The Ascent of Money Episode 2: Human Bondage

00:48:08
https://www.youtube.com/watch?v=yBQaQq0m5BA

概要

TLDRThe video examines how power has shifted from political leaders to key financial players controlling the bond market, epitomized by figures like Bill Gross, known as 'Mr. Bond.' It traces the origins and history of the bond market, starting from Renaissance Italy where wars were financed through bonds. The video discusses the significant influence of the Rothschild family, who rose to power by manipulating the bond market during the Napoleonic wars. It highlights how the bond market dictates economic conditions, exemplified by events like the fall of Argentina into economic chaos due to hyperinflation. The bond market's impact extends to modern economies, influencing policies and interest rates that affect individual financial well-being. The narrative illustrates both the historical significance and the current vast scale and power of the bond markets in global finance.

収穫

  • 💼 Real power today lies in the bond market, not political offices.
  • 🤑 Bill Gross, a key figure in the bond market, influences global economies.
  • 🔗 Bonds connect financial markets with political power and historical events.
  • 📈 The bond market originated in ancient Italy to fund wars.
  • 💰 The Rothschild family rose to power through bond trading.
  • 🔍 The bond market affects interest rates and pension values.
  • ⚠️ Inflation poses a risk to bondholders, devaluing bonds.
  • 🇦🇷 Argentina's economic collapse highlights bond market risks.
  • 🧮 Bonds were pivotal in financing historical wars like Waterloo.
  • 🌍 The global bond market remains a dominant financial force.

タイムライン

  • 00:00:00 - 00:05:00

    Power in today's world is not held by presidents and prime ministers, but by an elite group of men who control the world's bond market, such as Bill Gross of PIMCO. Bonds serve as a critical link between finance and political power, funding government deficits and impacting the global economy.

  • 00:05:00 - 00:10:00

    The history of the bond market began in the Italian Renaissance when city-states funded wars through bonds, transforming citizens into investors, and it grew to influence outcomes in major conflicts like the Battle of Waterloo and the American Civil War.

  • 00:10:00 - 00:15:00

    The bond market revolutionized state financing, setting interest rates and becoming integral to global finance. It facilitated wars but also led to complex financial dynamics, demonstrating its influence over military and economic outcomes.

  • 00:15:00 - 00:20:00

    Nathan Rothschild's financial acumen during the Napoleonic Wars exemplified how bonds could yield immense wealth and power. Despite initial setbacks, Rothschild's strategic bond trading brought unprecedented success, showcasing the bond market's potential.

  • 00:20:00 - 00:25:00

    The Rothschilds' influence through the bond market extended to global events like the American Civil War. However, their decisions reflected a preference for stability over conflict, emphasizing how bond markets could sway national destinies.

  • 00:25:00 - 00:30:00

    During the American Civil War, the South's reliance on cotton-backed bonds illustrated the bond market's power—and perils. The failure to secure foreign backing and reliance on cotton led to economic ruin and highlighted the bond market's deciding role.

  • 00:30:00 - 00:35:00

    The collapse of Confederate bonds due to military defeats and economic circumstances underscored the bond market's impact on national survival. The South's financial strategies failed against the harsh realities of war and economic isolation.

  • 00:35:00 - 00:40:00

    Argentina's hyperinflation crisis in the late 20th century demonstrated the bond market's vulnerabilities when governmental fiscal irresponsibility leads to monetary collapse, affecting bondholders, pensioners, and the broader economy significantly.

  • 00:40:00 - 00:48:08

    As modern economies continue to navigate fiscal policies, the bond market remains a key player with significant power over global economic stability, influencing decisions from interest rates to government bailouts and public confidence in economies.

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よくある質問

  • What is the main focus of the video?

    The video focuses on the historical and ongoing power and influence of the bond market over political and economic affairs.

  • Who is considered as a key figure in the bond market according to the video?

    Bill Gross, the boss of PIMCO and a significant player in the bond market, is highlighted as a key figure.

  • What historical events does the video link to the bond market?

    The video links the bond market to various historical events such as the wars in Northern Italy, the Battle of Waterloo, the American Civil War, and Argentina's economic crisis.

  • How did the bond market originate?

    The bond market originated during the Renaissance in Italian city-states, which used bonds as a means to fund wars.

  • How did the Rothschilds influence the bond market?

    The Rothschilds played a significant role by financing wars through bonds and becoming powerful financiers because of their strategies in the bond market.

  • What is the bond market's impact on everyday individuals?

    The bond market affects individuals by impacting the value of pensions and setting interest rates, which in turn affects mortgage and loan costs.

  • How does inflation impact bondholders?

    Inflation can erode the value of fixed interest returns for bondholders, making their investments less valuable in real terms.

  • What solved Florence's financial crisis in the Renaissance?

    Florence solved its financial crisis by obligating citizens to lend money to the government through bonds.

  • What lesson does the Argentine crisis offer?

    The Argentine crisis illustrates the dangers of poor financial management and the severe impact of hyperinflation on an economy.

  • How did cotton influence the American Civil War's bond market strategies?

    The Confederacy used the value of cotton as collateral to support its bonds, attempting to leverage this against Britain and other investors.

