London agent during the period of hostilities between Britain and the colonies .)
The rest of Europe may have seen Britain as a haven , but the British knew their defenses were not impenetrable . Their island was protected by its navy — perhaps the best in the world — but the British knew that if the Germans got a toehold on the island , it could mean real trouble .
The British military was purchasing American war supplies on a “ cash-andcarry ” basis in 1939-40 and needed to ship money to America to pay for them . In May 1939 , shortly before the Yugoslavian gold arrived and before hostilities began , the Bank of England secretly sent gold on trucks —“ lorries ”— on three consecutive nights from London to Portsmouth harbor and aboard a military cruiser that then joined an entourage escorting King George VI on a Royal visit to Canada and the United States . The operation was kept completely secret , and it went off like clockwork .
The war began in September 1939 with Germany ’ s invasion of Poland , and orders for American military supplies placed by Britain and France increased dramatically . Britain ’ s Chancellor of the Exchequer notified his military leaders that such secret shipments of gold would also have to escalate . He estimated some 200 million British pounds worth of gold — 800 tons of it , worth $ 44 billion today — would need to be shipped over the next 12 months , all while German U-boats patrolled and sank ships in the North Atlantic .
In early October 1939 , the first of the crossings was made , this time from Plymouth harbor bound for Halifax , Nova Scotia . Secrecy was paramount . The Royal Navy issued tropical gear to the sailors aboard the cruisers HMS Emerald and Enterprise to throw off any spies regarding their destination . The crossing weather was cold and rough , however , and the sailors ’ clothing proved completely inadequate . On arriving in Halifax , the captain of the Emerald casually requested warm clothing for the return trip , and the Canadian Red Cross rushed them such items as horsehide gloves , woolen scarves and leather headgear . The captain later called this act of generosity “ unbelievable .”
Canada had declared war on Germany shortly after Britain did in early September 1939 , and their efforts on behalf of the British and the allied cause during those years before the United States entered the war are little remembered and nothing
British Prime Minister Winston Churchill
short of heroic . United States neutrality law prevented warships such as those carrying gold from docking at any of their many eastern ports , so the ships went to Canada , where Canadians transported , guarded and brokered the contents .
The “ Phony War ” that followed the Polish surrender ended abruptly in April 1940 when Germany attacked Norway . Norwegian gold made it out of Norway to Scotland and then on to London as German paratroopers landed all around . German troops overpowered Holland and Belgium in May 1940 , and Dutch gold made it across the channel to England along with most of Holland ’ s royal family . The Germans then steamrolled into France . Some French gold had been shipped to London in April , but the bulk of it left the harbor at Brest in northwest France bound for the Caribbean and West Africa mere hours before the Germans arrived .
Parliament had appointed a new Prime Minister , Winston Churchill , in mid-May . He had been First Lord of the Admiralty and was well-aware of the financial problem of paying cash for armaments . He wrote to American President Franklin D . Roosevelt , a man he did not know well at the time , on May 15 . “ We shall go on paying dollars for as long as we can ,” he wrote , “ but I should like to feel reasonably sure that when we can pay no more you will give us the stuff all the same .”
Churchill tried to rally the French , but to no avail . The evacuation from Dunkirk and the French surrender in mid-June
left Britain alone . British resolve stiffened behind Churchill , but Churchill was a realist . Britain ’ s ability to buy weapons to defend itself was dependent on its wealth , which would be lost if the Germans were to reach London . That wealth had to be moved out of danger . The nation ’ s bankers also knew that much of Britain ’ s wealth was in securities owned by British citizens . The bankers determined that these private holdings , especially the highly marketable American and Canadian securities , could be moved as well under the provisions of the Emergency Powers Act . Churchill told the cabinet of the plan as events were coming to a head at Dunkirk .
The operation would have to be kept secret for all sorts of reasons . U-boats would be expected to target ships known to contain such wealth , but the mere fact that the nation ’ s wealth was leaving the country would look defeatist and would be a blow to British morale . Communication was kept to an absolute minimum , and the word “ fish ” was used to refer to the cargo .
The Bank of England work was supervised by Deputy Governor Basil Catterns , a highly discreet banker perfectly comfortable with secrecy . Catterns outlined the plan in a memo to the Deputy head of the Treasury . “ Our proposal in brief is that the Treasury should call in all restricted securities … and …[ those should be ] shipped to Canada by a vessel specially chartered for the purpose .”
Preparations began in late May 1940 . The military situation was deteriorating and required quick changes in plan . The channel ports of Portsmouth and Plymouth were no longer considered safe , so the gold and securities would have to travel northwest to board ships . The Admiralty also sent the bankers an ominous warning : In the event of a German offensive , all battleships would have to be pulled back from convoy duty to defend the island , and ships carrying gold would have to cross the Atlantic without military protection .
The banks collected the gold and negotiable securities and sent them to the port of Greenock in western Scotland . Five Bank of England men were hastily sent to Greenock to board the HMS Emerald to travel with the gold and the securities . The ship left Greenock bound for Halifax on June 23 .
The crossing would be windy and rough , especially on the bankers . The captain recalled , “ We left the Clyde that night with reports of really foul weather ahead .” One
www . MoAF . org | Spring 2024 | FINANCIAL HISTORY 25