What Were the Safe Assets During the Two World Wars
“Buy when there’s blood in the streets.” This saying is attributed to Baron Nathan Mayer Rothschild from the famous 19th-century banking dynasty. According to legend, he amassed a fortune by buying stocks after the Battle of Waterloo when everyone feared Napoleon’s victory and prices were at rock bottom.
The advice to make money while others are scared has transitioned from tales of cynical financiers to today’s crypto influencers. However, it overlooks the real risks associated with global upheavals, including the potential physical destruction of assets (and their holders).
ForkLog decided to revisit whether Rothschild’s advice helped those who tried to profit during the two world wars and how valid modern investors are when they refer to this semi-mythical meme.
World War I: For Some, War is a Mother, for Others, a Curse
In July 1914, World War I began, triggering a global financial panic. The London Stock Exchange closed for about five months—the first time in 300 years. What happened during this period? Amid the European crisis, some investors were dumping stocks en masse to return to gold and currency, moving assets to countries where fighting was not expected. Others simply waited. In an unpredictable market, the main goal became not to make money but to preserve what one had and survive.
Proponents of the “Buy while there’s blood in the streets” mantra often argue that after the American stock exchange reopened in December 1914, the Dow Jones index showed impressive recovery, rising by over 88%. But who benefited from the war-driven economy? Factory, newspaper, and shipping owners—mainly in the U.S. It’s important to note that this rebound was influenced by the accumulated demand for American assets amid European chaos. Additionally, the U.S. quickly became a key supplier of military goods and food for the Allies. Thus, the optimism of American investment coaches is understandable.
Despite major exchanges in warring countries resuming trading, they faced strict restrictions that effectively made markets unfree. Governments aggressively issued bonds as a “patriotic and reliable” asset, compelling not only businesses but also ordinary citizens to fund the war machine. This marked the first mass mobilization of public capital in history. What happened next? In most countries, especially Russia, Germany, and Austria-Hungary, these “valuable” papers turned into worthless scraps after defeats and revolutions.
According to economist Robert Higgs’ analysis, corporate profits in war-related sectors in the U.S. grew by 200-300% from 1914 to 1917. Corporations like US Steel, Bethlehem Steel, and DuPont amassed vast fortunes. For instance, DuPont’s net profit soared from $5 million in 1914 to $82 million in 1918—a 1540% increase.
The enrichment of these companies fueled a widespread conspiracy theory: that bloody conflicts are instigated and sustained by corporations profiting from arms trading. Real investigations in the U.S. and the UK sought to prove that bankers and munitions manufacturers dragged countries into war. However, the existence of “merchants of death” was never officially recognized.
Big money was indeed made during wartime, but not in the market per se; it was within the system of government contracts and resource redistribution. At the beginning of World War I, many countries abandoned the gold standard or limited convertibility. Gold bars, coins, and jewelry were hidden in mattresses and on the black market. While some exchanged a wagon of gold for a trainload of weapons, others traded wedding rings for two pounds of flour.
The Funeral of the Gold Standard
By autumn 1914, most politicians, bankers, industrialists, and merchants realized that the war would not end by Christmas. National currencies began to break free from their gold anchors. The amount of money no longer depended on the weight of gold bars in central bank vaults. Issuing currency became a purely political decision: money had to be printed to fund shells, new types of weapons, food, soldiers’ rations, salaries, and pensions.
Gold ceased to be a trading instrument; it became “survival currency”—both at the state level and in grassroots transactions. For the average person, the “debased metal” remained something that could be exchanged for food or simply hidden away for better times.
This marked the beginning of the fiat money era: its value relied on faith in the state, bolstered by propaganda, patriotism, and coercion. Free from gold constraints, governments initiated two main mechanisms:
- Direct issuance. The treasury issues bonds, the central bank “buys” them with freshly printed money, and the government pays factories for rifles and shells with this new currency. This is debt monetization: the money supply grows faster than production, followed by rising prices and inflation.
- War loans. Bonds were sold to the public, banks, and companies, pulling existing money out of circulation and slightly slowing inflation. Simultaneously, this served as a powerful propaganda tool: posters promised that each bond purchased was a “bullet for the enemy” and a personal contribution to victory.
A redistribution of economic influence occurred. Before 1914, the pound sterling was the world’s primary currency, with London handling most global trade and British banks financing international operations. Obsessed with respectability, the British tried to maintain their reputation until the end. About a quarter of military expenses were covered by a sharp increase in taxes; the rest came from domestic and foreign loans, primarily from the U.S. The pound’s inflation was significant but manageable, allowing it to retain its status as a serious currency—although Britain emerged from World War I as a debtor rather than a creditor.