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  • 00:00:03
    we may think power resides with
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    presidents and prime ministers in
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    palaces and Parliament's not so in
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    today's world real power lies in the
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    hands of an elite group of unassuming
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    men in anonymous open-plan offices the
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    men who controlled the world's bond
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    market Bill Gross is the boss of PIMCO
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    the world's biggest bond trading
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    operation which manages a portfolio of
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    bonds worth 700 billion dollars gross is
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    widely regarded as the king of the bond
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    market just call him Mr Bond
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    [Music]
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    bonds are the magical link between the
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    world of high finance and the world of
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    political power governments will always
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    spend more than they raise in taxation
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    sometimes shed loads more and they make
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    up the difference by selling bonds that
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    pay interest but and here's the magic if
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    you want to get rid of a bond the
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    government doesn't have to give you the
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    cash back you just take it to a bond
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    market like the one here took your stock
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    exchange and sell it
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    after the rise of banks the birth of the
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    bond market was the next big revolution
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    in the history of finance it created a
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    whole new way for governments to borrow
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    money
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    the bond market funded the walls that
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    plagued northern Italy six hundred years
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    ago it dictated the outcome of the
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    Battle of Waterloo and created the
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    world's greatest financial dynasty it
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    ensured the defeat of the south in the
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    American Civil War and in modern times
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    the bond market has brought once wealthy
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    nations like Argentina crashing to their
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    knees today
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    governments and companies use bonds to
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    borrow on an unimaginably vast scale all
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    told there are bonds out there worth
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    around 85 trillion dollars the fortunes
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    of most of us whether we like it or not
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    are directly linked to the bond market
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    if the bond market tanks then down goes
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    the value of our pensions and that's a
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    huge part of our wealth as individuals
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    in the financial crisis that has gripped
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    the world since the summer of 2007 US
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    government bonds have been seen as a
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    safe haven for investors seeking shelter
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    from the storm of falling property and
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    share prices so if Bill Gross were to
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    lose faith in those bonds it would hit
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    the financial world like well a fundable
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    that's why this mr. bond has become so
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    much more powerful than the mr. bond
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    created by Ian Fleming and that's why
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    both kinds of bond have a license to
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    kill
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    [Music]
  • 00:03:14
    [Music]
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    war declared the ancient Greek
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    philosopher Heraclitus is the father of
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    all things it was certainly the father
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    of the bond market for much of the 14th
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    and 15th centuries the medieval
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    city-states of Tuscany Florence Pisa and
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    Siena were at war with each other
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    this was war waged as much by money as
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    by men in Peter vanderheiden's battle of
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    the moneybags and strong boxes piggy
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    banks treasure chests and barrels full
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    of coins lay into one another with
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    Lance's and swords in a chaotic
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    free-for-all the Dutch verses inscribed
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    at the bottom read it's all for money
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    and goods this fighting and quarreling
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    but what they might just as easily have
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    said is that war is impossible if you
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    don't have the money to pay for it and
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    the way to do that the ability to
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    finance war through the bond market was
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    like so much else an invention of the
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    Italian Renaissance
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    rather than require their own citizens
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    to do the dirty work of fighting each
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    city hard military contractors
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    condottieri who raised armies to annex
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    land and Luke treasure from the others
