World War II Emergency Banknotes

The Second World War recast armies and factories — and it also turned monetary policy into a full-spectrum weapon. Fiduciary paper stopped being only a means of payment and a store of value. Control of the money stock, the exchange rate, and liquidity in occupied territory could wreck an economy as thoroughly as a bombing campaign. Induced inflation, occupation currencies used for plunder, and industrial-scale counterfeiting were deployed to freeze markets, sap civilian morale, and fund covert work.

When troops cross a border they bring enormous purchasing power with them. Paying them in dollars or sterling inside a ruined economy feeds the black market, drives local prices, and risks letting that hard currency fall into enemy hands. Allies and Axis answered with several kinds of emergency money: geographically ring-fenced issues that could be repudiated, occupation military currency, canteen vouchers for troop control, and paper designed to extract resources or to wage psychological fraud.

This case follows that network: the Hawaii and North Africa notes and the United States experimental issues; Allied Military Currency in Italy, France, and Germany; money used as an illusion at Theresienstadt; Operation Bernhard; Japanese invasion money and the Reichskreditkassenscheine; and, as the war closed, British Armed Forces Special Vouchers. It is not a price list and not a holding record. It is the historical frame for those issues. Notofilia’s virtual case already holds United States paper from the war years and the Philippine Victory Series; it does not yet hold a documented HAWAII overprint or a yellow-seal silver certificate.

United States defensive and experimental issues

After Pearl Harbor the Treasury and the War Department saw a clear logistical risk: if Japan or Germany captured large stocks of ordinary dollars, they could spend them in neutral countries for raw materials, espionage, or to prop up their own currencies. The answer was compartmented series with a visual switch for instant repudiation.

The Pacific vulnerability: HAWAII overprints

7 December 1941 left the Territory of Hawaii open to invasion. On 10 January 1942 the military governor, Lieutenant General Delos C. Emmons, ordered regular United States currency withdrawn. Individuals could keep no more than $200; businesses, $500, with exceptions for documented payrolls. Holding or exporting large sums of unmarked dollars became a serious offence.

The Hawaiian series was issued on 25 June 1942. In March the Treasury had brought $20 million of the new notes to the islands for the exchange. The plates were those of silver certificates and of Federal Reserve notes of the San Francisco bank, but the Treasury seal and serials changed from blue and green to an unmistakable brown. “HAWAII” was stamped vertically on both face margins and, on the back, in hollow letters that fill almost the entire field.

The contingency was blunt: if Japan took the islands, Washington would declare every note with that overprint and that seal worthless. From 15 August 1942, unmarked notes were banned in the Territory.

Withdrawing some $200 million in regular currency raised another problem: shipping it back to the mainland through waters hunted by Japanese submarines was an unjustifiable risk. The notes were burned in Hawaii. The work began at the Nuʻuanu crematorium, with screens to catch fragments; when that was not enough, the furnaces of the Aiea sugar mill finished it.

Compulsory use lasted until 21 October 1944, when an invasion of the archipelago was no longer plausible. Official withdrawal began in April 1946. Many notes survived because service members and residents kept them as souvenirs.

In modern notaphily they are a war type, not a trinket. The 1935A $1 (Fr. 2300) is the common note. The keys are paper quality — especially an EPQ designation — the sharpness of the overprint (it was a separate pass, often light or crooked), and star replacements. About 204,000 $1 star notes are documented; the $5 and $20 stars are far scarcer. This case does not publish auction or dealer prices. For grading houses see the ranking of certifiers; for serial patterns, special serial numbers.

Operation Torch: the North Africa yellow seal

The same logic was applied to the European–African theatre. Before Operation Torch (November 1942), paying troops in ordinary dollars risked a Rommel haul flooding Axis coffers with standard United States currency.

The Treasury chose a quieter mark than Hawaii’s: $1, $5, and $10 silver certificates with a bright yellow Treasury seal and blue serials, and no giant word on the back. If the Wehrmacht captured a depot, the yellow seal could be demonetized at once.

Those notes served in North Africa, in Operation Husky (Sicily, July 1943), and in the first weeks in Italy, until occupation lire replaced them. The type rarity most often cited is the Series 1934 $10 (Fr. 2308); Series 1934A (Fr. 2309) is the later companion. The Treasury briefly considered using the yellow seal in the Pacific as well; the Hawaiian dollar stayed, because the central Pacific islands cleared through Hawaii and because the word “HAWAII” was a faster deterrent under martial law.

