8 - Money,
Speculation & Gambling
“If one were to lead a
stranger through the streets of Amsterdam and ask him where he was, he
'Among speculators,' for there is no corner in the city where one does
not talk shares.”
de la Vega, in Confusion de Confusiones,
Today, as the bankruptcy
of our current financial system becomes more and more apparent, a
growing number of critics have attacked what they call the
“transformation of our financial system into a casino economy.” Many counterpose the
recent binge of financial speculation and the excesses of globalization
to what they profess is the “normal” functioning of the financial
markets and the economy. But they are wrong. The speculation, the
economic looting, and the spread of slave labor are the nature of the Empire, and its
modern representation in the British system of Free Trade.
What makes people think we had a “normal
economy” in the 1950s and 1960s, is that we had Franklin Roosevelt 20
years earlier. And it was Roosevelt’s revival of the anti-empire
American System of Economics, and his regulatory measures such as the
Act, which kept the Empire at bay until 1971.
There is either the Empire or the American System. There is no “normal
economy” at some vague location in-between.
Originating in Venice, and aided by the works of the Salamancans, among
others, during the 17th century, the oligarchy
initiated a vast revolution in financial policy. We have already looked
at a few of those institutional changes. Here we will look at some of
the content, to get at the essence of the insane oligarchical view of
what constitutes wealth. We have already touched on the creation of the
radical notion of “property rights” and the invention of the insane
magical notion of “money” as creations of the oligarchy. Here we will
look at these matters a little bit further, and how they were used to
create the functional institutions of the Empire.
– the Laboratory
Antwerp Bourse opened in 1531. Initially, most of
financial contracts involved trading in hard commodities, like wool,
in a manner not dissimilar to the earlier famous Champagne Fairs. But
as time went on, the activity of the Bourse was
over to almost entirely purely speculative investments. This
transformation included the invention of new financial instruments
such as futures contracts and other forms of financial derivatives.
Later, in Amsterdam, these Antwerp innovations would be taken much,
of the Antwerp innovations was that Bills of Exchanges, which had
already existed in Venice, Genoa and other locations, were made
transferable. This led the practice of discounting Bills, and the
development of a speculative money market in short term paper. Two
Imperial edicts gave legal protection on the negotiability of these
in Antwerp, also, that “futures trading” (a claim on the price of
a commodity or security transaction to occur at some future date)
became commonplace. A limited use of primitive futures contracts had
already been used at the commercial fairs of the 15th
16th centuries, but it was at Antwerp that
futures became routine. It was at Antwerp, as well, that “option
contracts” (the right to speculate on something you don’t
actually own) were invented. Later, after 1600, options trading was
to become a dominant practice of the Amsterdam market. This
Antwerp/Amsterdam creation of options contracts was the mother of all
of the purely financial derivatives trading that occurs today.
1570s, investments at the Antwerp Bourse were almost entirely
centered in purely speculative financial contracts. Speculators also
gambled on the rise and fall of currency exchange rates. A Bill of
Exchange, drawn at Antwerp was the most common commercial currency in
this activity was premised on an oligarchical-created notion that
wealth is defined by money, and that the markets were a way of
creating or stealing this wealth out of thin air. Money and other
financial instruments, which somehow seemed to magically exist in a
free marketplace, held the power to excite and enrich anyone clever
enough to possess them. Completely absent of course, was the
Commonwealth idea that real wealth stems from the deliberate
fostering of the creative capabilities of the individual human
members of society, and the power of those individuals to develop new
inventions and discoveries which can transform and truly enrich man’s
relationship with the universe.
the Antwerp Bourse was the testing ground for many
financial practices later adopted in Amsterdam, it was also merely a
financial exchange, located within the Hapsburg domains. Amsterdam,
conversely, was destined to become the financial capital of a
maritime empire, and the place where the true implications of the
Venetian-inspired Anglo-Dutch model could be realized.
had the Bourse; Amsterdam had the Dutch East India
the Amsterdam Exchange, and the Bank of Amsterdam, and it was in
Amsterdam that our current modern form of European Central Banking
technical standpoint, the single most important banking invention in
Amsterdam was that of Central Bank Money,
which is often described as the foundation of modern central banking
systems. This developed around the notion of a “unit of account,”
establishing a relationship of bank money (the privately issued notes
of the bank) to specie, with the value of the bank money eventually
becoming the actual legal unit of account and the basis for the final
settlement of all contracts and accounts. When the Wisselbank
ended the right of specie withdrawal in the 1680s, the ascendancy of
fiat bank money was complete. The financial paper of the Central
Bank was legally, the official money of the realm, so to speak.