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    among the condottieri of the 13 60s and
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    13 70s one stood head and shoulders
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    above the others
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    this is his portrait in Florence's Duomo
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    earth thank you from a grateful public
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    unlikely though it may seem this master
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    mercenary was an Essex boy so skillfully
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    did he wage war that the Italians called
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    Sir John Hawkwood Giovanni Acuto John
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    the acute
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    this castle was one of many pieces of
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    prime real estate the Florentines gave
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    him as a reward for his services
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    but Hawkwood was a mercenary who was
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    willing to fight for anyone who'd pay
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    him
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    Milan Padua Pisa or the Pope
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    these dazzling frescoes in Florence's
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    palazzo vecchio show the armies of pisa
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    and florence clashing in 1364 at that
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    time hawkwood was fighting on the side
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    of pisa but 15 years later he'd switched
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    sides
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    why because florence was where the money
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    was the cost of these incessant wars
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    plunged Italy's city-states into crisis
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    expenditures even in years of peace were
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    running at double or more tax revenues
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    to pay the likes of Sir John Hawkwood
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    Florence was drowning in deficits this
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    wonderful document in the Florentine
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    State Archives shows how the city's debt
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    had exploded from around fifty thousand
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    florins at the beginning of the 14th
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    century to five million by 14:27 it was
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    quite literally a mountain of debt hence
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    the name the Monti communiy but from who
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    look at the Florentines possibly have
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    borrowed such a vast sum the answer is
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    right here from themselves
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    it was a revolutionary idea that would
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    change the world of money forever rather
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    than paying direct tax citizens were now
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    effectively obliged to lend money to
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    their own government
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    [Music]
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    in return for these forced loans they
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    received interest these debt instruments
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    simple lines in a ledger were the
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    original government bonds and the
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    wonderful thing about them was that if
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    you needed your money in a hurry you
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    could sell your bonds to other citizens
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    they were liquid assets what this record
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    tells us is how Florence turned its
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    citizens into its biggest investors this
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    what I'm expedient marked the birth of
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    the modern bond market everyone was a
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    winner bonds had saved the city-state
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    from bankruptcy the citizens were happy
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    earning their interest and the bond
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    market let them buy or sell as they saw
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    fit it seemed as if the problem of
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    public debt had been solved allowing the
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    citizens of Florence to turn their minds
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    to higher things but there was just one
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    problem
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    with this brilliant idea
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    there was a limit to how many more or
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    less unproductive walls could be waged
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    the larger the depths of the Italian
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    cities became the more bonds they had to
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    issue and the more bonds were issued the
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    less valuable they looked to investors
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    and that was exactly the sequence of
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    events in Venice
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    by the early 16th century the city had
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    suffered a series of military reverses
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    and a value of venetian bonds had taken
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    a hammering
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    at the nadir between 1509 and 15:29
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    Venetian Montaigne reverb bonds were
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    trading at just 10% of their face value
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    now if you buy a bond when war is raging
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    you're taking a risk the risk that the
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    city won't pay you back or pay your
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    interest on the other hand remember that
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    the interest is paid on the face value
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    of the bond so if you conveyor to just
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    10% of its face value you're earning a
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    handsome return of maybe 50% and that is
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    how the bond market works in a sense you
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    get returned for the risk you'll prepare