The “R” and “S” experimental notes

The war also squeezed the materials in the paper itself — linen and cotton. The Treasury tested another furnish on the $1 silver certificate (not $15: that figure, which sometimes migrates through secondary summaries, is not the type). Two trial lots were printed: a small S at lower right marks the special paper; R (“Regular”) is the control on standard stock.

Exactly 1,184,000 notes of each kind were released to watch wear in circulation. The technical durability report has not been published in detail; the short printings are enough to collect the type apart from ordinary 1935A notes. No price is quoted here.

Allied Military Currency: liberation and inflation

Color-coded dollars protected the Treasury, but they did not solve what happened when troops entered a collapsed economy. A soldier with hard dollars priced food and clothing beyond the reach of local civilians, encouraged hoarding, and made the “liberators” unpopular. In a combat zone there was also no cooperating central bank.

War, Navy, State, and Treasury, with the British government, designed Allied Military Currency: temporary fiat of the Allied Military Government of Occupied Territories (AMGOT). Most of it was printed by the Bureau of Engraving and Printing and by Forbes Lithograph Manufacturing Company in Boston, in the native units: lire, francs, marks, schillings, and yen. It was issued to troops at a fixed dollar rate and declared legal tender by military edict.

The AM-lira and Italian inflation

The first large-scale use came with Husky (Sicily, July 1943) and the invasion of the mainland. AMGOT put hundreds of millions of AM-lire into circulation. The first 1943 printing was so hurried that it carried neither “Lira” nor the country name — those words were added three days after the landing, so Axis intelligence would not read the objective on the paper. Denominations ran from 1 to 1,000 lire; the fractional notes (1 to 10) were square and the high values rectangular, dollar-size. The back carried Roosevelt’s Four Freedoms in English. Series 1943A, Forbes only, dropped the 1- and 2-lira notes: inflation had already made them useless.

The shock to Italy was severe. The war had destroyed between 14 and 17 percent of fixed capital and wrecked transport. AMGOT set 100 AM-lire to the dollar — a political rate, not a market one — until 1946, when it moved to 225. That overvalued the dollar, cheapened the lira, and put imports out of reach. Because the AM-lira was interchangeable with the pre-existing lira, the new liquidity without matching goods collapsed the currency: it is cited as falling to a thirtieth of its pre-war value. The black market and local counterfeits — despite the lithographic inks — made the damage worse.

Stabilization took years. Luigi Einaudi and Donato Menichella at the Bank of Italy recovered monetary sovereignty with a four-point plan: dearer credit, a 15 percent cap on direct state financing of spending, Italy’s return to Bretton Woods, and a rebuilt bank supervisor. With the Marshall Plan, that cooled inflationary expectations and prepared the postwar economic miracle.

The AM-franc and Gaullist sovereignty

If Italy shows the danger of fiduciary inflation, France shows that paper is also a claim to legitimacy. Under the code name “Operation Tom Cat,” Washington printed francs for the Normandy troops. Charles de Gaulle, heading the Provisional Government, read it as an insult: unilateral note issue treated France as conquered ground, not a sovereign ally. He denounced the AM-francs as “billet drapeau” and, more contemptuously, as “monnaie de singe” — play money. The GPRF warned that paper without the French Treasury behind it would speed inflation.

There were two printings, distinct in collections today:

1. Supplemental currency (first issue, 1944). Printed before the landing: a blue border, “SÉRIE DE 1944” and “ÉMIS EN FRANCE” on the face; on the back, the tricolor and “LIBERTÉ ÉGALITÉ FRATERNITÉ.” The GPRF held that a foreign power had no right to print the symbols of the state. Denominations ran from 2 to 5,000 francs.
2. Provisional currency (second issue, 1944–1945). “ÉMIS EN FRANCE” was dropped. On the back, the flag gave way to the word “FRANCE,” without state heraldry.

Local banks and tax offices had to take them so trade could function behind the front. In June 1945, with the European war over, France moved quickly to replace them and demonetized the high denominations (50 to 5,000). The 2-, 5-, and 10-franc notes, of little macroeconomic weight, stayed as small change and were not fully retired until the euro.

The AM-mark, Operation Wild Dog, and the Soviet plates

No AMC issue had longer geopolitical consequences than the Allied military mark. Operation Wild Dog was meant to give one fiduciary currency to the four occupation zones — American, British, French, and Soviet — and to keep Germany a single economic unit.

Forbes designed and printed the notes in a dollar style: a security web, a floral ground, and an ornamental “M” on the back. Serials coded the zone: “1” for the American, “0” for the British, “00” for the French, and a hyphen “-” for the Soviet. The secret printer’s mark was a tiny “F,” hidden in the scrollwork under the denomination at lower right on the face.