this did was was to
system whereby the power of money replaced any
concept of the
Common Good as the governing principle of society. It also took the
power over currency and credit out of the hands of the sovereign
government. The issues involved are not technical; they are
axiomatic. This concept of the pre-eminence of money is at the heart
of the modern System of Central Banking. It is a system based on
money, usury, and debt, where both the people, as well as the
government, are controlled through the Central Bank’s power over
money and debt. The purpose of the debt is not to finance physical
economic development for the benefit of the Common Good, but to
perpetuate the wealth and governing power of the financial oligarchy.
second half of the 17th century, the Wisselbank
amassed an enormous concentration of financial power, which gave them
the ability to expand the Empire and finance wars on a scale never
center of the new Empire’s activity in financial speculation was
the Amsterdam Bourse. The Bourse
was a money market, a
finance market, and a stock market. Practices included futures,
options, margin loans, financial leverage, speculation in
foreign securities, and trading in outright derivatives (known as
trading did not become a widespread financial practice in Amsterdam
until the 1630s, and its emergence was connected directly to the
dividend policy of the VOC. From 1603 to 1620, the VOC only paid
dividends to shareholders 3 times, but by 1635 they began paying
yearly dividends, with annual returns ranging from 15 to 65 percent.
These yearly dividends then became the basis for widespread betting
(options) on what they would eventually be worth.
clarify matters, the difference between the three main types of
contracts traded at the Amsterdam Bourse is as
1650, a 21st century-style market in options
including “puts” (prime a recevoir) and “calls” (prime
a delivrer), was widespread. One historian has called it a
“mature speculative market.” The Tulipmania of 1637-1638 was
based almost entirely on futures and options trading, and by 1688, a
full-blown derivatives market existed in Amsterdam. Many of these
Dutch practices were later imported into London in the 1690s.
contract: an obligation to take delivery of a commodity at a
specific date, at a fixed price. (this can be a physical commodity or a
contract: essentially a transferable Forward contract, where
the original buyer may sell his claim, turning the contract into a
contract: the right (not obligation) to
sell or buy a contract at a specific date, at an agreed price. This
allowed investors to take market positions at a fraction of the cost.
These were also transferable.
an eyewitness account of the Amsterdam speculative market was
published under the title of Confusion de Confusiones.
Written in Spanish, it was the work of Joseph de la Vega, a Sephardic
Jew. The work is a series of four dialogues between a Merchant, a
Philosopher, and a Speculator, and, in it, De la Vega describes in
detail the various types of transactions on the Amsterdam market,
De la Vega’s account, the philosophy of the Amsterdam market is
given by the Speculator, in the first dialogue, where he says:
purchases and sales of real stock
sales, where the buyer puts up only 20 percent
Shares” - speculating on the performance of the market or
individual shares, without actually owning anything. Duction shares
were purely fictitious, gambling on the future course of the market.
best and most agreeable aspect of the new business is that one can
become rich without
risk, indeed without endangering your capital.”
Black and Myron Scholes
could not have said it better.
1638, simultaneous with the creation of the Amsterdam speculative
market, the first government-sponsored gambling casino in European
history opened in Venice – the famous Ridotto.
surprisingly, Venice had been the center of European gambling
since at least the 13th century. In 1229, the
a doge was determined by a throw of dice. Open gambling flourished
during the Carnival season, which often lasted from October through
March. During the 14th century the development
games emerged first in Venice and spread from there to other cities.
Venice also pioneered in the creation of private lotteries, which
then were copied throughout Italy and in France and Flanders.
was casino gambling that made Venice unique. Casino gambling was
invented in Venice. In fact, the word - casino -
appears in Venice. By the mid-16th century
private gambling houses, known as ridotti, were
throughout Venice. Towards the end of the century many of these
ridotti had changed from places where individuals
against each other, to establishments where bettors played against
the “house,” the method still in use in present-day Las Vegas.
the Venetian Grand Council voted to establish the first
government-owned gambling house in Europe. Known simply as the
Ridotto, it was housed at the San Moise Palace which
by the Venetian nobleman Marco Dandolo, a descendant of the leader of
the fourth crusade. At the Ridotto, aristocrats,
pimps, usurers, degenerate gamblers, and many foreign visitors rubbed
shoulders. All wore masks to protect their identity. In addition to
the gambling, a room called the “Chamber of Sighs” provided a
place for sexual liaisons.
than a gambling hall, the Ridotto functioned as an
for the corruption and blackmail of foreign guests. Of the many
thousands who frequented it’s gaming tables, perhaps the two most
famous were the Venetian spy Giacomo Casanova, and the speculator
John Law. In 1768 the Ridotto was enlarged, using
confiscated from religious convents. In 1774 the Venetian Senate
voted to close the Ridotto, after a large number of
Venetian nobility had gambled themselves into poverty. However, this
only led to a proliferation of private casinos.
expansion of gambling took place in France during the reign of Louis
XIV, when games like roulette, baccarat and blackjack became popular.
