Profiting while blood runs in the streets

What counted as defensive assets in the two world wars

“Buy when there is blood in the streets.” The phrase is attributed to Baron Nathan Mayer Rothschild of the famed 19th-century banking dynasty. Legend has it he made a fortune by snapping up shares after the Battle of Waterloo: everyone feared a Napoleonic victory, and prices were at rock bottom.

The counsel to make money while others are afraid has migrated from tales about cynical financiers to the patter of today’s crypto influencers. Yet it ignores the objective risks of global upheaval—up to and including the physical destruction of assets (if not their holders).

ForkLog set out to recall whether the line attributed to Rothschild helped those who tried to profit from the two world wars, and how justified modern investors are when they invoke this half-mythical meme.

World War I: ruin for most, a boon for some

In July 1914 World War I began—and with it, a global financial panic. The London Stock Exchange shut for roughly five months—for the first time in its 300-year history. New York closed for four. What happened in the interim? Amid Europe’s crisis, some investors dumped equities en masse to retreat into gold and cash, moving assets abroad to places deemed safe from fighting. Others simply waited. In conditions of market unpredictability, the priority was not to profit but to preserve capital and survive.

Adherents of the “Buy when there is blood in the streets” cult often cite the rebound after the New York market reopened in December 1914: the Dow Jones index sprang back by more than 88%. But who were the winners in an economy refitted for war? Owners of factories, newspapers and shipping lines—and mostly in the United States. Do not discount the role of pent-up demand for American assets amid European chaos. The US swiftly became a key supplier of armaments and food to the Entente. No wonder American investing coaches sound upbeat.

Even where bourses in belligerent countries resumed trading, they faced heavy constraints that made markets anything but free. States aggressively floated their bonds as a “patriotic and safe” asset, effectively strong-arming not only business but ordinary citizens into bankrolling the war machine—the first mass mobilisation of public capital. And then? In most countries—especially Russia, Germany and Austria-Hungary—these “securities” became scrap after defeat and revolution.

According to an analysis by the economist Robert Higgs, corporate profits in US war-related industries rose by 200–300% between 1914 and 1917. Corporations such as US Steel, Bethlehem Steel, and DuPont amassed fortunes. DuPont’s net profit, for instance, jumped from $5m in 1914 to $82m in 1918—an increase of 1,540%.

The very fact of such enrichment fuelled a pervasive conspiracy theory: that bloody conflicts are initiated and sustained by corporations profiting from arms sales. Real investigations in the US and Britain sought to prove that bankers and munitions makers dragged countries into war. In the end, the existence of “merchants of death” was never officially acknowledged.

Big money in wartime was indeed made—but not in the market as such. It flowed through state orders and the redistribution of resources. Early in the war many countries abandoned or curtailed the gold standard. Bullion, coins and jewellery disappeared into mattresses and the black market. If one party traded a wagon of gold for a trainload of weapons, someone else at the same time swapped a wedding ring for two pounds of flour.

The gold standard’s funeral

By autumn 1914 most politicians, bankers, industrialists and merchants realised the war would not be over by Christmas. National currencies slipped their golden anchors. The quantity of money no longer hinged on the weight of bullion in a central bank’s vaults. Issuance became a political decision: governments had to print to pay for shells, new weapons, rations, wages and pensions.

Gold was ceasing to be a market instrument and becoming a “currency of survival”—for states and at street level alike. For ordinary people the “base metal” remained something to swap for food or hide until better times.

Thus began the era of fiat money: value rested on faith in the state, shored up by propaganda, patriotism and coercion. Freed from golden constraints, governments deployed two main mechanisms:

1. Direct issuance. The treasury sells bonds, the central bank “buys” them with freshly printed money, and the state pays factories for rifles and shells with these new notes. This is debt monetisation: the money supply grows faster than output—and prices and inflation follow.
2. War loans. Bonds were sold to households, banks and companies, pulling existing money out of circulation and slightly braking inflation. It was also a propaganda tool: posters promised every bond was “a bullet for the enemy” and a personal contribution to victory.

Economic spheres were reshaped. Before 1914 sterling was the world’s principal settlement currency; most global trade cleared through London; British banks financed international deals. Obsessed with respectability, the British tried to preserve their reputation to the end. Roughly a quarter of war spending was covered by sharp tax rises; the rest came from domestic and foreign borrowing, chiefly from the US. Sterling’s inflation was palpable but managed, allowing it to remain a serious currency—even as Britain emerged from the war a debtor rather than a creditor.