The breach began at the Treasury. Harry Dexter White, an architect of Bretton Woods, ignored British and American intelligence warnings and handed the Soviet Union the plates, the glass negatives, and the paper and ink specifications. Declassified records and much later historiography place him as a Soviet agent of influence; the point is not settled, and this page does not treat it as a verdict. With the plates, Giesecke & Devrient in Leipzig printed almost identical AM-marks without the “F.” Moscow used them to pay the Red Army months and years of arrears in Central Europe.

That uncapped issue set off inflation and a vast military arbitrage. Soviet soldiers, holding sacks of marks that were worthless in Moscow, bought watches, cigarettes, and luxuries from Americans. Washington kept the official exchange at 10 marks to the dollar to support its own troops’ remittances. GIs cashed the Soviet marks from the black market at Army pay offices for dollars. The Treasury ended up, in effect, subsidizing the Red Army: the War Department’s redemption deficit is put at $250 million and drew congressional inquiries. Refusing conversion would have meant admitting Germany’s economic partition; the United States did not do that until the 1948 Deutsche Mark.

Theresienstadt: money as an illusion

While the powers fought a macroeconomic war, the SS used the form of money to mask the Holocaust in the Theresienstadt ghetto and camp, in occupied Czechoslovakia. The Ghetto-Kronen (1 to 100), printed by the National Bank of Prague in 1943, bought nothing. Theresienstadt was shown to the Red Cross as a “model camp”: a paper wage was meant to suggest a self-supporting community and a legitimate wage for forced labor.

The design was by the Czech Jewish poet and artist Peter Kien, a prisoner in the camp. Reinhard Heydrich rejected the first project and demanded that the Jewish iconography be distorted. Kien later died at Auschwitz. Those notes are the conflict’s most macabre use of a currency press: money that purchased nothing, drawn to hide systematic murder.

Operation Bernhard: state counterfeiting

Nazi monetary policy reached its greatest technical scale in Operation Bernhard, the largest state-backed counterfeiting scheme on record. The original plan — Arthur Nebe, approved by Heydrich in September 1939 as Operation Andreas — was to forge Bank of England notes and drop them from the Luftwaffe over British cities. Goebbels saw in that “grotesque plan” a chance to break sterling’s credibility.

Alfred Naujocks and the mathematician Albert Langer ran the first phase. Naujocks reached a point at which Bank of England experts in Switzerland passed 90 percent of the notes as genuine. Internal fights removed him and the plan stalled.

In 1942 SS Major Bernhard Krüger reopened it. Himmler dropped the air drop — air superiority over Britain was gone — and turned the shop toward funding intelligence, buying gold and hard currency in neutrals, and acquiring strategic materials. Krüger recruited more than 140 Jewish prisoners — engravers, lithographers, papermakers, bankers — and isolated them in blocks 18 and 19 at Sachsenhausen. Failure or sabotage meant execution; in return they received clean clothes, proper beds, and radios, unthinkable privileges in the rest of the camp.

Taking the pound apart

The Bank of England “White Note,” almost unchanged since 1855, was thought nearly impossible to forge. The prisoners broke it into seven problems:

1. The paper. It was not wood pulp or ordinary cotton, but used linen rags, soiled and then washed. At Spechthausen they matched the chemistry of English water, the watermark, and the irregular “deckle” edge.
2. The secret marks. More than 150 deliberate “errors,” different on each denomination (£5, £10, £20, and £50). One example: in the Britannia vignette, the bulge of a leaf near five o’clock stops short on genuine notes; they copied that, and the other 149 flaws.
3. Numbering and ageing. Langer broke the chief cashier’s serial and signature progression. Then they rubbed, folded, and soiled the sheets, and even added bank stamps and pencil, so that a note that was too clean would not draw suspicion.

Impact and Lake Toplitz

By January 1943 Sachsenhausen was printing about 400,000 notes a month. At least 8.9 million pieces worth £134.6 million are documented — around 10 percent of the British Empire’s circulating paper at the time. Some estimates run as high as £300 million; this page keeps the documented figure and flags the other as a hypothesis.

Friedrich Schwend laundered the paper. It paid Elyesa Bazna (“Cicero”) £300,000 for secrets from the British embassy in Ankara, and £100,000 for Otto Skorzeny’s raid that took Mussolini off the Gran Sasso.