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    to take at the same time it's the bond
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    market that sets interest rates for the
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    economy as a whole if the state has in
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    effect to pay 50% then so do all the
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    other borrowers
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    the bond market had been invented to
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    help pay for it at his Wars but now it
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    was setting interest rates for everyone
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    its rise to par had begun over the next
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    two centuries bonds would come to rule
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    the world
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    [Music]
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    this house was built by the financial
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    dynasty that helped decide the Battle of
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    Waterloo the dynasty that produced the
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    man they called the Bonaparte of Finance
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    the Emperor of the 19th century bond
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    market he is master of unbounded wealth
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    he boasts that he is the arbiter of
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    peace and war and that the credit of
  • 00:11:07
    nations depends upon his nod ministers
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    of state are in his pay those words
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    spoken in 1828 by the radical Member of
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    Parliament Thomas Dunne scam were
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    describing Nathan Rothschild bond trader
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    extraordinaire and founder of the London
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    branch of what became the biggest bank
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    in the world
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    the bond market made the Rothschilds
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    stupendously rich so rich that they
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    could afford to build 41 stately homes
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    all over Europe this is number 29 pods
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    Dhin Manor in Buckinghamshire which has
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    been restored in all its gilded glory by
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    Jacob Rothschild Nathan's great-great
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    great-grandson well he was short fat
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    obsessive extremely clever highly
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    focused and I can't imagine he would be
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    a very pleasant person to her dealings
  • 00:12:18
    between around 1810 and 1836 the five
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    sons of Mayer Amschel Rothschild rose
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    from the obscurity of the Frankfurt
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    get'r to attain a position of unequaled
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    power in international finance it was
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    the third son Nathan who orchestrated
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    this family triumph from London
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    Evelyn de Rothschild is Nathan's
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    great-great grandson he recently retired
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    as chairman of Rothschilds the bank that
  • 00:12:48
    Nathan built he was very ambitious and
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    he moved to London and I think he was
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    determined I don't think he's half of
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    fools like him
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    maybe that's a family trait this is one
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    of the few surviving letters from Nathan
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    Rothschild to his brothers written as
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    always in udin Dodge
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    that was German transliterated into
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    Hebrew characters and it gives you an
  • 00:13:11
    idea what an extraordinary work ethic
  • 00:13:12
    the man had and how he tried to impose
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    it on his poor long-suffering brother's
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    just listen to this dear I'm sure I'm
  • 00:13:21
    writing you my opinion because it's my
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    damn duty to do so I read your letters
  • 00:13:28
    not once but often a hundred times
  • 00:13:30
    because you can well imagine that after
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    dinner I don't read books I don't play
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    cards I don't go to the theater my only
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    pleasure is my business
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    it was this phenomenal drive allied with
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    innate financial genius that propelled
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    Nathan from obscurity to mastery of the
  • 00:13:57
    London bond market once again however
  • 00:14:01
    the opportunity for a financial
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    breakthrough came from war on the
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    morning of June the 18th 1815 67
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    thousand British Dutch and German troops
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    under the Duke of Wellington's command
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    looked out across the fields of Waterloo
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    not far from Brussels towards an almost
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    equal number of French troops commanded
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    by the French Emperor Napoleon Bonaparte
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    the Battle of Waterloo was the
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    culmination of more than two decades of
  • 00:14:41
    intermittent conflict between Britain
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    and France but it was more than just a
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    battle between two armies it was also a
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    contest between rival financial systems
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    won the French based on plunder the
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    other the British based on debt to pay
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    for the war the British government had
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    sold an unprecedented amount of bonds
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    according to a long-standing legend the
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    Rothschild family made their first
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    millions by speculating on how the
  • 00:15:09
    outcome of the Battle of Waterloo would
