Saturday 2011-09-17

High Financier by Niall Ferguson

Siegmund Warburg profited from Marshall Plan cash flows and the rebuilding of post-world-war-2 Europe.

Over the years, the Warburgs had developed a system of familial organization, the central principle of which was that, whatever the procreative fortunes of the family, and whatever the individual inclinations of its members, a certain number of male members should always pool their inherited wealth and treat it as the capital of the family firm.
-- Siegmund and His Cousins
The common interests of Besitz und Bildung (property and education) appeared gradually to have dissolved earlier barriers of belief and observance.
-- Siegmund and His Cousins
'This, my boy,' he was told, 'is the best club in London. We really ought to be paying a subscription instead of receiving a salary.' The puritanical visitor from Germany was appalled.
-- Rothschild's -- The First World Revolution
with total proprietary shareholdings that gave it a stake in nearly 60 percent of the country's long-distance routes, Kuhn Loeb could count on substantial dividend and interest income.
-- Prior to the Crash -- The First World Revolution
Paul Wallich, a director of the Deutsche Bank who had been born a Jew but had been baptized and who had married a Gentile, committed suicide in 1938 rather than endure further discrimination, just one victim of the wave of suicides that swept through the German-Jewish community after 1933.
-- Exile
In 1934 it was made clear to Gruenfeld just how little of this wealth he would be able to take with him if he emigrated. First, under the Aryanization programme, he and his father were bought out on the basis of the 1898 book value of their firm's assets. Then the 25 percent Reich Flight Tax had to be paid. After that, the remainder was converted into so-called blocked marks, which could be converted into foreign currency at around 10 percent of the official exchange rate. All that remained, as Gruenfeld later recalled, was '7.5 per cent of the value of the company 35 years earlier'.
-- Trading Against the Enemy
But it soon became clear that dollar loans (Marshall Plan) could themselves be used to encourage Europeans to cooperate. The most obvious example was the creation of the European Payments Union in July 1950, which linked together the international payments systems of the recipients of American aid.
-- The Financial Roots of European Integration
Monetary tightening failed to tame inflation, but it did succeed in bringing house price inflation back down to single digits. The least intended consequence of all this was a stock-market crash. By the end of 1974, the FT All-Shares index was down a wrenching 69 percent from its peak. Adjusted for inflation, the losses were even greater -- comparable, indeed, with the losses suffered by American investors in the Great Depression.
-- Expensive Lessons