The fraud was found in September 1942: a London clerk, copying serials from a deposit that had come from Morocco, saw that the same number was already marked “paid.” The Bank of England progressively withdrew denominations above £5 and, after the war, redesigned the paper with a metal thread and new colors. For the everyday gesture of spotting a fake in hand, see how to identify counterfeit banknotes; Bernhard is the extreme, state-run case, not a back-room shop.

At the end of the war the SS dismantled the presses and threw waterproof crates — pounds, plates, and records — into Lake Toplitz in Austria. Divers in 1959 confirmed the cache. By 1944 Himmler had ordered Salomon Smolianoff to copy the United States $100; the Reich collapsed before that shop matured.

Axis extraction: occupation and guerrilla money

Japanese invasion money and the puppet banks in China

From 1942 the Japanese Empire, through the Wartime Finance Bank and the Southern Development Bank (Nanpo Kaihatsu Kinko), imposed so-called Japanese Invasion Money. It forcibly replaced the Malayan dollar, the Burmese rupee, and the Netherlands Indies gulden, and it took the metal. It had no gold or silver behind it; it was printed to pay the occupation. In Malaya the collapse of value earned it the name “banana money.”

In China the mechanism went further. The Federal Reserve Bank of China (north) and the Central Reserve Bank (Wang Jingwei’s government in Nanjing) printed yuan at a pace that destroyed purchasing power day by day. By the end of the war the Central Reserve Bank was issuing 5,000- and 10,000-yuan notes: the middle class was stripped, and exports moved to Tokyo at null prices.

In the Philippines the guerrillas refused that paper. With MacArthur’s tacit approval, local councils — Cagayan, Iloilo, often on rustic presses such as Dialosa — mimeographed emergency vouchers (guerrilla currency), which Pick and Shafer catalogue separately. Possessing them defied the Kempeitai and could mean death. The Victory Series in this case is liberation paper, not those mountain vouchers; they are not the same objects.

Reichskreditkassenscheine

In western Europe the Wehrmacht financed itself through the Reich Credit Offices and their Reichskreditkassenscheine. In France or Denmark that special mark was imposed at manipulated rates. Occupied central banks handed over real goods and foreign exchange for synthetic credit: the Reich pushed the army’s logistics cost onto the subject countries.

BAFSV: the postwar black market

Surrender did not end the monetary chaos. In occupied Germany the Reichsmark bought nothing; the cigarette became an informal reserve. Soldiers of the British Army of the Rhine were paid in sterling and bought subsidized coffee, chocolate, and tobacco at NAAFI canteens, then sold them on the German black market. The British Treasury lost the subsidy.

The Army Council closed the circuit: British Armed Forces Special Vouchers. From 1 August 1946 BAOR troops stopped receiving regular sterling and were paid, in part, in BAFSV. The back warned that the notes were valid only in the NAAFI and that passing them to civilians was an offence.

The 1st series was 52.4 million vouchers, about £10 million. Guilloché engraving did not stop local gangs and corrupt quartermasters from absorbing them. In secret the 2nd series was printed — with the legend “2nd SERIES” and the pound repeated ten times on face and back. On 6 January 1948 the books were frozen, the new vouchers issued, and the 1st series demonetized overnight. Anyone who had hoarded the old paper was left with scrap. Together with the Deutsche Mark, that broke the canteen black market.

The program lasted for decades: Suez (3rd), the 1960s reserve (4th and 5th), and 1972 decimalization (6th), until withdrawal after the Falklands War in 1982. It is the bridge to the military payment certificates with which the United States closed, from 1946, the same gap that yellow-seal dollars and AMC had opened.

Conclusion

The emergency notes of 1939–1948 show that the economy was not an annex of the artillery: it belonged to the arsenal. Hawaii and North Africa are the success of compartmented logistics: a seal or a word was enough to isolate the dollar without stopping wartime trade. AMC shows the other face: the AM-lira wrecked Italian prices; the AM-franc collided with Gaullist sovereignty; the AM-mark, with the plates in Leipzig, brought forward the economic border of the Cold War.

The Axis used paper to extract, not to stabilize: Japanese invasion money and the RKKS loaded the war deficit onto occupied banks. At Theresienstadt the money did not buy: it sold an illusion. Bernhard — nearly £135 million forged by 140 prisoners — forced the Bank of England to redesign its circulating paper. The BAFSV remind us that, once the shooting stopped, an overnight demonetization could restore a perimeter as well as a decree.

Yellow-seal certificates, Iloilo vouchers, or pounds lifted from Toplitz are the printed record that, in that war, fiduciary faith was a front as well.