“You, sir, have the honor of adding a new vice to the military catalogue; and the reason, perhaps, why the invention was reserved for you, is, because no general before was mean enough even to think of it.”
- American revolutionary Thomas Paine, in an open letter to British commander-in-chief Sir William Howe, 1777
Although not quite a devastating new nerve agent or plague, the Redcoats’ unspeakable “military vice” was nonetheless the first instance of the deployment of an economic weapon capable of mass destruction. The British, of course, lost the American Revolutionary war – but their Continental currency counterfeiting operation was exceptionally successful; “I hope to see him hanged. He has done more damage than 10,000 men could have done.” (New Hampshire patriot John Langdon on Stephen Holland, a counterfeiter).
In 1781, the entire sum of $200,000,000 issued by the United States government was rendered worthless, at least partially due to British counterfeiting of Continental currency aboard the HMS Phoenix. It was the first instance of the deployment of such a weapon as a military tactic, but by no means the last; to this day, the monetary remnants of a Nazi counterfeiting operation lie at the bottom of an Austrian lake.
Two weeks into the second World War, the Reichssicherheitshauptamt (Reich Security Main Office) under the direction of Heinrich Himmler and Reinhard Heydrich, established a counterfeiting program of passports and other identity cards for the use of German intelligence operations in the war. Only by 1942 did the program, under the shrewd command of Bernhard Krüger, encompass the manufacture and distribution of counterfeit British (and, by 1944, American) currency, with the aim of inducing crippling hyperinflation in their economies and hampering the Allied war effort. Had Himmler’s initial efforts achieved the organisational efficiency of Krüger’s, World War II might have taken a different turn, suggests Holocaust scholar Marvin Hier. At any rate, one in three British banknotes in circulation was counterfeit[3] by 1945, despite only 10-15% of the counterfeited £134mn (£6bn by today’s standards) being estimated of a high enough standard to deploy. Like the American Revolutionary war, the Napoleonic conquest of Austria, and the American Civil war, counterfeit currency was being propagated to undermine the economic stability of the enemy, rather than for personal financial gain/profit. To date, Operation Bernhard is the “greatest forgery and counterfeiting enterprise of all time”, says Amstein, a leading authority on counterfeiting.
“It was the biggest; it delivered the most bogus money over the longest period of safety; it turned out the finest counterfeit notes ever seen; it had the world’s largest distribution network; it operated with the lowest overhead even though it had the greatest number of conspirators and prisoner employees’ – probably more than three hundred at its peak – and had the finest equipment ever assembled for a counterfeiting operation.”
- Murray Teigh Bloom, Money of Their Own: The Great Counterfeiters
The pre-war British monetary system had been a victim of its own success. Bank of England authorities were oblivious to the economic threat of Nazi forgeries, owing in part to the intricacies of £5, £10, £20, and £50 banknotes. Going into the war, British banknotes featured sophisticated security measures: artisanal watermarks and serial numbering system to prevent forgeries were printed on one side of multi-layered rag-paper (or linen paper). Until 1939, Pound Sterling in its paper form had not been successfully counterfeited, allowing the Bank of England to maintain a static design since 1855; “[the Bank] was a little complacent about the design of its notes and the production of them [the notes]” Despite this, the notes were exceedingly difficult to forge well enough “to fool anyone but an expert” (post-war report, Ruffner), let alone source the raw materials.
Alfred Naujocks – ‘the man who started the war’ – knew the counterfeiting operation would be an uphill battle. Sanctioned with a 2mn Reichsmark budget, Naujocks commissioned German chemical universities to analyse British banknotes chemically and physically, starting with the £5 note. With the help of Polish cryptographer Gwido Langer, the alpha-numeric serial code system was cracked; raw materials for the elusive rag-paper were traced and sourced back to Turkey. Despite the eventual procurement of around 200,000 £10 notes, this initial iteration of the counterfeiting operation, Operation Andreas, was ultimately unsatisfactory and decommissioned following Naujocks’ falling out with Heydrich in 1942.
Figure 1: Two sides of “Forgery of English 20 Pound Note: Operation Bernhard” (1937). Bulmash Family Holocaust Collection. 2014.1.321.