Germany struck France where it hurt most—occupying the industrial north-east along with its tax base. Paris leaned on domestic loans and issuance via the Banque de France, borrowing heavily from London and Washington. The result was high inflation, a vast debt and the hope that “Germany will pay” through reparations.

Berlin initially banked on a “quick victory”: the war would pay for itself via France and Russia. Taxes were scarcely touched; the army was funded by internal loans and an aggressive printing press—the money supply swelled roughly fivefold. After defeat, Germany was left with a wrecked economy, a domestic debt in debased marks and a straight road to early‑1920s hyperinflation.

The Russian Empire was arguably in the weakest fiscal and economic shape: a primitive tax system, underdeveloped industry and logistical chaos. The state leaned almost entirely on issuance and external loans from allies. Contrary to popular belief, grain requisitioning was introduced under the Tsar in 1916, as food was critically scarce both at the front and in markets. By 1917 the money supply had ballooned, the rouble’s purchasing power collapsed, and cities faced food shortages—one of the fuses for the February and October revolutions.

Before entering the war, the United States served as the “arsenal of democracy”, supplying the Entente with goods and credit in exchange for gold. By 1918 America’s gold and currency reserves were among the world’s largest. The US never formally abandoned the gold standard and financed its own war effort through higher taxes and massive bond drives. Its geopolitical position made Washington the world’s leading creditor. The dollar era was beginning. The US became the biggest holder of gold not because it mined the most, but because many who owned bullion preferred to store it there—far from fronts and revolutions. The dollar was tied to gold, and the rest of the world’s currencies to the dollar.

Europe, by contrast, emerged from the war in debt. World War I showed starkly that the classical gold standard does not function under total mobilisation. States, however, can run on fiat money for a long time—its value propped up by faith, hope and propaganda.

World War II: when money becomes useless

Gold by no means became worthless, nor did it lose its role as a reserve, but it was no longer the sole pillar of the financial system. During World War II it was joined by the dollar and sterling, while within countries government debt and administrative controls were decisive. No state grew richer in that period.

When blood truly flowed, citizens did not swap gold for stocks or bonds. For ordinary people, bread, matches, coal, kerosene, grain and salt were dearer than money or securities. In conditions of scarcity and inflation, banknotes and coins stopped performing their basic function—delivering access to goods. Governments imposed tight economic management: controls on production, prices and supply. Rationing systems followed. Without them, speculators would have bought up everything in sight, leaving the poor with no chance to survive.

Food became the universal medium of exchange. Alongside it stood basic resources—fuel, warm clothing, medicines. Anything that ensured physical survival automatically turned into “hard currency”. And the state could always seize what the population had. People could be barred from taking firewood in the forest or peat from the bog; under the “Law on Spikelets” even gathering leftovers in collective fields could mean execution or ten years in camps with confiscation. The law was actively enforced until 1947 and formally repealed only in 1959.

At the top of the “currencies” on Europe’s black markets were butter, coffee, cigarettes, meat, canned goods, alcohol, spirits and fuel. In a shortage economy, value shifted from ownership to control and access: a job at a warehouse, in the distribution system, in a canteen or in transport conferred more real purchasing power than any wage. Social capital—connections, acquaintances, “blat”—became an economic resource in its own right.

In World War II, those who prospered sat close to allocation: state contracts, raw materials, logistics, scarce goods. The opportunity set collapsed and an economy of access took over. Hence smuggling and blockade‑running. Through neutral territories and sham deals flowed goods officially banned from trade. Risks—confiscation, prosecution—were high, but margins more than compensated.

Neutral countries—Sweden, Portugal, Switzerland—played a distinct role as intermediaries between belligerents. Through them went supplies of raw materials, processing and financial operations. Strategic resources such as tungsten or iron ore yielded significant profits precisely because access was restricted and demand existential.

The main source of major fortunes was war industry. In the US, firms like Boeing, General Motors and DuPont worked hand in glove with the state. Civilian production was repurposed to churn out aircraft, vehicles and munitions. Contracts were often cost‑plus: the state covered expenses and guaranteed profit. Risk largely vanished; scale ensured revenue growth.