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    affect the price of these bonds it was
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    this legend of Jewish profiteering that
  • 00:15:19
    a century later the Nazis did their best
  • 00:15:22
    to embroider in 1940 Joseph Goebbels
  • 00:15:27
    approved the release of this film dijo
  • 00:15:29
    chills it give us nathan is seen bribing
  • 00:15:35
    a french general to ensure that you have
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    Wellington's victory and then
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    deliberately misreporting the outcome of
  • 00:15:41
    the battle in London this triggers panic
  • 00:15:44
    selling of British bonds which Nathan
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    then snaps up at bargain basement prices
  • 00:15:56
    what happened here in 1815 was
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    altogether different far from making
  • 00:16:03
    money from Wellington's defeat of
  • 00:16:04
    Napoleon the Rothschilds were very
  • 00:16:06
    nearly ruined by us their fortune was
  • 00:16:09
    made not by Waterloo but despite it this
  • 00:16:15
    is how it really happened
  • 00:16:17
    selling bones to the public and raised
  • 00:16:20
    plenty of cash for the British
  • 00:16:21
    government
  • 00:16:22
    but neither bones nor banknotes were any
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    use to Wellington to provision his
  • 00:16:27
    troops and pay Britain's allies against
  • 00:16:29
    France he needed a currency that was
  • 00:16:32
    universally acceptable
  • 00:16:35
    Nathan Rothschild was given the job of
  • 00:16:37
    taking the money raised in the bond
  • 00:16:39
    market and delivering it to Wellington
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    as gold the success of this operation
  • 00:16:47
    would determine the fate of the warring
  • 00:16:49
    empires and of all Europe this letter
  • 00:16:56
    marks a turning point in the history of
  • 00:16:57
    both the Rothschild family and the
  • 00:16:59
    British government it's dated the 11th
  • 00:17:02
    of January 1814 and it's an order from
  • 00:17:04
    the Chancellor of the Exchequer to the
  • 00:17:06
    commissary in chief telling him to a
  • 00:17:09
    point Nathan Rothschild mr. Rothschild
  • 00:17:11
    as a British government agent
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    Nathan's job was to gather together as
  • 00:17:15
    much gold and silver as he could find on
  • 00:17:18
    the European continent and make sure
  • 00:17:20
    that it got to the Duke of Wellington in
  • 00:17:21
    his army who had just fought their way
  • 00:17:23
    out of Spain into the South of France it
  • 00:17:26
    was an operation that relied heavily on
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    the Rothschilds unique pan-european
  • 00:17:30
    credit network and also an Athens
  • 00:17:32
    ability to mobilize gold the way
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    Wellington could mobilize troops
  • 00:17:38
    [Music]
  • 00:17:39
    shifting such vast amounts of gold in
  • 00:17:41
    the middle of a war was hugely risky of
  • 00:17:43
    course yet from the Rothschilds point of
  • 00:17:46
    view the hefty Commission's they were
  • 00:17:48
    able to charge more than justified the
  • 00:17:50
    risks the Rothschilds soon became
  • 00:17:56
    indispensable to the British war effort
  • 00:17:58
    in the words of the British commissary
  • 00:18:01
    in chief Rothschild of this place has
  • 00:18:03
    executed the various services entrusted
  • 00:18:06
    to him in this line admirably well and
  • 00:18:08
    though a Jew we place a good deal of
  • 00:18:10
    confidence in him the Rothschilds were
  • 00:18:15
    so effective as war financiers because
  • 00:18:18
    they had a ready-made banking network
  • 00:18:20
    within the family
  • 00:18:22
    Nathan in London Amschel in Frankfurt
  • 00:18:25
    James in Paris Karl in Amsterdam and
  • 00:18:29
    Salomon roving wherever Nathan saw fit
  • 00:18:36
    if the price of gold was higher and say
  • 00:18:39
    Paris than in London James and Paris
  • 00:18:42
    would sell Nathan in London would buy I
  • 00:18:50
    think the edge
  • 00:18:52
    they were families like the bearings
  • 00:18:54
    with whom they were competing was that
  • 00:18:56
    they had their brothers in very
  • 00:18:59
    important financial centres and
  • 00:19:01
    countries now whether that was
  • 00:19:03
    premeditated whether they thought that
  • 00:19:05
    through as they got out together it's
  • 00:19:07
    not believed of them I just pass that
  • 00:19:09
    but that's what happened and once they
  • 00:19:11
    saw that it was an advantage right they
  • 00:19:13
    worked on that advantage in March 1815
  • 00:19:17
    Napoleon returned to Paris from exile in
  • 00:19:20
    Elba determined to revive his imperial
  • 00:19:22
    ambitions Rothschilds immediately ramped
  • 00:19:28
    up their gold operation buying up all
  • 00:19:30
    the bullion and coins they could lay
  • 00:19:32
    their hands on Nathan's reason for
  • 00:19:35
    buying this huge stock of gold was
  • 00:19:37
    simple he assumed that as with all
  • 00:19:40
    Napoleon's Wars
  • 00:19:41
    this would be a long one his gold would
  • 00:19:44
    be more and more sought-after and it
  • 00:19:46
    would rise in volume it proved to be a
  • 00:19:49
    near fatal miscalculation
  • 00:19:55
    wellington famously called the Battle of
  • 00:19:57
    Waterloo the nearest run thing you ever
  • 00:19:59
    saw in your life after a day of brutal
  • 00:20:08
    charges counter charges and heroic
  • 00:20:10
    defense the late arrival of the Prussian
  • 00:20:12
    army finally proved decisive
  • 00:20:16
    for Wellington it was a glorious victory
  • 00:20:20
    but not for the Rothschilds no doubt it
  • 00:20:25
    was gratifying to Nathan Rothschild to
  • 00:20:27
    be the first to hear the news of
  • 00:20:29
    Napoleon's defeat thanks to the
  • 00:20:31
    swiftness of the Rothschild couriers he
  • 00:20:33
    heard it fully 48 hours before major
  • 00:20:36
    Henry Percy delivered Wellington's
  • 00:20:38
    official dispatch to the British Cabinet
  • 00:20:40
    but no matter how early he heard it the
  • 00:20:43
    news from Waterloo was anything but good
  • 00:20:45
    from Nathan's point of view he had
  • 00:20:47
    bargained for something much more
  • 00:20:49
    protracted now he and his brothers were
  • 00:20:52
    sitting on top of a pile of cash that
  • 00:20:54
    nobody wanted to pay for a war that was
  • 00:20:57
    over with the coming of peace the great
  • 00:21:01
    armies that at fort napoleon could be
  • 00:21:03
    disbanded that meant no more gold for
  • 00:21:06
    soldiers wages and it meant the price of
  • 00:21:08
    gold which had soared during the war
  • 00:21:10
    would fall
  • 00:21:19
    Nathan was faced with heavy and growing
  • 00:21:22
    losses there was only one possible way
  • 00:21:27
    out Nathan could use the Rothschild gold
  • 00:21:31
    to make a massive and hugely risky bet
  • 00:21:34
    on the bond market July the 20th 1815
  • 00:21:46
    the evening edition of the London Korea
  • 00:21:49
    reported that Nathan had made great
  • 00:21:51
    purchases of stock meaning British
  • 00:21:54
    government bonds
  • 00:21:55
    Nathan's gamble was that the British
  • 00:21:57
    victory at Waterloo would send the price
  • 00:21:59
    of British bonds soaring upwards
  • 00:22:05
    Nathan bought and as the price of bonds
  • 00:22:08
    began to rise he kept on buying
  • 00:22:13
    despite his brother's desperate and
  • 00:22:15
    treaties to sell Nathan held his nerve
  • 00:22:20
    for another year
  • 00:22:24
    eventually in July 1817 with bond prices
  • 00:22:28
    up by 40%
  • 00:22:30
    he sold his holding his profits were
  • 00:22:35
    worth approximately six hundred million
  • 00:22:37
    pounds today
  • 00:22:39
    the Rothschilds had shown that bonds
  • 00:22:42
    were more than just a way for
  • 00:22:43
    governments to fund their Wars they
  • 00:22:45
    could also be bought and sold in a way
