May 8, 2020 marks the 75th anniversary of V-E Day, the end of World War II in Europe. It also marks the beginning of the occupation of Germany.
International law recognizes the right of an invading country to determine what will pass as legal tender in conquered territory. The domestic currency may remain valid, the currency of the invader may be made valid, the invader may introduce an entirely new currency system or a combination of these may occur. The choice will depend on what the invader’s goals are.
The primary purpose of an occupation currency is to compel the conquered territory to pay for the expense of the occupation. The occupier uses occupation currency to pay for items it requisitions and to pay its occupying troops. The occupier creates this money out of thin air and compels its acceptance. The occupier essentially gets everything for free while maintaining the pretense of paying for it.
Both sides made extensive use of occupation currency in WWII. Japan was the first to use an occupation currency when it introduced military yen in China. The first Allied use of occupation currency was in North Africa where yellow seal US dollars and British Military Authority notes were used with the Operation Torch landings in late 1942.
The occupation of Germany presented a number of challenges when it came to an occupation currency. The western Allies had been able to cooperate with one another on currency matters (although General DeGaulle was difficult when it came to issuing supplemental francs). Money in Germany would have to be coordinated with the Soviet Union.
It was agreed at the Yalta Conference that there would be a single, uniform occupation currency for Germany. While the Soviets were in agreement with this, they refused to accept a US proposal for the US to print all the military marks and supply the finished money to the Soviets. They insisted on printing their own notes for their own needs. When the US insisted on being the sole printer, the Soviets threatened to print their own so the designs would not be uniform.
The US relented. The Soviets requested plates for printing notes from the US. The Treasury Department objected to the President that it was not advisable to provide this to the Soviets. Instead, they were given glass positives of the notes along with a supply of ink and paper. With these they were able to duplicate the design of the notes printed in the US — almost. More on that later.
The decision to allow the Soviets to print their own military marks had long lasting effects. They had no intention of allowing Germany to have a quick economic recovery and controlling the currency was one way to do this. While the western Allies looked to have the Reichsbank resume printing notes for its own use, the Soviets refused to allow this to happen. The Soviets printed hundreds of millions of military mark notes and used them to pay their own troops several months of back pay.
Black marketing was rampant as free-spending Russian troops flooded the German economy with military marks and were willing to pay exorbitant prices for consumer goods and cigarettes. Western Allied soldiers got in on the racket by making goods available to their Russian counterparts and converting the military marks to their own currencies at the official exchange rate of ten reichsmarks to a dollar. It took the United States almost two years to come up with a method to get currency matters under control when Military Payment Certificates were issued in September 1946.
Military marks were printed in denominations of 50 pfennig, 1, 5, 10, 20, 50, 100 and 1,000 marks. The western Allies did not issue the 1,000 mark note but the Soviets did. In the US, the notes were printed by the Forbes Lithograph Company of Boston. They are not engraved or intaglio printed but were lithographed. There are no security features in the printing or paper.
The Soviet printed notes were identical except for two small differences. The Forbes printed notes have a small, stylized letter “f” for Forbes hidden in the design that does not appear on the Soviet notes. The serial numbers for the Soviet printed notes are eight digits long preceded by a dash. They included the dash because the examples they were provided by the US were replacement notes that included the dash. Regular US printed notes had nine digit serial numbers without the dash.
When the serial numbers of the Soviet notes exceeded 99999999, they dropped the dash and added a ninth digit. Nine digit Soviet notes can be distinguished from the US printed nine digit notes by the lack of the Forbes “f”. Another diagnostic of the Soviet printed notes is a gap that appears between the third and fourth places in the serial number on many notes. The Soviets did not have numbering wheels that could accommodate nine digits so they used two wheels for each number, one with three digits and one with six.
Of the sixteen different types printed (eight denominations printed each by the US and Soviets), the Soviet 50 pfennig note had the smallest print run of approximately 5,000,000 notes. The Soviets apparently did not have much need for a half mark note. By comparison, Forbes printed over 75,000,000 50 pfennig notes.
Despite repeated requests, the Soviets refused to provide data on the number of notes printed or the amount issued.
While military mark notes were intended to be used exclusively by the occupation forces, the inability of the Reichsbank to print its own notes led to it being supplied with military marks for its use. This was possible since the military mark and the reichsmark were at par and neither the Allied Military Government nor any of the Allied governments were responsible for redeeming military marks.
Military marks remained in circulation in Germany until the Currency Reform of 1948 when the reichsmark and the military mark were replaced by the Deutsche mark.