Financial intermediaries also fared well. Banks—especially in the US and Switzerland—earned from lending to allies, settling payments and managing assets. Institutions like JPMorgan sat astride financial flows, extracting fees and control rents. It was a less visible but highly resilient income stream.

When we say it is impossible to get rich from war, we mean 99% of people. The remaining 1% existed—with specific surnames and corporate names behind them. War brings no real financial benefits to states or peoples at large.

In “Wartime Prosperity? A Reassessment of the U.S. Economy in the 1940s“, Robert Higgs dissects the mythology of “make money while the blood flows” with rigour. His central claim: the war economy looks excellent on paper—especially measured by GDP—but much worse in real life. Formally, the output of tanks, bombs and shells flatters the statistics, creating an illusion of growth. In reality, such production does not increase welfare; it merely consumes resources for the sake of destruction.

In other words, an economy can “grow” while producing ever more things that will either explode or be blown up. Higgs urges a rethink of the metrics: war can create the impression of prosperity, but much of it is an accounting effect masking a grim reality.

War fortunes—some triumphant, many tawdry

To stress again: bankers and industrialists amassed capital not on war itself, but because of it—and via existing infrastructure. While a German housewife swapped her last Reichsmarks for potatoes and a Soviet soldier dug up frozen tubers near Smolensk, bankers at JPMorgan in Manhattan and UBS in Zurich skimmed profits from Lend‑Lease and Nazi gold. They happened to own the pipe through which other people’s billions flowed. For them, “blood in the streets” was not a signal to act, but an extra condition under which they kept tallying EBITDA.

Germany had a man named Günther Quandt. A textile magnate who made millions on uniforms during World War I, he later became one of the chief “Nazi billionaires”. In the 1920s, via his wife Magda (later Joseph Goebbels’s spouse), Quandt backed the NSDAP; after 1933 he financed Adolf Hitler and won contracts for weapons, munitions, batteries for the Luftwaffe and Daimler‑Benz.

He created several companies, one of which is now known as BMW. Quandt took part in the “Aryanisation” of Jewish plants and used slave labour from concentration camps. After Nuremberg he returned to business after just two years under arrest—reportedly because a strong Germany was needed for the Cold War against the USSR, and industry barons were indispensable. The Quandt dynasty still owns BMW.

The Soviet Union had no such “success stories”. That does not mean there were no people keen to use the war for personal gain. Leaving aside small-time grifters, consider a character whose brazenness and luck (for a time) deserves a screenplay. Military engineer Nikolai Pavlenko deserted the front in the chaos of summer 1941. Instead of a trench, he chose the life of a shadow contractor, ready to rebuild ruined cities. Forging stamps and papers, Pavlenko registered a fictitious “Construction Unit of the Kalinin Front No. 5” and, via draft offices, mustered his own “private army” of convalescents, deserters and stragglers.

The dummy unit followed behind the advancing front, winning building contracts, uniforms, rations and supplies like any regular formation. Pavlenko embezzled most of the funds, generously cutting in officers and cultivating high‑level patrons in the rear. By 1944 his “unit” numbered more than two hundred men with heavy weapons, and he had become wealthy by wartime standards.

In Poland and Germany, Pavlenko’s people seized cars, livestock, equipment and tons of food, receiving entire trains from headquarters to haul away the loot, which they then fenced. After victory, the enterprise was legalised as the “Directorate of Military Construction”. The con man received orders and respect; his men had official decorations, often without realising they had served in a bogus unit.

The scheme collapsed only in 1952, when a government bond fraud surfaced. The probe accidentally uncovered that the “construction directorate” existed nowhere on paper—and that Pavlenko was wanted for earlier theft. Hundreds were arrested; weapons, machinery and property were seized; yet only a few drew real prison terms. Pavlenko was executed, while officials who had turned a blind eye for years escaped punishment.

It is not that no one ever managed to cash in on war, but such stories are absolute exceptions—and almost always leave a foul moral aftertaste. The “blood in the streets” meme has its place, and today’s conditions are unlike those of either world war. In reality, though, military upheavals are unlikely to deliver multi-baggers for portfolios even now. More probably they serve as a deadline for swapping cash for food, a passport to a quiet country—or life itself.