  • 00:22:47
    that generated serious money and with
  • 00:22:51
    money came power
  • 00:22:56
    myah Amschel Rothschild had repeatedly
  • 00:22:58
    admonished his five sons if you can't
  • 00:23:00
    make yourself loved make yourself feared
  • 00:23:03
    as they burst rode the mid 19th century
  • 00:23:05
    financial world as masters of the bond
  • 00:23:08
    market the Rothschilds were already more
  • 00:23:10
    feared than loved but now they had
  • 00:23:14
    become hated too
  • 00:23:17
    [Music]
  • 00:23:23
    the fact that the Rothschilds were
  • 00:23:25
    Jewish gave a new impetus to deep-rooted
  • 00:23:28
    anti-semitic prejudice just a few months
  • 00:23:32
    ago a colleague a man in my office who
  • 00:23:35
    collects posters found these rather this
  • 00:23:40
    particular rather extraordinary example
  • 00:23:43
    of anti-semitism in a stark form about
  • 00:23:46
    the rust Charles who have epitomized to
  • 00:23:50
    them and others at times are the most
  • 00:23:53
    extreme forms of undesirable kept
  • 00:23:56
    capitalism as practiced by Jews it was
  • 00:24:01
    above all the Rothschild seeming ability
  • 00:24:03
    to permit or prohibit Wars that aroused
  • 00:24:06
    the most indignation you might have
  • 00:24:12
    thought that the Rothschilds actually
  • 00:24:14
    needed war after all some of Nathan's
  • 00:24:17
    biggest deals had been produced by war
  • 00:24:19
    and if it hadn't been for war 19th
  • 00:24:21
    century states wouldn't have needed to
  • 00:24:23
    issue any bonds for the Rothschilds to
  • 00:24:25
    buy and sell but the trouble with war
  • 00:24:28
    and even more so with revolution was
  • 00:24:30
    that it increased the risk that a debt
  • 00:24:32
    estate might fail to meet its
  • 00:24:34
    commitments and that hid the price of
  • 00:24:36
    existing bonds but the mid 19th century
  • 00:24:39
    the Rothschilds were no longer mere
  • 00:24:41
    traders they were fund managers
  • 00:24:43
    carefully tending to a vast portfolio of
  • 00:24:46
    their own government bonds now they
  • 00:24:49
    stood to lose much more than to gain
  • 00:24:51
    from conflict
  • 00:24:53
    the Rothschilds had helped decide the
  • 00:24:55
    outcome of the Napoleonic Wars by
  • 00:24:56
    putting their financial weight behind
  • 00:24:58
    Britain now they would help decide the
  • 00:25:00
    outcome of the American Civil War by
  • 00:25:04
    choosing to sit on the sidelines once
  • 00:25:09
    again it was the Masters of the bond
  • 00:25:11
    market who would be the arbiters of war
  • 00:25:15
    [Music]
  • 00:25:27
    [Applause]
  • 00:25:31
    fifty years after the Battle of Waterloo
  • 00:25:33
    and on the other side of the world
  • 00:25:35
    another great war would be decided by
  • 00:25:38
    the power of the bond market but this
  • 00:25:43
    time it would be the vanquished who made
  • 00:25:45
    the big bet and lost
  • 00:25:49
    [Applause]
  • 00:25:59
    the traditional view is that the key
  • 00:26:01
    turning point in the American Civil War
  • 00:26:04
    came in June 1863 two years into the
  • 00:26:07
    conflicts that was the month when Union
  • 00:26:10
    forces captured Jackson the Mississippi
  • 00:26:12
    State Capitol and forced a Confederate
  • 00:26:14
    Army to retreat westward to Vicksburg
  • 00:26:16
    their backs to the Mississippi River
  • 00:26:21
    surrounded with Union gunboats
  • 00:26:23
    bombarding their positions from behind
  • 00:26:25
    the southerners held out for a month
  • 00:26:27
    before finally laying down their arms
  • 00:26:33
    after Vicksburg the Mississippi was
  • 00:26:35
    firmly in the hands of the north the
  • 00:26:38
    South was literally split in two yet
  • 00:26:46
    this military setback wasn't the
  • 00:26:48
    decisive factor in the South's
  • 00:26:50
    ultimate defeat the real turning point
  • 00:26:52
    came earlier and it was financial
  • 00:27:00
    200 miles downstream from Vicksburg
  • 00:27:02
    where the Mississippi joins the Gulf of
  • 00:27:04
    Mexico lies the Port of New Orleans
  • 00:27:12
    this is fort pike built after 1812 to
  • 00:27:17
    protect New Orleans from a future
  • 00:27:19
    British attack but 50 years later it
  • 00:27:22
    wasn't able to protect the south from a
  • 00:27:24
    northern attack when captain David
  • 00:27:26
    Farragut seized New Orleans on April the
  • 00:27:29
    28th 1862 it was a crucial moment in the
  • 00:27:33
    Civil War because New Orleans was the
  • 00:27:35
    principal outlet for the South's most
  • 00:27:37
    important export cotton without control
  • 00:27:45
    over the cotton trade the South's cause
  • 00:27:47
    was doomed because cotton had become the
  • 00:27:51
    essential ingredient in an ambitious
  • 00:27:53
    scheme to bring the bond market into the
  • 00:27:56
    war
  • 00:27:59
    [Music]
  • 00:28:00
    like the Italian city-states 500 years
  • 00:28:03
    before the Confederate Treasury had
  • 00:28:05
    initially raised money for the war by
  • 00:28:07
    selling bonds to its own citizens but
  • 00:28:13
    there was a finite amount of capital
  • 00:28:14
    available in the south to survive the
  • 00:28:18
    Confederacy looked to Europe in the hope
  • 00:28:21
    that the world's greatest financial
  • 00:28:22
    dynasty might help them beat the north
  • 00:28:25
    as they had helped Wellington beat
  • 00:28:27
    Napoleon
  • 00:28:32
    initially the confederacy had grounds
  • 00:28:35
    for optimism in new york the rothschilds
  • 00:28:38
    agent was sympathetic having opposed the
  • 00:28:40
    north leader Abraham Lincoln in the
  • 00:28:42
    presidential election of 1860 but still
  • 00:28:52
    the Rothschilds hesitated lending to the
  • 00:28:56
    British government to help defeat
  • 00:28:57
    Napoleon had been one thing but buying
  • 00:29:00
    bonds from a bunch of breakaway southern
  • 00:29:02
    slave states seemed a risk too far the
  • 00:29:07
    Rothschilds decided to stay out
  • 00:29:15
    yet despite this setback the Confederate
  • 00:29:19
    government had an ingenious trick up
  • 00:29:20
    their sleeves the trick like the sleeves
  • 00:29:23
    themselves was made of cotton the
  • 00:29:31
    South's idea was to use cotton as
  • 00:29:33
    collateral to back its bonds investors
  • 00:29:36
    would be comforted to know that even if
  • 00:29:38
    the interest payments dried up they
  • 00:29:40
    could still demand their cotton instead
  • 00:29:45
    the South's agents went to work selling
  • 00:29:47
    the bonds in the financial centers of
  • 00:29:49
    Europe
  • 00:29:54
    when the Confederacy tried to market
  • 00:29:56
    conventional bonds in European financial
  • 00:29:59
    centres like Amsterdam's investors
  • 00:30:01
    wouldn't touch them with a bargepole but
  • 00:30:03
    when an obscure French firm named Emil
  • 00:30:06
    airliner and company offered cotton
  • 00:30:08
    backed bonds it was a completely
  • 00:30:10
    different story the key to the success
  • 00:30:12
    of the airliner bonds was that they
  • 00:30:14
    could be converted into cotton at the
  • 00:30:17
    pre-war price of six pence a pound these
  • 00:30:22
    cotton bonds formed the basis of the
  • 00:30:24
    South's new financial strategy if they
  • 00:30:27
    could restrict the supply of cotton its
  • 00:30:30
    value and the value of the bonds would
  • 00:30:32
    increase at the same time the
  • 00:30:35
    Confederates set out to use cotton to
  • 00:30:37
    blackmail the most powerful country in
  • 00:30:39
    the world Britain
  • 00:30:45
    [Music]
  • 00:30:55
    in 1816 the Port of Liverpool was the
  • 00:30:58
    principal gateway for imports of cotton
  • 00:31:01
    to the British textile industry then the
  • 00:31:03
    mainstay of the Victorian industrial
  • 00:31:05
    economy more than 80 percent of the
  • 00:31:07
    cotton came from the southern United
  • 00:31:09
    States
  • 00:31:10
    now that gave the Confederate leadership
  • 00:31:12
    hope that they had the leverage to bring
  • 00:31:14
    in Britain on their side in the Civil
  • 00:31:17
    War to ratchet up the pressure they
  • 00:31:19
    decided to impose an embargo on all
  • 00:31:21
