nation’s (i.e., England’s) interest to make peace, for it has the command of the sea; on the contrary, it is really in the interest of France to continue war, which allows her to expand indefinitely and make a fresh fleet, which cannot be done once peace is established. Why does not the English Cabinet make a proposal to France to destroy the United States of America, and by making them again dependent on England, persuade Napoleon to lend his aid to destroy the life-work of Louis XVI? … It is to her (England’s) interest to conclude peace and to flatter Napoleon’s vanity by recognizing his work and his imperial title

The Cabinet discussed the proposals and approved them. Wellesley at once hurried to Baring’s house to give him the good news … The Dutch would be able to pay and would be compelled to pay in gold.

Unhappily Napoleon found out what was afoot and took somewhat strong objections to the plan of a joint attack on the United States. He arrested Ouvrard, dismissed and exiled Fouche, and published the whole story, to the grave distress of Wellesley and Baring.

It must not be concluded from this that Napoleon was a paragon of virtue or a champion of honest money. His objection to the bankers was that their monetary power was able to threaten the sovereignty of his own political power. He allowed them a free hand while they served the purpose of the state. Then, when the need for military financing subsided, he would condemn them for making unholy profits and simply take it from them in the name i’of the people. If the bankers protested, they were sent to prison.

And so the battle lines were drawn. Napoleon had to be destroyed at all costs. To make this possible, the Bank of England created vast new amounts of fiat money to lend to the government so it could finance an overpowering army. A steady stream of gold flowed out of the country to finance the armies of Russia, Prussia, and Austria. The economy staggered once again under the load of war debt, and the little people paid the bill with hardly a grumble because they hadn’t the slightest knowledge it was being charged to their account. Wilson concludes the story:

The bankers won. Louis XVIII was restored by British arms and British diplomacy to the throne of his ancestors. Loans were placed at his disposal, though Napoleon had left a France which enjoyed a credit balance.

A year later the man whom every King and every banker in Europe called usurper won back his throne with 800 men and without the firing of a single shot. On this occasion he had no option but to raise a loan for the defense of France. The City of London [banking district] accommodated him with £5,000,000. With this sum he equipped the army which Wellington defeated at Waterloo.

Gold for the Duke of Wellington

One of the most fascinating and revealing episodes to be recorded by Rothschild biographers concerns the smuggling of a large shipment of gold to finance the Duke of Wellington who was attempting to feed and equip an army in Portugal and in the Pyrenees mountains between Spain and France.

It was not at all certain that Wellington would be able to defeat Napoleon in the coming battle, and the Duke was hard pressed to convince bankers and merchants in Portugal and Spain to accept his written promises-to-pay, even though they were officially guaranteed by the British government These notes were deeply discounted, and Wellington was desperate for gold coin. It was at this point that Nathan Rothschild offered the services of himself and his brothers. With an efficient smuggling apparatus already functioning throughout Europe, he was able to offer Wellington much better terms while still making a magnificent profit. But, to accomplish this, the gold had to pass right under Napoleon’s nose. Frederic Morton describes the scene:

There was only one way to route the cash: through the very France England’s army was fighting. Of course, the Rothschild blockade-running machine already had superb cogs whirring all over Germany, Scandinavia, and England, even in Spain and Southern France. But a very foxy new wheel was needed in Napoleon’s capital itself. Enter Jacob — henceforth called James — the youngest of Mayer’s sons.

James was only nineteen years old but was well trained by his father in the art of deception. He arrived in Paris with a dual mission. First, he was to provide the French authorities with a false report about the British gold movement, with just enough truth in it lo sound convincing. He presented the government with falsified letters indicating that the English were desperate to halt the flow of their gold into France. The ploy paid off when the French authorities then actually encouraged the financial community to accept British gold and to convert it into commercially sound banknotes. Second, James was to serve as a vital link in a financial chain stretching between London and the Pyrenees. He was to coordinate the receipt of the gold into France, the conversion of that gold into Spanish banknotes, and the movement of those notes out of the country on their way to Wellington. All of this he did with amazing dexterity, especially considering his youth. Morton concludes:

In the space of a few hundred hours Mayer’s youngest had not only gotten the English gold rolling through France, but conjured a fiscal mirage that took in Napoleon himself. A teen-age Rothschild tricked the imperial government into sanctioning the very process that helped to ruin it …

The family machine began to hum. Nathan sent big shipments of British guineas, Portuguese gold ounces, French napoleons d’or (often freshly minted in London) across the Channel. From the coast James saw them to Paris and secretly transmuted the metal into bills on certain Spanish bankers. South of the capital, Kalmann [another of Mayer’s sons] materialized, took over the bills, blurred into a thousand shadowed canyons along the Pyrenees — and reappeared, with Wellington’s receipts in hand. Salomon [another son] was everywhere, trouble-shooting, making sure the transit points were diffuse and obscure enough not to disturb either the French delusion or the British guinea rate. Amschel stayed in Frankfurt and helped father Mayer to staff headquarters.

