Making Money While the Blood Flows: What Were the Safeguard Assets of the Two World Wars?

Making Money While the Blood Flows: What Were the Safe Havens of the Two World Wars
"Buy when there's blood in the streets." This phrase is attributed to Baron Nathan Mayer Rothschild, a legendary 19th-century banker. Legend has it that he amassed a vast fortune by buying up stocks immediately after the Battle of Waterloo: everyone was panicking over Napoleon's possible victory, and prices plummeted to rock bottom.

Today, this cynical wisdom is often repeated by crypto influencers. But it completely ignores the real risks of global upheaval—even to the point of completely destroying assets (and sometimes their owners).

We at AsicFIX decided to recall whether this advice helped those trying to profit from the First and Second World Wars, and whether modern investors are right in recalling this semi-mythical advice.

World War I: Some People's Wars Are Other People's Mothers
July 1914 World War I began, and immediately a global financial panic erupted. The London Stock Exchange closed for nearly five months—the first time in 300 years. The New York Stock Exchange closed for four.

Investors dumped stocks en masse and converted their money into gold and foreign currency, moving capital to neutral countries. The primary goal was not to make money, but simply to preserve capital and survive.

Proponents of the "buy blood" principle like to point out that after the American stock exchange reopened in December 1914, the Dow Jones index rose by more than 88%. But who really benefited? The owners of military factories, newspapers, and shipping companies—mostly in the United States.

The American economy quickly adapted to the war effort and became the main supplier of weapons and food to the Entente. This is why American investment coaches recall that period so optimistically.

In countries where fighting was taking place, stock exchanges resumed operations, but under strict government control. Governments forced everyone to buy "patriotic" bonds. This was the first mass mobilization of public capital in history. After defeat and revolution, these securities in most countries (especially Russia, Germany, and Austria-Hungary) turned into waste paper.

According to economist Robert Higgs, corporate profits in the US military industries increased by 200-300% from 1914 to 1917. Companies such as US Steel, Bethlehem Steel, and DuPont made enormous fortunes. DuPont's net profit, for example, jumped from $5 million in 1914 to $82 million in 1918—an increase of 1,540%.

The big money was made not on the open market, but through government contracts and the redistribution of resources.

The Funeral of the Gold Standard
By the fall of 1914, it became clear that the war would drag on. Countries began abandoning the gold standard. Money was no longer tied to bullion stored in central bank vaults. Issuance became a political decision: print as much as needed for ammunition, food, and salaries.

Gold, instead of being a stock market asset, became a "survival currency"—it was hidden in mattresses and exchanged on the black market. Some traded a trainload of gold for a trainload of weapons, while others exchanged a wedding ring for two pounds of flour.

Thus began the era of fiat money. Its value was based on faith in the state, propaganda, and coercion. Governments launched two main mechanisms:

Direct emission—the treasury issues bonds, the central bank prints money and buys them, and the government pays factories with these bills.
War loans—bonds were sold to the public and businesses, simultaneously used as a powerful propaganda tool ("every piece of paper is a bullet for the enemy").
Europe emerged from the war in debt. The pound sterling lost its status as the world's leading currency. France, Germany, and Russia faced hyperinflation. The United States, meanwhile, became the largest holder of gold and the world's leading creditor, ushering in the dollar era.

World War II: When Money Becomes Useless
Gold didn't completely lose its role as a reserve, but it was now supplemented by the dollar, the pound, government debt, and strict administrative control. Not a single country grew rich during this period.

When the bloodshed really began, people exchanged gold not for stocks and bonds, but for bread, matches, kerosene, and salt. Money ceased to fulfill its primary function. Governments introduced rationing, total price controls, and distribution.

On European black markets, butter, coffee, cigarettes, meat, alcohol, and fuel became the main "currency." Social capital (connections, connections, access to distribution) became more important than any money.

Those who were close to government contracts, logistics, and scarce goods became rich. Neutral countries—Sweden, Switzerland, Portugal—and large US corporations (Boeing, General Motors, DuPont), working under cost-plus contracts, fared particularly well.

Robert Higgs, in his work "War Prosperity?", writes bluntly: the war economy creates the illusion of GDP growth, but in reality, it's simply a redistribution of resources for destruction. Formally, production grows, but prosperity declines.

Stories of those who did profit
Bankers and industrialists made money not "from" the war, but "thanks" to the war—through existing infrastructure and connections. An example is Günther Quandt in Germany: a textile magnate, later a "Nazi billionaire,"