    shipments of cotton to Liverpool for a
  • 00:31:28
    while the South's strategy worked
  • 00:31:29
    brilliantly cotton prices soared so did
  • 00:31:33
    the value of the Confederates cotton
  • 00:31:35
    backed bonds and the cotton embargo
  • 00:31:39
    devastated the British economy mills
  • 00:31:42
    were forced to lay off workers
  • 00:31:44
    eventually in late 1862 production
  • 00:31:48
    orbits east
  • 00:31:55
    this cotton mill and style south of
  • 00:31:58
    Manchester employed around 400 workers
  • 00:32:00
    but that was just a fraction of the
  • 00:32:02
    500,000 people employed by king cotton
  • 00:32:05
    across Lancashire obviously with no
  • 00:32:07
    cotton there was nothing for people to
  • 00:32:09
    do by the end of 1862 half the entire
  • 00:32:13
    workforce of Lancashire had been laid
  • 00:32:15
    off a quarter of the population was on
  • 00:32:17
    poor relief they called it the cotton
  • 00:32:20
    famine but this really was a man-made
  • 00:32:22
    famine Britain was in the doldrums and
  • 00:32:29
    the South's cotton bombs were riding
  • 00:32:31
    high yet the South's ability to
  • 00:32:34
    manipulate the bond market depended on
  • 00:32:37
    one overriding condition that investors
  • 00:32:40
    could be sure of taking physical
  • 00:32:42
    possession of the cotton which
  • 00:32:43
    underpinned the bonds if the south
  • 00:32:45
    failed to make its interest payments
  • 00:32:52
    and that's why the fall of New Orleans
  • 00:32:55
    on April the 28th 1862 was the real
  • 00:32:58
    turning point in the American Civil War
  • 00:33:01
    now that the South's main port was in
  • 00:33:03
    Union hands any investor who wanted to
  • 00:33:06
    lay his hands on Southern cotton had to
  • 00:33:08
    run the union's formidable naval
  • 00:33:11
    blockade
  • 00:33:14
    [Music]
  • 00:33:22
    [Applause]
  • 00:33:26
    the Confederates had overplayed their
  • 00:33:28
    hand they had turned off the cotton tap
  • 00:33:31
    but then lost the ability to turn it
  • 00:33:34
    back on by 1863 the mills of Lancashire
  • 00:33:38
    had found new sources of cotton in China
  • 00:33:40
    Egypt and India and investors were
  • 00:33:43
    rapidly losing faith in the South's
  • 00:33:45
    cotton backbones the consequences for
  • 00:33:48
    the Confederate economy were disastrous
  • 00:33:51
    with its domestic bond market exhausted
  • 00:33:54
    and only to poultry foreign loans the
  • 00:33:57
    Confederacy really had no alternative
  • 00:33:59
    but to print paper dollars like these
  • 00:34:02
    ones here in the Louisiana State Museum
  • 00:34:03
    to pay for the war in all 1.7 billion
  • 00:34:08
    dollars worth now it's true that the
  • 00:34:11
    north also printed paper money but by
  • 00:34:13
    the end of the war its greenbacks was
  • 00:34:15
    still worth around fifty pre-war cents
  • 00:34:17
    whereas a southern gray back was down to
  • 00:34:20
    just one cent what's more with more and
  • 00:34:22
    more of this cash chasing fewer and
  • 00:34:24
    fewer goods inflation in the South
  • 00:34:27
    simply exploded by January 1865 the
  • 00:34:30
    price of some goods was up by a factor
  • 00:34:33
    of 90
  • 00:34:36
    the south had bet everything on
  • 00:34:38
    manipulating the bond market and had
  • 00:34:40
    lost it would not be the last time in
  • 00:34:43
    history that an attempt to do so would
  • 00:34:45
    end in ruinous inflation today the
  • 00:34:59
    global market for bonds is still bigger
  • 00:35:01
    than all the world stock markets put
  • 00:35:04
    together it's still a market that can
  • 00:35:07
    make or break governments does it
  • 00:35:14
    surprise you that its key player began
  • 00:35:16
    his money-making career in the casinos
  • 00:35:19
    of Las Vegas I was a blackjack player
  • 00:35:23
    I'm one of the first professional
  • 00:35:25
    blackjack players not to brag but in the
  • 00:35:28
    late 60s I went to Vegas and applied a
  • 00:35:32
    card counting system to to try and beat
  • 00:35:35
    Vegas
  • 00:35:39
    now this master of understatement is the
  • 00:35:42
    king of the bond market controller of
  • 00:35:44
    the biggest bond fund in the world so
  • 00:35:47
    what is this got to do with you and me
  • 00:35:49
    well when gross buyers or sells bonds it
  • 00:35:53
    doesn't just affect financial markets
  • 00:35:54
    and government policy it affects the
  • 00:35:57
    value of our pension funds and the
  • 00:36:00
    interest rates we pay on our mortgages
  • 00:36:02
    [Music]
  • 00:36:04
    there's only one thing that mr. bond is
  • 00:36:07
    afraid of and it's not Goldfinger rather
  • 00:36:10
    it's inflation the lethal danger that
  • 00:36:15
    inflation poses is that it undermines
  • 00:36:17
    the value of being paid a fixed rate of
  • 00:36:20
    interest in a bond if inflation goes up
  • 00:36:24
    to ten percent and the value of a fixed
  • 00:36:28
    rate interest is only five then that
  • 00:36:30
    basically means that the bond holder is
  • 00:36:32
    falling behind inflation by five
  • 00:36:34
    percents that's why at the first whiff
  • 00:36:38
    of higher inflation bond prices fall and
  • 00:36:41
    in some cases keep falling to see just
  • 00:36:50
    how bad things can get when the
  • 00:36:52
    inflation rate genie escapes from the
  • 00:36:54
    bottle you just have to look at the
  • 00:36:56
    example of Argentina
  • 00:37:04
    many Argentines date the steady decline
  • 00:37:07
    of their economic fortunes to a day in
  • 00:37:09
    February 1946 when the newly elected
  • 00:37:12
    President General Juan Domingo perón
  • 00:37:14
    came here to the central bank in Buenos
  • 00:37:17
    Aires
  • 00:37:18
    [Music]
  • 00:37:22
    he was astonished at what he saw there
  • 00:37:25
    is so much gold he marveled you could
  • 00:37:28
    hardly walk through the corridors
  • 00:37:31
    the very name Argentina suggests wealth
  • 00:37:34
    plenty it means
  • 00:37:36
    the land of silver the river flowing
  • 00:37:38
    past the capital is the Rio de la Plata
  • 00:37:40
    the silver River
  • 00:37:46
    [Music]
  • 00:37:48
    once upon a time there used to be two
  • 00:37:50
    Harrods in the world one in London
  • 00:37:52
    Knightsbridge and the other here avenida
  • 00:37:54
    florida in the heart of Buenos Aires
  • 00:37:56
    founded in 1912 this other Harrods is a
  • 00:38:00
    reminder that Argentina used to be a
  • 00:38:02
    rich country indeed at one time its per
  • 00:38:05
    capita income was just 18% less than
  • 00:38:07
    that of the United States investors who
  • 00:38:10
    flocked to buy Argentine bonds hope that
  • 00:38:12
    our gen Tina would become the United
  • 00:38:15
    States of South America while
  • 00:38:19
    Argentina's history since then is a
  • 00:38:20
    classic illustration that all the
  • 00:38:22
    resources and talent in the world can be
  • 00:38:25
    set at naught by chronic financial
  • 00:38:27
    mismanagement
  • 00:38:29
    [Music]
  • 00:38:38
    there have been many financial crises in
  • 00:38:40
    Argentine history but the crisis that
  • 00:38:43
    hit the country in 1989 was unparalleled
  • 00:38:57
    [Music]
  • 00:39:01
    at the beginning of February the country
  • 00:39:03
    was suffering one of the hottest summers
  • 00:39:05
    on record in Buenos Aires the
  • 00:39:09
    electricity system just couldn't cope
  • 00:39:11
    five-hour par cuts were commonplace
  • 00:39:16
    but these as it turned out were the
  • 00:39:19
    least of Argentina's problems as is
  • 00:39:23
    almost always the case there were
  • 00:39:25
    several well trodden steps to monetary
  • 00:39:27
    health it's that one the government
  • 00:39:31
    spends more much more than it can raise
  • 00:39:33
    in taxation usually but not always it's
  • 00:39:36
    because of a war in Argentina's case
  • 00:39:39
    there were two one a civil war between
  • 00:39:41
    generals on the left in the 1970s the
  • 00:39:44
    other a foreign war against Britain over
  • 00:39:46
    the Falkland Islands in 1982 by 1989 the
  • 00:39:50
    financial system was about ready to blow
  • 00:39:54