The French did catch a few whiffs of the truth. Sometimes the suspicious could be prosperously purged of their suspicion. The police chief of Calais, for example, suddenly was able to live in such distracting luxury that he found it difficult to patrol the shoreline thoroughly …

While Napoleon struggled his might away in the Russian Winter, there passed through France itself a gold vein to the army staving in the Empire’s back door.

At a dinner party in later years, Nathan casually summed up the episode as though it were merely a good piece of routine business. He said:

The East India Company had £800,000 worth of gold to sell. I went to the sale and bought it all. I knew the Duke of Wellington must have it. The government sent for me and said they must have the gold. I sold the gold to them, but they didn’t know how to get it to the Duke in Portugal. I undertook all that and sent it through France. It was the best business I have ever done.

The Battle of Waterloo

The final outcome of the battle at Waterloo between Wellington and Napoleon was crucial to Europe both politically and economically. If Napoleon had been victorious, England would have been in even greater economic trouble than before. Not only would she have lost international power and prestige, but even at home, her subjects would have been further disgruntled over such great personal and financial wartime sacrifices. Her defeat almost surely would have resulted in not being able to repay the great amounts she had borrowed to conduct the war. In the London stock exchange, therefore, where British government bonds were traded along with other securities, everyone waited anxiously for news of the outcome.

It was well known that the Rothschilds had developed a private courier service that was used, not only to transport gold and other tangible cargo, but to rapidly move information that could be useful in making investment decisions. It was expected, therefore, that Nathan in London would be the first to know the name of the victor after the cannon smoke had cleared from the battlefield. And they were not to be disappointed. The first news of Wellington’s victory arrived in Brussels around midnight on June 18, 1815, where a Rothschild agent named Rothworth was waiting in readiness. He immediately mounted a fresh horse and set off for the port of Ostend where a boat was standing by to speed him across the channel to London. In the early hours of June 20, the exhausted messenger was pounding on Nathan’s door, a full twenty-four hours before Wellington’s own courier, Major Henry Percy, arrived.

At least one friendly biographer claims that Nathan’s first act was to deliver the news to the Prime Minister, but that government officials were hesitant at first to believe it, because it ran contrary to reports they had received previously telling of serious British setbacks. At any rate, there is no doubt that Nathan’s second act of the morning was to set off for the stock exchange to take up a position at his usual pillar.

All eyes were upon him as he slumped dejectedly, staring at the floor. Then, he raised his gaze and, with pained expression, began to sell. The whisper went through the crowded room, Nathan is selling? Nathan is selling! Wellington must have lost. Our government bonds will never be repaid. Sell them now. Sell. Sell!

Prices tumbled, and Nathan sold again. Prices plummeted, and still Nathan sold. Finally, prices collapsed altogether and, in one quick move, Nathan reversed his call and purchased the entire market in government bonds. In a matter of just a few hours, he had acquired the dominant holding of England’s entire debt at but a tiny fraction of its worth.


Benjamin Disraeli, the Prime Minister of England, wrote a book in 1844 called Coningsby. It was a political novel in which the author expressed his views about contemporary issues. One of the strong characters in the book was a financier named Sidonia, but every detail of Sidonia’s actions was an exact replica of the real Lord Rothschild, whom Disraeli greatly admired. In the guise of a novel, we read about Rothschild’s emigration from Germany, his family and banking ties throughout Europe, his handling of the gold for Wellington, and his financial coup after Waterloo. Then Disraeli wrote:

Europe did require money, and Sidonia was ready to lend it to Europe. France wanted some; Austria more; Prussia a little; Russia a few millions. Sidonia could furnish them all …

It is not difficult to conceive that, after having pursued the career we have intimated for about ten years, Sidonia had become one of the most considerable personages in Europe. He had established a brother, or a near relative, in whom he could confide, in most of the principal capitals. He was lord and master of the money market of the world, and of course virtually lord and master of everything else. He literally held the revenues of Southern Italy in pawn; and monarchs and ministers of all countries courted his advice and were guided by his suggestions.

That Disraeli was not exaggerating was made clear by the boast of James Rothschild himself. When U.S. Treasury agents approached him in Paris in 1842 with a request for a loan to the American government, he said to them: You have seen the man who is at the head of the finances of Europe.