The Germans struck the French where it hurt most—occupying the developed industrial northeast along with the tax base. Paris relied on domestic loans and issuance through the Bank of France, actively borrowing from London and Washington. The result was high inflation, massive debt, and the hope that “Germany would pay for everything” in reparations.
Berlin initially operated under a “quick victory” scenario: the war was supposed to pay for itself through France and Russia. Taxes were hardly touched, the army was funded through domestic loans and aggressive printing—money supply grew about fivefold. After defeat, Germany was left with a shattered economy, internal debt in devalued marks, and a direct path to hyperinflation in the early 1920s.
The Russian Empire had perhaps the weakest financial and economic position: a primitive tax system, underdeveloped industry, and logistical chaos. The state relied almost entirely on issuance and external loans from allies. If you thought that grain requisitioning was a communist invention, it was introduced under the Tsar in 1916 due to critical food shortages in both the army and the market. By 1917, the money supply had multiplied, the ruble rapidly lost purchasing power, and food shortages began in cities—this became one of the sparks for the February and October revolutions.
Before entering the war, the U.S. was the “arsenal of democracy,” supplying the Allies with goods and credit in exchange for gold. By 1918, the U.S. gold and currency reserves became one of the largest in the world. The U.S. formally did not abandon the gold standard and financed its participation in the war through tax increases and large-scale campaigns to sell government bonds. America’s geopolitical position made Washington the world’s leading creditor. Thus began the dollar era. The U.S. became the largest holder of gold not because it mined more than anyone else, but because many who had gold bars preferred to store them there—far from the front lines and revolutions. The dollar was pegged to gold, while other world currencies were pegged to the dollar.
Europe, on the other hand, emerged from the war in debt. World War I clearly demonstrated that the classic gold standard does not work in total mobilization mode. However, states can survive for a long time on fiat money, whose value rests on faith, hope, and propaganda.
World War II: When Money Becomes Useless
Gold certainly did not lose its value and did not completely lose its role as a reserve, but it was no longer the sole guarantee of the financial system's stability. During World War II, it was supplemented by the dollar and the pound, while within countries, government debt and administrative control played key roles. None of the states became wealthy during this period.
When blood was truly flowing, citizens exchanged gold not for stocks or bonds. For ordinary people, bread, matches, coal, kerosene, grains, and salt became more valuable than money and securities. Banknotes and coins ceased to fulfill their primary function—providing access to goods—amid shortages and inflation. Governments imposed strict economic controls: production, price, and supply management. This led to a rationing system for food distribution. Without it, speculators would have bought up everything possible, leaving the poor with no chance of survival.
Food became the universal medium of exchange. Alongside food were basic resources—fuel, warm clothing, and medicine. Anything that ensured physical existence automatically became “hard currency.” And the state could always seize what people had. It prohibited people from, for example, collecting firewood in the forest or peat in the bog, not to mention that under the “Law on Ears,” gathering leftovers in collective fields could lead to execution or ten years in a labor camp with property confiscation. This law was actively enforced until 1947 and officially repealed only in 1959.
On European black markets, the top “currencies” included oil, coffee, cigarettes, meat, canned goods, alcohol, spirits, and fuel. In a scarcity economy, value shifted from ownership to control and access: working in a warehouse, distribution system, cafeteria, or transport provided more real purchasing power than any salary. Thus, social capital—connections, acquaintances, and “blat”—became a full-fledged economic resource.
During World War II, those who profited were those closest to distribution: government contracts, raw materials, logistics, and scarce goods. The market of opportunities shrank, and an economy of access took hold. This was also linked to smuggling and circumventing blockades. Goods officially banned from supply were moved through neutral territories and fictitious deals. The risks were high—confiscation, criminal prosecution—but the margins more than compensated for them.
Neutral countries—Sweden, Portugal, Switzerland—played a significant role. They became intermediaries between warring parties. Through them flowed supplies of raw materials, processing of materials, and financial operations. For example, strategic resources like tungsten or iron ore generated significant profits precisely because access to them was limited and demand was critically high.
The military industry became the main source of large capital. In the U.S., companies like Boeing, General Motors, and DuPont closely collaborated with the government. All civilian production was repurposed for manufacturing planes, equipment, and munitions. Contracts were often awarded on a cost-plus basis—the government covered expenses and guaranteed profits. In such conditions, risk nearly vanished, and the scale of orders ensured revenue growth.
