Additions to the MP Third Edition – Currency and The Black Market

          What could possibly go wrong with giving the Soviets, what David Rees described as "a blank check drawn on the Bank of Inter-Allied Unity?" 4  Walter Rundell wrote, “The United States government could have had no idea the Russians would unloose a plethora of Allied military marks to flood the German economy.”  (Rundell p. 43)  This faith in the Soviets required a complete lack of knowledge of their previous behavior.  Benn Steil called White’s trust in the Russians as, “inexcusably naïve, at best.” 5

         Vladimir Petrov related that the three Western allies put into circulation a total of about 10.5 billion AM Marks.  The Soviets issued on "a very conservative estimate" 78 billion. 6   These occupation marks were eventually redeemed by the American and British taxpayers.  Rober Haeger of the United Press estimated, "This oblique raid on the Treasury amounted to more than $300,000,000 before the Army called a halt, . . .” 7   Hartrich calculated that "the Americans had been fleeced out of $500 million and the British out of $300 million by the Communist financiers." 8  Walter Rundell, Jr. puts the figure at $530,755,440.  (Rundell, Walter, Jr. Black Market Money.  Louisiana State University Press, 1964. p. 7)  Rundell gives the figures for October 1945 in Berlin, “The Berlin district disbursed as  pay and allowances in October $2,570,921.32; yet it collected through finance offices, Army post offices, post exchanges, and quartermaster sales stores a total of $8,226,461.73!”  Ibid, p. 71  Rundell asserted that it was clear that no one was trying to limit this situation.  He attributed this to General Eisenhower: The primary deterrent to any effective action on G-1’s part was the unsympathetic attitude toward currency control on the part of the theater commander, General Eisenhower.”  Ibid p. 51

         Walter Rundell Jr. claimed that 80% of the overdraft in marks was of Russian origin.  (Rundell, Walter, Jr. Black Market Money.  Louisiana State University Press, 1964. p. 36) 

Col. Stanley Andrews commented on a group of U.S. Congressmen that came to Germany for an inspection.  “They were given Post Exchange cards which allowed them to buy anything at they wanted at the local Post Exchange. They would load up their suitcases with cigarettes, and, on at least one occasion, a very prominent congressman asked me: ‘Tell me where this black market village is?’ and he headed straight for it.” Stanley Andrews, Journal of a Retread, (Alamo, Texas, 1971).  https://archive.org/stream/TheJournalOfARetread/The%20Journal%20of%20a%20Retread_djvu.txt

         Col Andrews quotes an Army officer on the black market policy:

. . .nobody who sold a few cartons was considered a criminal. It was the big wheeler-dealers who dealt in cars, diamonds and tens of thousands of dollars that the CID [Criminal Investigations Division] was after. This army organization might call on you if you ordered 100 cartons a week from the US (at one dollar a carton), and enquire politely whether you were really such a heavy smoker. But they were too busy to investigate something like twenty cartons a month. For four packages of cigarettes, you could hire a German orchestra for an entire evening.

                        Ibid.

Russians paid the equivalent of US$1,000 for a Mickey Mouse watch.  In July 1945 the army's finance office in Berlin disbursed one million dollars in pay, yet soldiers sent some three million dollars to addresses in America.  (Kevin Conley Ruffner, The Black Market in Postwar Berlin Colonel Miller and an Army Scandal, Prologue Magazine,  Vol. 34, No. 3, 2002 http://www.archives.gov/publications/prologue/2002/fall/berlin-black-market-1.html)

         As early as May 1945 SHAEF warned the War Department that Russian behavior, “was endangering the Army’s entire monetary program.” (Rundell, p. 44)  There was opposition to currency reform among the higher levels of the military.  Rundell states, “The primary deterrent to any effective action . . . was the unsympathetic attitude toward currency control on the part of the theater commander, General Dwight D. Eisenhower.” (Rundell, p. 51)  The currency problem began to draw media attention.  In August 1945 currency conversion controls were devised that would be implemented on 1 November.  Randell stated, “Inexplicably and revealing an amazing lack of coordination . . . the adjutant general announced the proposed” reforms which Randell described this as “an open invitation to convert all indigenous currency,” including black market proceeds.  (Randell p. 70)  Rundell points out that GIs in Berlin converted nearly 6 million dollars more than they received in pay during the month of October. (Rundell, p. 71) 

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4  Laurence Rees, WWII Behind Closed Doors (New York, Pantheon Books, 2008), p. 184.

5 Benn Steil, The Battle of Bretton Woods, (Princeton and Oxford, Princeton University Press, 2013), p. 273

6   Rees, Harry Dexter White, p. 190.

7  Settel, ed., This is Germany, p. 9.

8  Hartrich, The Fourth and Richest Reich, pp. 38-39.