There have always been men who were in a position to make private fortunes out of cooperating with both sides in a war. The Rothschilds were not unique in this, but they no doubt perfected the art and became the personification of that breed. They were not necessarily evil in a moral sense. What preoccupied their minds were not questions of right or wrong but of profit and loss. This analytical indifference to human suffering was aptly described by one Rothschild when he said: When the streets of Paris are running with blood, I buy. They may have held citizenship in the country of their residence, but patriotism was beyond their comprehension. They were also very bright, if not cunning, and these combined traits made them the role model of the cool pragmatists who dominate the political and financial world of today. Disraeli well described this type when he wrote of Sidonia:

He was a man without affections. It would be harsh to say he had no heart, for he was susceptible of deep emotions, but not for individuals … The individual never touched him. Woman was to him a toy, man a machine.

It would seem that an absence of patriotism and a cold, analytical outlook would lead financiers to avoid making loans to governments, particularly foreign ones. Private borrowers can be hauled into court and their assets confiscated to make good on their the courts. They are the police. Who will seize their assets? The answer is another government. Speaking of a relatively modern example of this principle, Ron Chernow explains:

The new alliance [between the monetary and political scientists] was mutually advantageous, Washington wanted to harness the new financial power to coerce foreign governments into opening their markets to American goods or adopting pro-American policies. The banks, in turn, needed levers to force debt repayment and welcomed the government’s police powers in distant places. The threat of military intervention was an excellent means by which to speed loan repayment. When Kuhn, Loeb considered a loan to the Dominican Republic, backed by customs receipts, Jacob Schiff inquired of his London associate Sir Ernest Cassel, If they do not pay, who will collect these customs duties? Cassel replied, Your marines and ours.

One of the great puzzles of history is why governments always go into debt and seldom attempt to put themselves on a pay-as-you-go basis, A partial answer is that kings and politicians lack the courage to tax their subjects the enormous sums that would be required under such an arrangement. There is also the deeper question of why the expenditures are so high in the first place.

Given the mentality of the world’s financial lords and masters, as Disraeli described them, it is conceivable that a coldly calculated strategy has been developed over the years to insure this result. In fact, the historical evidence strongly suggests that just such a plan was developed in eighteenth-century Europe and perfected in twentieth-century America. For the purposes of hypothetical analysis, let us identify this strategy as The Rothschild Formula.

The Formula

Let us imagine a man who is totally pragmatic. He is smarter and more cunning than most men and, in fact, holds them in thinly disguised contempt. He may respect the talents of a few, but has little concern over the condition of mankind. He has observed that kings and politicians are always fighting over something or other and has concluded that wars are inevitable. He also has learned that wars can be profitable, not only by lending or creating the money to finance them, but from government favoritism in the granting of commercial subsidies or monopolies. He is not capable of such a primitive feeling as patriotism, so he is free to participate in the funding of any side in any conflict, limited only by factors of self interest. If such a man were to survey the world around him, it is not difficult to imagine that he would come to the following conclusions which would become the prime directives of his career:

  1. War is the ultimate discipline to any government. If it can successfully meet the challenge of war, it will survive. If it cannot, it will perish. All else is secondary. The sanctity of its laws, the prosperity of its citizens, and the solvency of its treasury will be quickly sacrificed by any government in its primal act of self-survival.
  2. All that is necessary, therefore, to insure that a government will maintain or expand its debt is to involve it in war or the threat of war. The greater the threat and the more destructive the war, the greater the need for debt.
  3. To involve a country in war or the threat of war, it will be necessary for it to have enemies with credible military might. If such enemies already exist, all the better. If they exist but lack military strength, it will be necessary to provide them the money to build their war machine. If an enemy does not exist at all, then it will be necessary to create one by financing the rise of a hostile regime.
  4. The ultimate obstacle is a government which declines to finance its wars through debt. Although this seldom happens, when it does, it will be necessary to encourage internal political opposition, insurrection, or revolution to replace that government with one that is more compliant to our will. The assassination of heads of state could play an important role in this process.
  5. No nation can be allowed to remain militarily stronger than its adversaries, for that could lead to peace and a reduction of debt. To accomplish this balance of power, it may be necessary to finance both sides of the conflict. Unless one of the combatants is hostile to our interests and, therefore, must be destroyed, neither side should be allowed a decisive victory or defeat. While we must always proclaim the virtues of peace, the unspoken objective is perpetual war.

Whether anyone actually put this strategy into words or passed it along from generation to generation is not important. In fact, it is doubtful it has ever worked that way. Whether it is the product of conscious planning or merely the consequence of men responding to the profit opportunities inherent in fiat money, the world’s financial lords have acted as though they were following such a plan, and this has become especially apparent since the creation of the central-bank Mandrake Mechanism three centuries ago.

