If the price of gold was higher in, say, Paris than in London, James in Paris would sell gold for bills of exchange, then send these to London, where Nathan would use them to buy a larger quantity of gold. The fact that their own transactions on Herries's behalf were big enough to affect such price differentials only added to the profitability of the business. In addition, the Rothschilds also handled some of the large subsidies paid to Britain's continental allies. By June 1814, Herries calculated that they had effected payments of this sort to a value of 12.6 million francs. 'Mr Rothschild', remarked the Prime Minister, Lord Liverpool, had become 'a very useful friend'. As he told the Foreign Secretary Lord Castlereagh, 'I do not know what we should have done without him . . .'. By now his brothers had taken to calling Nathan the master of the Stock Exchange.
After his abdication in April 1814, Napoleon had been exiled to the small Italian island of Elba, which he proceeded to rule as an empire in miniature. It was too small to hold him. On 1 March 1815, to the consternation of the monarchs and ministers gathered to restore the old European order at the Congress of Vienna, he returned to France, determined to revive his Empire. Veterans of the grande armée rallied to his standard. Nathan Rothschild responded to this 'unpleasant news' by immediately resuming gold purchases, buying up all the bullion and coins he and his brothers could lay their hands on, and making it available to Herries for shipment to Wellington. In all, the Rothschilds provided gold coins worth more than £2 million - enough to fill 884 boxes and fifty-five casks. At the same time, Nathan offered to take care of a fresh round of subsidies to Britain's continental allies, bringing the total of his transactions with Herries in 1815 to just under £9.8 million. With commissions on all this business ranging from 2 to 6 per cent, Napoleon's return promised to make the Rothschilds rich men. Yet there was a risk that Nathan had underestimated. In furiously buying up such a huge quantity of gold, he had assumed that, as with all Napoleon's wars, this would be a long one. It was a near fatal miscalculation.
Wellington famously called the Battle of Waterloo 'the nearest run thing you ever saw in your life'. After a day of brutal charges, countercharges and heroic defence, the belated arrival of the Prussian army finally proved decisive. For Wellington, it was a glorious victory. Not so for the Rothschilds. No doubt it was gratifying for Nathan Rothschild to receive the news of Napoleon's defeat first, thanks to the speed of his couriers, nearly
forty-eight hours before Major Henry Percy delivered Wellington's official despatch to the Cabinet. No matter how early it reached him, however, the news was anything but good from Nathan's point of view. He had expected nothing as decisive so soon. Now he and his brothers were sitting on top of a pile of cash that nobody needed - to pay for a war that was over. With the coming of peace, the great armies that had fought Napoleon could be disbanded, the coalition of allies dissolved. That meant no more soldiers' wages and no more subsidies to Britain's wartime allies. The price of gold, which had soared during the war, would be bound to fall. Nathan was faced not with the immense profits of legend but with heavy and growing losses.
But there was one possible way out: the Rothschilds could use their gold to make a massive and hugely risky bet on the bond market. On 20 July 1815 the evening edition of the London Courier reported that Nathan had made 'great purchases of stock', meaning British government bonds. Nathan's gamble was that the British victory at Waterloo, and the prospect of a reduction in government borrowing, would send the price of British bonds soaring upwards. Nathan bought more and, as the price of consols duly began to rise, he kept on buying. Despite his brothers' desperate entreaties to realize profits, Nathan held his nerve for another year. Eventually, in late 1817 , with bond prices up more than 40 per cent, he sold. Allowing for the effects on the purchasing power of sterling of inflation and economic growth, his profits were worth around £600 million today. It was one of the most audacious trades in financial history, one which snatched financial victory from the jaws of Napoleon's military defeat. The resemblance between victor and vanquished was not lost on contemporaries. In the words of one of the partners at Barings, the Rothschilds' great rivals, 'I must candidly confess that I have not the nerve for his operations. They are generally well planned, with great cleverness and adroitness in execution - but he is in money and funds what Bonaparte was in war.' To the Austrian Chancellor Prince Metternich's secretary, the Rothschilds were simply die Finanzbonaparten. Others went still further, though not without a hint of irony. 'Money is the god of our time,' declared the German poet Heinrich Heine in March 1841, 'and Rothschild is his prophet.'
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