Financial intermediaries fared well during World War II. Banks, especially in the U.S. and Switzerland, profited from lending to allies, organizing payments, and managing assets. Institutions like JPMorgan operated at the intersection of financial flows, extracting profits from commissions and transaction control. This was a less visible but extremely stable source of income.
When we assert that it’s impossible to get rich from war, we mean 99% of people. But the remaining 1% exists, and behind them are specific names and corporate entities. This is a systemic exception for elites already embedded in the financial machine. Wars do not bring financial benefits to states or peoples.
In the article “Wartime Prosperity? A Reassessment of the U.S. Economy in the 1940s,” Robert Higgs critically examines the mythology surrounding the narrative of “making money while blood flows.” His main thesis is that the wartime economy looks great on paper, especially when measured by GDP, but much worse in real life. Formally, the production of tanks, bombs, and munitions boosts statistics, creating an illusion of growth. In reality, this production does not increase wealth; it merely consumes resources for destruction.
In other words, the economy can “grow” while producing more and more things that will either explode or be exploded. Higgs suggests reevaluating the very logic of such assessments: war can create an impression of prosperity, but this is largely an accounting effect that hides a grim reality.
Stories of Those Who Got Rich from War—Successful and Not So Much
Let’s clarify once more: bankers and industrialists did not build their fortunes on war but through war, leveraging existing infrastructure. While a German housewife exchanged her last reichsmarks for potatoes, and a Soviet soldier dug up frozen tubers near Smolensk, JPMorgan bankers in Manhattan and UBS in Zurich were skimming profits from Lend-Lease and Nazi gold. For them, “blood in the streets” was not a call to action but an additional condition under which they continued to calculate EBITDA.
In Germany, there lived a man named Günther Quandt. He was a textile magnate who made millions supplying uniforms during World War I and later became one of the main “Nazi billionaires.” In the 1920s, through his wife Magda (who later married Joseph Goebbels), Quandt supported the NSDAP and, after 1933, financed Adolf Hitler, securing contracts for weapons, munitions, and batteries for the Luftwaffe and Daimler-Benz.
This man created several companies, one of which is still known as BMW. Quandt participated in the “Aryanization” of Jewish factories and used slave labor from concentration camp prisoners. After the Nuremberg Trials, he returned to business, having spent only two years in custody. It is said that this was because, during the Cold War against the USSR, a powerful Germany was needed, and where would it be without industrialists? The Quandt dynasty still owns the BMW corporation.
In the Soviet Union, there were no such “success stories.” But that doesn’t mean there weren’t people looking to exploit the war for personal gain. Let’s not recall petty fraudsters and focus on a character whose audacity and luck (for a time) deserve a movie script. Military engineer Nikolai Pavlenko deserted from the front in the chaos of summer 1941. Instead of a trench, he chose a career as a shadow contractor, ready to rebuild destroyed cities. Creating fake seals and documents, Pavlenko registered a non-existent “Military Construction Site of the Kalinin Front No. 5” and recruited a “personal army” of recovering soldiers, deserters, and those who had fallen behind their units through military enlistment offices.
The fictitious unit followed the advancing front, receiving construction contracts, uniforms, rations, and supplies like a regular unit. Pavlenko embezzled most of the funds, generously sharing with officers and gaining high-ranking patrons in the rear. By 1944, his “unit” numbered over two hundred people and heavy weaponry, making him one of the wealthiest individuals by wartime standards.
In Poland and Germany, Pavlenko’s men confiscated cars, livestock, equipment, and tons of food, receiving entire trains from headquarters for transporting the looted goods, which they then sold. After the victory, the enterprise was legalized under the guise of the “Military Construction Administration,” and the swindler received orders and respect; his fighters also received official awards, often not even realizing they had served in a fictitious unit.
The end of the scam came only in 1952 when a scheme involving state loan bond fraud surfaced. An investigation accidentally revealed that the “construction administration” was not registered anywhere, and Pavlenko was wanted for previous embezzlements. As a result, hundreds of people were arrested, and weapons, equipment, and property were seized, but only a few received real sentences. The adventurer was executed, but the officials who had turned a blind eye to his activities for decades escaped punishment.
It cannot be said that no one profited from war, but these stories are absolute exceptions, and they almost always carry an unpleasant moral odor. “Blood in the streets” as a meme certainly has a right to exist, especially since current conditions are nothing like those of the First or Second World Wars. However, in reality, military upheavals are unlikely to yield returns to investment portfolios today. More likely, they will serve as deadlines for exchanging money for food, a passport from a peaceful state, or even life.