The balance-of-power question is particularly intriguing. Most history texts present the concept as though it were some kind of natural, social phenomenon which, somehow, has worked to the benefit of mankind. The implication is that it’s just wonderful how, after all those European wars, no nation was strong enough to completely dominate the others. When the United States emerged from World War II with exactly such power, it was widely deplored, and massive political/financial mechanisms such as foreign aid and disarmament were set in motion to restore the balance. This has become almost a revered doctrine of international democracy. But the overlooked consequence of this sentimental notion is that wars between equals have become the permanent landscape of history.

This does not mean that every war-like group that comes along will find easy financing from the lords and masters. It depends on whom they threaten and how likely they are to succeed. In 1830, for example, the Dutch were facing an uprising of their subjects in Belgium. Both the ruling government and the revolutionaries were dependent upon the Rothschilds for financing their conflict. The Dutch rulers were reliable customers for loans and, just as important, they were reliable in their payment of interest on those loans. It would have been foolhardy to provide more than token assistance to the rebels who, if they came to power, quite likely would have refused to honor the debts of the former puppet regime. Salomon Rothschild explained:

These gentlemen should not count on us unless they decide to follow a line of prudence and moderation … Our goodwill does not yet extend to the point of putting clubs into the hands that would beat us, that is, lending money to make war and ruin the credit that we sustain with all our efforts and all our means.

After the revolution was resolved by negotiation rather than by arms, the new government in Brussels was a natural target for financial takeover. James Rothschild laid out the strategy that has become the model of such operations ever since:

Now is the moment of which we should take advantage to make ourselves absolute masters of that country’s finances. The first step will be to establish ourselves on an intimate footing with Belgium’s new Finance Minister, to gain his confidence … and to take all the treasury bonds he may offer us.

Perpetual War in Eighteenth Century England

Wars, great and small, have always been a plague to Europe, but it was not until they were easy to finance through central banking and fiat money that they became virtually perpetual. For example, the following war chronicle begins immediately following the formation of the Bank of England which, as you recall, was created for the specific purpose of financing a war:

1689-1697 The War of the League of Augsberg
1702-1713 The War of Spanish Succession
1739-1742 The War of Jenkin’s Ear
1744-1748 The War of Austrian Succession
1754-1763 The French and Indian War
1793-1801 The War against Revolutionary France
1803-1815 The Napoleonic Wars

In addition to these European conflicts, there also were two wars with America: the War for Independence and the War of 1812. In the 126 years between 1689 and 1815, England was at war 63 of them. That is one out of every two years in combat. The others were spent preparing for combat.

The mark of the Rothschild Formula is unmistakable in these conflicts. The monetary scientists often were seen financing both sides. Whether ending in victory or defeat, the outcome merely preserved or restored the European balance of power. And the most permanent result of any of these wars was expanded government debt for all parties.


By the end of the eighteenth century, the House of Rothschild had become one of the most successful financial institutions the world has ever known. Its meteoric rise can be attributed to the great industry and shrewdness of the five brothers who established themselves in various capitals of Europe and forged the world’s first international financial network. As pioneers in the practice of lending money to governments, they soon learned that this provided unique opportunities to parlay wealth into political power as well. Before long, most of the princes and kings of Europe had come within their influence.

The Rothschilds also had mastered the art of smuggling on a grand scale, often with the tacit approval of the governments whose laws they violated. This was perceived by all parties as an unofficial bonus for providing needed funding to those same governments, particularly in time of war. The fact that different branches of the Rothschild network also might be providing funds for the enemy was pragmatically ignored. Thus, a time-honored practice among financiers was born: profiting from both sides.

The Rothschilds operated a highly efficient intelligence gathering system which provided them with advance knowledge of important events, knowledge which was invaluable for investment decisions. When an exhausted Rothschild courier delivered the first news of the Battle of Waterloo, Nathan was able to deceive the London bond traders into a selling panic, and that allowed him to acquire the dominant holding of England’s entire debt at but a tiny fraction of its worth.

A study of these and similar events reveals a personality profile, not just of the Rothschilds, but of that special breed of international financiers whose success typically is built upon certain character traits. Those include cold objectivity, immunity to patriotism, and indifference to the human condition. That profile is the basis for proposing a theoretical strategy, called the Rothschild Formula, which motivates such men to propel governments into war for the profits they yield. This formula most likely has never been consciously phrased as it appears here, but subconscious motivations and personality traits work together to implement it nevertheless. As long as the mechanism of central banking exists, it will be to such men an irresistible temptation to convert debt into perpetual war and war into perpetual debt.

In the following chapters we shall track the distinctive footprint of the Rothschild Formula as it leads up to our own doorstep in the present day.