During the Regency of Louis XV, when the finances of France were
turned over to John Law, licensed gambling houses spread all over
Paris, and of course, Law, himself, imported the gambling methods of
manipulation of the finances of the French nation. Law spent his
last years back in Venice, a regular at the gambling tables, and in
1729 he was buried in a plot of land adjacent to the Ridotto.
should be obvious, at this point in the story, that the gambling at
Venice’s Ridotto and the financial speculation at
Amsterdam Bourse, are identical. They both rest on the idea that
“wealth” is defined by that magical thing called money, and that
the accumulation of wealth has no connection to any physical economic
process. In methodology, they are also both based on the linear
statistical mathematical methods introduced by Paolo Sarpi.
the first modern writings on gambling theory was Sopra
Scoperte (Concerning an Investigation on
written by Sarpi’s puppet Galileo Galilei. In this work, Galileo
employs a method of statistical probability to attempt to determine
the outcome (odds) of various combinations of a dice throw, using a
set of three dice. During this formative period of the Anglo-Dutch
financial system, two other major works on gambling theory also
appeared. These were Girolamo Cardano’s Liber de
(The Book on Games of Chance), and The
Chances, written by Abraham de Moivre.
works, which have experienced a recent revival in popularity in our
current era of unregulated hedge funds and derivatives trading, were
all based on the idea that occurrences in the real world can be
reduced to linear mathematical formulas. This methodology all comes
from Sarpi, Galileo, and Descartes. Not only is it the basis for all
of the “formulas” -- like the infamous Black-Scholes Formula -- used
today in the speculative derivatives market, it also formed
the basis for the oligarchical creation of modern insurance
companies. And, of course it is the exact same method used today by
professional card counters in Las Vegas and Atlantic City.
writings on gambling, particularly those of De Moivre, were also the
theoretical foundation for the creation of the modern insurance
One of the earliest works in this field was the aforementioned Value
of Life Annuities in Proportion to Redeemable Bonds,
Dutch leader Johann DeWitt. Additionally, between 1662 and 1724 a
series of works were written by De Moivre, William Petty, Edmund
Halley, and John Graunt. The mechanical-statistical method employed
by all of these writers led into what we would call today modern
probability theory, which is the basis for all financial speculation,
gambling and the actuarial tables of the insurance industry comes
from Sarpi’s notion of empiricism and sense certainty. Sarpi says,
that whether it be clamshells, dollar bills, or numbers, individual
empirical data can be counted, and formulas can be devised to predict
the outcome of any set of linear statistics. For Sarpi, this is the
real world of the senses. This is the opposite of Johannes Kepler’s
approach, that the real universe can only be
through scientific investigation that leads towards discoveries of
the actual non-linear underlying
principles which bound the conduct of that universe.
example of the difference in the two approaches is the discovery of
the calculus by Gottfried Leibniz, where he demonstrates that the
calculus is a representation of a lawfully-ordered principle of
creation, versus Isaac Newton’s fraudulent calculus, based on a
statistical approach, not dissimilar to earlier, failed, linear
attempts to square the circle. In the real world, the concrete
outcome of Sarpi’s methodology, is the delusion that the financial
markets can be used, predicted, and manipulated to amass more and
more wealth (countable money), regardless of what is going on in the
physical economy or the real state of the population. It is a
gambling addict’s chimera.
figures mentioned in this chapter, two are worth saying a little more
about, De Moivre and Petty. William Petty was wholly created by the
Sarpi networks around Francis Bacon and the Mersenne Circle. Throughout
the entirety of his career, Petty was supported by the
Cavendish family. This included financial backing from William
Cavendish, the First Duke of Newcastle, the same individual who
helped to organize the Mersenne network in Paris, and
political/scientific backing by William’s brother, the
mathematician Charles Cavendish.
knew many members of the Mersenne circle personally, but his closest
relation was with Thomas Hobbes. Through the Cavendish family, Petty
also became a rabid supporter of Francis Bacon and became a founding
member of the “Invisible College,” composed of Bacon’s
acolytes. His works abound with praise for Bacon, particularly in
the preface to his Anatomy of Ireland.
Not surprisingly Petty was also an enthusiastic champion of
free markets and usury.
de Moivre, a Huguenot immigrant to England, was another project of
the Cavendish family. After arriving in England, he was befriended
by the William of Cavendish who was a leader of the 1688 plot to
organize the takeover of England by William of Orange. Cavendish
provided De Moivre with employment and introduced him to Isaac
Newton. In 1697, through the sponsorship of Newton and Edmund
Halley, De Moivre became a member of the British Royal Society. In
1712 both De Moivre and Halley would play despicable roles in the
rigged Royal Society proceedings, which lyingly upheld Newton’s
plagiarism charges against Leibniz on the authorship of the calculus.
Moivre’s writings, particularly the 1756 revised edition of The
Doctrine of Chances, were very influential, and
extensively discussed and referenced by a new generation of Sarpi’s
descendent's, including Euler, Laplace, and others.