    by February inflation had already
  • 00:39:57
    reached 10 percent per month
  • 00:40:02
    banks were ordered to close as the
  • 00:40:04
    governor tried to lower interest rates
  • 00:40:06
    and prevent the currency's exchange rate
  • 00:40:08
    from collapsing
  • 00:40:11
    it didn't work in just a month the
  • 00:40:15
    Austral fell a hundred and forty percent
  • 00:40:17
    against the dollar
  • 00:40:20
    at the same time the World Bank froze
  • 00:40:23
    lending to Argentina saying that the
  • 00:40:25
    government had failed to tackle the root
  • 00:40:27
    cause of inflation a bloated public
  • 00:40:29
    sector deficit with no cheap loans
  • 00:40:32
    forthcoming from the World Bank the
  • 00:40:34
    government tried to finance its deficit
  • 00:40:36
    by selling bonds to the public but
  • 00:40:39
    investors were hardly likely to buy
  • 00:40:40
    bonds with the prospect that their real
  • 00:40:42
    value would be wiped out by inflation in
  • 00:40:44
    just a matter of days nobody was buying
  • 00:40:47
    the government was running out of
  • 00:40:49
    options
  • 00:40:52
    in April furious customers overturned
  • 00:40:56
    shopping trolleys after one supermarket
  • 00:40:58
    announced over the loudspeaker that
  • 00:41:00
    prices were being raised by 30 percent
  • 00:41:02
    immediately shops emptied of goods as
  • 00:41:08
    owners weren't making enough money to
  • 00:41:09
    buy a new stock
  • 00:41:14
    misuk muy Malo muy Malo
  • 00:41:19
    porque a la mañana tenía un precio
  • 00:41:21
    mediodía tenías Otranto si no podían
  • 00:41:24
    vender Corky la gente / dia los buenos
  • 00:41:26
    aires / da show Vindhya Lomond Abba lo
  • 00:41:29
    vendhya un precio Alicia GABA otro y la
  • 00:41:32
    continuo tres cuatro veces en el dia
  • 00:41:34
    tambi abba los precios government bond
  • 00:41:38
    prices plunged as fears rose dat the
  • 00:41:40
    central bank's reserves were running out
  • 00:41:43
    with no foreign loans and no one willing
  • 00:41:46
    to buy bonds there was only one thing
  • 00:41:48
    left for an increasingly desperate
  • 00:41:49
    government to do get the central bank
  • 00:41:52
    literally to print more money if they
  • 00:41:54
    couldn't even get back right
  • 00:41:58
    [Music]
  • 00:42:01
    on Friday April the 28th Argentina
  • 00:42:04
    literally ran out of money it's a
  • 00:42:09
    physical problem
  • 00:42:10
    the central bank vice president told a
  • 00:42:12
    news conference what he meant was that
  • 00:42:16
    Argentina's Mint had run out of paper to
  • 00:42:19
    print new notes and the printers had
  • 00:42:22
    gone on strike
  • 00:42:22
    [Music]
  • 00:42:26
    I don't know how we're going to do it
  • 00:42:34
    but the money has got to be there on
  • 00:42:36
    Monday he declared
  • 00:42:42
    yet the faster the printing presses
  • 00:42:44
    rolled the less the money was worth the
  • 00:42:48
    government was forced to print higher
  • 00:42:49
    and higher denominations of notes in May
  • 00:42:53
    the price of coffee went up by 50% in a
  • 00:42:56
    week
  • 00:42:58
    farmers stop bringing cattle to market
  • 00:43:00
    as the price for one cow was now the
  • 00:43:02
    same as for three pairs of shoes
  • 00:43:16
    by June 1989 inflation Argentina had
  • 00:43:20
    reached a monthly rate of 100 percent an
  • 00:43:23
    annual rate of roughly 12,000 percent to
  • 00:43:26
    put that into concrete terms if you
  • 00:43:28
    wanted to go out for dinner in Buenos
  • 00:43:30
    Aires in a Saturday night in May you'd
  • 00:43:32
    pay ten thousand Australia's bye dude
  • 00:43:35
    you'd have to pay twenty thousand for
  • 00:43:38
    the same meal and by the following month
  • 00:43:41
    it would take sixty thousand you've
  • 00:43:44
    heard of A Fistful of Dollars well you
  • 00:43:45
    needed a drawer full of Australia's just
  • 00:43:48
    to buy a square meal in June popular
  • 00:43:58
    frustration erupted in two days of
  • 00:44:00
    intense rioting and looting by hungry
  • 00:44:02
    mobs at least 14 people died
  • 00:44:09
    in a country were a steak and a bottle
  • 00:44:11
    of wine were on practically every table
  • 00:44:13
    every day thousands were eating in soup
  • 00:44:16
    kitchens or going hungry
  • 00:44:19
    [Music]
  • 00:44:20
    it's obvious enough who loses from
  • 00:44:23
    hyperinflation very rapidly rising
  • 00:44:26
    prices are bound to wipeout anybody
  • 00:44:28
    who's dependent on an income that's
  • 00:44:29
    fixed in cash terms groups like
  • 00:44:32
    academics and civil servants on
  • 00:44:34
    inflexible monthly salaries old-age
  • 00:44:36
    pensioners and particularly bondholders
  • 00:44:39
    living off the interest on their
  • 00:44:41
    investments when as IRAs is absolutely
  • 00:44:44
    full of antique shops like this one
  • 00:44:46
    Laden down with jewelry and watches and
  • 00:44:49
    cutlery all sold off by middle-class
  • 00:44:51
    families who just ran out of cash in the
  • 00:44:56
    1920s the great economist John Maynard
  • 00:44:58
    Keynes had predicted the euthanasia of
  • 00:45:01
    the bondholder anticipating that
  • 00:45:03
    inflation would eat up the paper wealth
  • 00:45:05
    of financial families like the
  • 00:45:07
    Rothschilds
  • 00:45:08
    [Music]
  • 00:45:10
    as inflation swept through the world in
  • 00:45:13
    the 1970s Keynes seemed to be proved
  • 00:45:15
    right in our time however we've seen a
  • 00:45:21
    miraculous resurrection of the
  • 00:45:22
    bondholder a comeback by Mr Bond
  • 00:45:25
    even in Argentina
  • 00:45:29
    the bond market is back terrifying
  • 00:45:32
    American officials as they try to fund a
  • 00:45:35
    massive financial bailout by you guessed
  • 00:45:38
    it selling billions of dollars of
  • 00:45:40
    freshly minted bonds the key to mr.
  • 00:45:44
    bonds revival has been a growth in the
  • 00:45:47
    number of bondholders which brings us
  • 00:45:54
    back to Italy for the bond market was
  • 00:45:58
    born 600 years ago
  • 00:46:06
    Italy is now a country with one of the
  • 00:46:08
    most rapidly ageing populations in
  • 00:46:10
    Europe in such a growing Society there's
  • 00:46:15
    a growing demand for fixed income
  • 00:46:17
    securities like bonds but there's also a
  • 00:46:19
    strong fear of inflation eating up the
  • 00:46:22
    real value of pensions and savings
  • 00:46:24
    central bankers suspected of being soft
  • 00:46:27
    on inflation have to answer to the
  • 00:46:29
    pensioners friend the bond market and
  • 00:46:33
    Treasury is planning to spend billions
  • 00:46:35
    to bail out banks that have gone bust in
  • 00:46:37
    the current credit crunch have to tread
  • 00:46:39
    warily too if they expect to raise the
  • 00:46:42
    money by selling yet more bonds in
  • 00:46:47
    modern Europe as in Renaissance Italy an
  • 00:46:50
    equilibrium has been struck between
  • 00:46:52
    political power and financial exposure
  • 00:46:55
    today as much as ever it seems it's the
  • 00:46:59
    bond market our old friend mr bond that
  • 00:47:02
    really rules the world
  • 00:47:05
    but what if rather than lending to
  • 00:47:07
    government's you prefer to use your
  • 00:47:09
    money to buy a share in a company would
  • 00:47:13
    that be more or less risky more or less
  • 00:47:16
    profitable in the next episode of the
  • 00:47:20
    ascent of money we'll discover why we
  • 00:47:21
    find it so hard to learn from financial
  • 00:47:24
    history despite nearly 300 years of
  • 00:47:28
    stock market bubbles and busts
  • 00:47:31
    [Music]
  • 00:47:36
    the next episode is next Monday from 8
  • 00:47:39
    here on channel 4 now next tonight a
  • 00:47:42
    brand new series and how lucky are we
  • 00:47:44
    our existence our very own human
  • 00:47:46
    survival all stems from catastrophes
  • 00:47:49
    that happened billions of years ago Tony
  • 00:47:52
    Robinson has the evidence
  • 00:47:54
    [Music]
タグ
  • Bond Market
  • Rothschild
  • Financial History
  • Economic Power
  • Bill Gross
  • War Financing
  • Inflation
  • Public Debt
  • Investment
  • Argentine Crisis