How Germany Almost Bankrupted Britain in WW2 by Creating 5 Pound Notes

Destroying an economy with forged bills sounds like the plot of an Austin Powers movie, or something conceived of by a bunch of stoned teenagers. The crazy thing is that it very nearly happened.

In a German plan from World War 2, called Operation Bernhard, the Nazis planned to create vast amounts of fake British currency and circulate these forgeries throughout the United Kingdom in an attempt to undermine confidence in the pound and eventually crash the entire economy.

Chances are you have been in possession of a fake bill at one point or another and although illegal tender exists in almost every market on the globe, you might think it unlikely that counterfeiting would significantly affect any single economy to the point of collapse. However, Operation Bernhard took forgery to a whole new level. To say this is a little bit of forgery is like saying you only gained a little bit of weight over the holidays, or only had a few drinks on spring break.

The Third Reich set up a massive counterfeiting operation at Sachsenhausen concentration camp, using inmates for skilled labor. Other camps and locations (including Auschwitz) were used later to support the effort as well.

Sachsenhausen Concentration Camp. Oranienburg - Berlin.
Sachsenhausen Concentration Camp. Oranienburg – Berlin.

£134 million in fake currency was created, equaling 10% of all British currency in circulation at the time. To put this in perspective, that’s more than £5.2 billion, adjusted for inflation (based on the Bank of England calculator).

What is truly impressive is that this phony tender was practically undetectable — the prisoners used many of the same techniques as high-end currency printers of that period, including watermarks, special paper, engraved plates and all the same counterfeit protection features used in real British currency. These bills are considered some of the most perfect forgeries ever created and fetch a high price when any come up for auction.

Originally, the plan was to drop the imitations from airplanes onto the British countryside (because apparently, no one thought this would be conspicuous).  The landscape did not end up being money-bombed after all, but small amounts of the fake cash were passed off in England by German spies.

Opting for a different strategy, large amounts of fraudulent currency were passed off in neutral countries, such as Spain, to raise funds for the German war effort. Ironically, the success of the Allied troops on the European continent led to further dissemination of the bogus bills. One example of this spread were cases in which soldiers would sell their supplies on the black market for (fake) British pounds (often at a discount), which then found their way back to England both during and after the war.

Germany lost the war (spoiler alert), but Operation Bernhard almost succeeded. Declassified files from MI5 reveal that by the end of the war, confidence in British currency had fallen — you couldn’t actually use British pounds to buy anything on continental Europe (it’s rather like trying to spend Canadian Tire money in Florida).

Importing goods into the United Kingdom became more expensive as people in continental Europe refused to take the pound at face value. Transactions between individuals became more difficult since you were not sure if you were getting real money or fake. Fabricated cash even fooled some German spies.

As a result of all the counterfeit currency in circulation, the British government was forced to recall all £5 notes and larger and issue new notes with security features (specifically a metal strip). This was such an extensive effort that it was not until the 1970s that notes with a value of £20 and higher started being printed again.

As an interesting sidenote, Nazi counterfeit operations were halted in 1945 as the war turned against Germany, and the majority of the remaining currency and other supplies were dumped in Lake Toplitz in Austria.

Lake Toplitz - By de:User:Blueangel - Public Domain
Lake Toplitz. Image courtesy Blueangel. Public Domain.

Although divers recovered the notes, which were discovered in 1959, some people think there is more hidden treasure to be found in the lake. Anyone up for a vacation?