Hello everyone, when we say World War 2, most people, including probably most of us, imagine the classic stuff: the horrors of war, tanks rolling in, planes flying overhead, concentration camps and all the other awful stuff that happened. Few people are however interested in another part of the war – economics. Wartime economics are a complicated topic, that would fill several book volumes (it does in fact), so today, I’d like to write about one certain aspect of the war – the price of the Czechoslovak resistance in gold. After the Munich betrayal, many politicians (including president Beneš) foresaw the need to assemble sufficient resources to finance the exile movement in case Czechoslovakia was ever occupied (despite the “guarantees” of the British and the French, only very few people trusted their word – after all, once a betrayer, always a betrayer). Surely enough, the worst happened and Czechoslovakia got occupied by nazi armies in March 1939, forcing many officers and representatives to leave Czechoslovakia to seek exile in other countries. Thus, as predicted, the need to finance the entire exile movement arose. In the first phase, the exile (not yet an official army) was supported by the finances of the Czechoslovak offices (embassies) abroad, that did not accept the destruction of Czechoslovakia and represented its unbroken continuity until the war was over. Especially the ambassador in Britain (J.Masaryk, son of the legendary president T.G.Masaryk) and in France (Š.Osuský) recieved during 1938 large sums of money for “special purposes”. The president in exile, E.Beneš, also donated his professor’s salary and the money he recieved for giving lectures. Third large source early on was the money, collected by Czechoslovaks living in the USA. Czechoslovak Military Intelligence Service also had its “special” funding. A day before occupation, the 11 foremost Czechoslovak intelligence experts boarded a plane to London. The Intelligence had its own funds on several accounts abroad and for example the Intelligence funds in France were used to finance the escape of Czechoslovak soldiers from Poland and Yugoslavia to France. There was one embassy that surrendered to Germans – the one in Sweden, where the ambassador V.Kučera transferred the building of the embassy and the access to funding to the Germans. He however did not know the password to the account and so it was useless to the Germans. Unfortunately, the data to the accounts got lost during the war and thus the former Czechoslovak money in Sweden are still on an account somewhere in Sweden to this day. On 21.7.1940, Britain acknowledged the temporary Czechoslovak government in exile in Britain and on 25.10.1940, a Czechoslovak-British military treaty was signed. This treaty, apart from setting the rules for the organization of Czechoslovak units in Britain, also regulated the means of financing these Czechoslovak soldiers in Britain. Czechoslovak soldiers and their equipment were to be entirely paid by Czechoslovaks from a special load by the British government. The loan contract was signed on 10.12.1940 for a sum of 7,5 million GBP. The British insisted that the loan was to be covered by Czechoslovak gold, secured in Bank of England. This gold was made previously available by the Czechoslovak government for the (Czechoslovak) war effort. Czechoslovak gold reserves in September 1938 consisted of 94771 kg of gold. Because of the threat of war, only a small portion of this gold was actually in Prague – 6336 kg. The rest was moved to several foreign banks, especially in Switzerland and Britain (88435 kg). After the Munich treason, the Germans pressured Czechoslovakia to transfer 14,5 tons of Czechoslovak gold from the foreign bank to the Deutsche Reichsbank to cover the value of Czechoslovak banknotes, “acquired” by the Germans during the annexation of Czechoslovak borderlands (the official reason was that it was “a demand of local population against the state of Czechoslovakia and its economy, to which the Germans contributed by their work”). All of the remaining Czechoslovak gold from Prague was then transported to Berlin on 12.6.1940. As mentioned above, a part of the gold was “saved” by transferring it to the Bank of England in Britain. Specifically, it was 28309 kg of gold on an account, opened by Bank of International Settlements. Another “batch” of gold (26793 kg) was on an account of Czechoslovak National Bank (also in Bank of England). Two days after the German occupation (18.3.1939), two foremost Czechoslovak bankers in Prague (directors of Czechoslovak national bank, F.Peroutka and J.Malík) were arrested, held for a few days and forced to order the transfer of 23087 kg of gold from the BIS account to a Deutsche Reichsbank account. The British complied (despite the unlawful occupation) and the BIS gold was indeed transferred to Germany, which created a huge political scandal (it is often called “financial Munich treason”). After this screw-up, all the transfers of Czechoslovak gold in Bank of England were frozen. The scandal did hit the British finance minister John Simon hard and in the following months, he was forced to answer many uncomfortable questions in parliament. F.Peroutka on the right: In the end, the Czechoslovak government in Britain had only the 26793 kg of gold from the CNB account and the ramaining 3706 kg of gold on the BIS account. There were other sources of funding for the Czechoslovak armed forces in exile as well. One of them was the “tax” the foreign branches of Czechoslovak companies paid to the exile government (those were de-facto donations). Yet another source were the license and patent fees, paid during wartime. The ministry of trade and industry in exile was very active in enforcing these fees in favour of the Czechoslovak government. Typically, these concerned weapons. In one example, when the war started, Zbrojovka Brno rightfully claimed a license fee for the British production of BESA and Bren machineguns (those were license-produced Czechoslovak arms, as you probably know). At that point, this fee reached 450 thousand GBP and due to series of secret deals, it was the exile, who recieved the money, not the “mother” company in occupied Czechoslovakia. When the war started in earnest, the arms production (and therefore the license fees) peaked sharply. As another example: a license fee for one Bren machinegun was 2 GBP (and that was the lowest value). In 1943 in British Enfield factory alone, 1000 Brens were made per week, with the total production reaching cca half a million. The last (but morally important) source of income were donations of both private and legal persons. J.A.Baťa for example donated significant sums to the exile (this story had a sad ending, but that’s for another time). The total sum of Czechoslovak gold lost in the war was 45,3 tons Continue reading →

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