On 18th September 1939, Arthur Nebe, head of the Reichskriminalpolizeiamt (Nazi Germany’s central criminal investigation department), put forward in a secret meeting what Joseph Goebbels himself described as “einen grotesken Plan” (a grotesque plan), in a condemnation eerily reminiscent of Paine’s words to Howe. Counterfeiters would produce vast sums of British currency to distribute from the skies by Luftwaffe over densely populated areas to overheat the monetary supply, causing rapid inflation and destabilising the British – and, by virtue of Sterling’s status as a ‘supranational currency’ – Allied economies too. Six months after the clandestine Nazi high-command discussion, the British Secret Service approached PM Chamberlain to suggest the counterfeiting of Reichsmarks as a monetary weapon. Chamberlain, unsurprisingly, rejected the idea, reasoning that “if the Germans retaliated, we had obviously more to lose than they had” (Sterling was stronger than the Mark at the time). Churchill and Roosevelt, too, were unconvinced on the issue, ultimately concluding that any bogus Reichsmarks in German bank accounts would fall prey to Hitler’s extortion and the Nazi war machine. Of course, the counterfeit notes never found their way onto British streets, but they were used to finance black-market arms deals or to exchange genuine foreign currencies with neutral parties in a last-ditch attempt to salvage Krüger’s operation.
The prisoners of Block 19, Sachsenhausen concentration camp – “Krüger’s men’ as they came to be known through Lawrence Malkin’s investigative ‘true-story’ account of the same name – knew their lives depended on their ability to rapidly forge British banknotes. Demarcated by barbed wire from the rest of the camp, Krüger’s operation was so clandestine that the director of Sachsenhausen was himself unaware of the goings-on in the two barracks of Block 18 and 19. Inside, the number of prisoner-turned-forgers rose from 12 to 144 during the operation’s two-year period, each of whom was specialised in photography, printing, engraving, binding, and so on. The US dollar was near-perfect by mid-1945, and faux British banknotes totalled up to £300 million before production ground to a halt. Krüger’s legacy is altogether more contested regarding his involvement in Operation Bernhard; Lawrence Malkin writes that the prisoners of Block 19, Sachsenhausen were “kept in a semblance of health”. CIA historian Kevin Ruffner credits Krüger with the preferential treatment of his forgers, offering “better food and other privileges” in return for his counterfeits. Yet prisoner-forger Adolf Burger claims that “Major Krüger was… a murderer just like everyone else, six weeks before the war ended he had six people shot just because they were sick. He couldn’t send them to hospital in case they said something about the operation, so he killed them.”
Ultimately, the banknotes didn’t fly (literally or figuratively); the aerial bombardment of British towns and cities with banknotes (or anything else for that matter) was rendered impracticable by the Royal Air Force’s dominance over the skies following the Battle of Britain. The Luftwaffe simply did not have the capacity for another Blitz-level aerial campaign. The final nail in the coffin for Operation Bernhard was the Soviet advance towards Berlin in the early months of 1945. ‘Krüger’s men’, the prisoners at the heart of the operation, had to be evacuated with their machinery from Sachsenhausen to Mauthausen camp in Austria. By mid-April, they had shifted west again to an underground factory which never came to fruition at Redl-Zipf. Just weeks later, the SS resorted to dumping crates stacked with millions of counterfeit pounds into the depth of Lake Toplitz, since labelled the “garbage can of the Third Reich”. Krüger ordered his SS guards to execute every last one of the Block 19 prisoners and fled the scene. The timely advance of Patton’s 4th Armed Division of the U.S. army spared the prisoners, but the banknotes were already 300ft deep. Banknotes over bombs never came to fruition, but Operation Bernhard certainly managed to strike fear into British intelligence:
“The German object of destroying confidence aboard in Bank of England notes has been achieved. At present no one will accept a Bank of England note in any neutral country of Europe except at a very large discount.”
- MI5, 1945
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Tiley, M. (2007) ‘The Third Reich’s Bank of England’, History Today.
Malkin, L. (2008) Krueger’s men: The Secret Nazi Counterfeit Plot and the Prisoners of Block 19. New York, NY: Back Bay Books/Little, Brown and Co.
Bloom, Murray Teigh. (1957) ‘Money of Their Own: The Great Counterfeiters’ New York: Scribner.
Cooley, John K. (2008) Currency Wars: How Forged Money Is the New Weapon of Mass Destruction. New York: Skyhorse Publishing.
Cook, A. (2024) ‘Operation Bernhard, Bank of England’. Available at: https://www.bankofengland.co.uk/museum/online-collections/blog/operation-bernhard
Fürbach, M. (2015) ‘70 years from the largest ever counterfeiting of banknotes: Operation Bernhard’, Schweizer Papierhistoriker.
Newman, Eric P. (n.d.), ‘The Successful British Counterfeiting of American Paper Money During the American Revolution’.
Rhodes, K. (2012) ‘The Counterfeiting Weapon’, Federal Reserve Bank of Richmond Working Papers. Available at: https://catalog.archives.gov/id/169223651
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