Operation Fish: largest transfer of physical wealth – ever
Published on: 26 May 2024
Early morning, around 7 am.
1st of July, 1940.
A ship had arrived at Halifax harbor (Canada).
Workers started offloading fish boxes from the ship.
This ship had come to Canada from England – after a 7-day journey crossing the Atlantic Ocean.
The boxes were loaded onto a train.
The security was extremely tight. About 300 guards with weapons oversaw this operation carefully.
About 2,500 boxes were taken off the ship and loaded on the train.
The train then set off for the city of Montreal – 800 km away.
The 300 guards accompanied the train on the journey.
When the train arrived at Montreal, two men named Perkins and Craig met.
Perkins worked in the Bank of Canada. Craig was from the Bank of England.
Craig told Perkins that he had gotten ‘a load of fish’.
After dark, the boxes were put in armored cars. It took many hours and men.
They were taken to the Bank of Canada’s underground vault and stored there.
The boxes were fish boxes – yes.
They had indeed come from England – yes.
But they did not carry fish.
So what did they have?
Inside, the boxes had bricks of gold.
Many more ships arrived at Halifax with ‘fish’ from England.
In total, 1,500 tons of gold reached Canada via these ships.
(Yes, tons. Not kilograms).
In 2017, this gold would have been worth about $160 billion.
Whom did it belong to? And what was it doing in Canada?
This gold belonged to England (Bank of England).
And England was storing the gold in Canada’s vaults.
Why?
World War 2.
World War 2
Any incident from the World Wars requires a lot of explaining.
Too many things were happening all at once.
We will have to start from the middle somewhere – not from the beginning.
In 1939, World War 2 had started.
Germany had been greatly damaged in World War 1. Their economy was ruined. The country was experiencing hyperinflation.
Their currency had little value.
To rebuild itself in every way, it needed resources.
Germany has little resources of its own – except coal.
Iron, aluminum, crude oil, etc – everything had to be imported.
There was a problem.
Their currency was not valued (because of hyperinflation). No country would accept their money.
How do you import then?
Well, if not cash, you can pay using something everyone is willing to accept – gold.
But there was another problem.
Just like other resources, Germany did not have much gold or gold mines.
By this time, Germany started World War 2.
Germany had big ambitions. It wanted to expand and conquer.
They had attacked neighboring countries like Poland and Austria. And after doing so, they had seized these countries’ gold.
The seized gold allowed Germany to expand their military.
The war grew bigger and involved more countries. It reached a point where England and Germany were fighting each other.
All countries need money to fight wars. It is not free.
Germany was able to use gold from countries it had defeated.
England had a lot of gold. They worried about losing to Germany.
What if Germany got all of England’s gold? Then Germany would be unstoppable.
And England would lose its gold – so it would not be able to buy weapons and pay salaries to soldiers. How would they continue fighting the Germans?
They came up with a plan: Operation Fish.
To keep their gold safe, they moved it from England to Canada – in its banks’ vaults. Multiple navy ships carried the gold from England to Canada.
They succeeded.
Operation Fish. The largest transfer of physical wealth – ever.
This step proved crucial.
It allowed England to remain financially stable during the war.
Eventually, Germany lost.
(Do note, that Germany lost because of many other factors – not just because of Operation Fish. But Operation Fish certainly helped).
Gold
Wars have been fought over gold and gold mines.
Gold has been used as currency or as an asset across the world – for thousands of years.
If you go to different countries, you cannot use the Indian Rupee. You are required to use the local currency. Example: Dirham in UAE.
Some strong currencies are more readily accepted. The US dollar is accepted in many countries.
But even that is not accepted everywhere.
On the other hand, gold is accepted almost universally.
How did gold become this sought-after asset?
Gold is a rare metal that is not too rare. It does not corrode. And crucially, it is dense.
1 kg of gold is much smaller than 1 kg of say rice or milk. So it becomes much easier to transport gold.
It is a safe haven.
When people are uncertain about the future, they keep money in gold.
We wrote about one such example above: how Germany used gold when their economy was shattered and their currency did not have any value.
We routinely talk of investing in gold as individuals – especially in India.
Something that is not known is that countries love gold too – even today.
The central banks of many countries have vast gold reserves, just like the Bank of England.
If you look at the price of gold, you will notice that the price climbs when the share markets are doing poorly.
For example, the price of gold shot up during the 2008 recession. It shot up during the 2020 pandemic year.
This makes sense because during such uncertain times, people fear for their future.
To be safe, they take out money from the share markets and other relatively riskier investments. And invest in gold.
Bad things do not need to actually happen for gold’s price to shoot up.
Many times, the price of gold shoots up in fear of something bad that might happen.
In the year 2000, the dot com bubble burst.
From 2000 to 2008, the market and the economy were actually doing fine.
Still, the price of gold kept climbing in that period.
Why?
There were many factors – the US dollar was weakening. Fear of terrorism causing global damage (after the World Trade Center attacks). Newer investors starting to invest for the first time using gold ETFs. And so on.
It is a perfect example of a rise in gold value even while the stock markets and the economy were doing well.
Of course – after that period, the 2008 recession hit and gold’s price shot up even more.
Current Times
The price of gold has shot up significantly in 2024. It has climbed by around 15% so far.
The stock markets are doing fine.
Then why is gold climbing? Is something bad happening?
It appears that this price increase is because of heavy buying by various buyers.
Who are these buyers?
Many large countries’ central banks have increased their gold holdings.
The commonly held belief is that the Ukraine-Russia war instilled some fear in countries – about a larger-scale war. The Israel-Palestine conflict added to that.
So they want to diversify and hold more gold.
Central banks of countries like China and Turkey have nearly doubled their of gold purchases.
Another reason is investment by new investors.
People in countries like China are getting richer.
Also, the US economy seems to be doing fine but the Chinese economy is not. So it is driving Chinese investors to buy gold.
Even in other countries, people who did not invest earlier are now starting to invest. And gold is one of the assets attracting these new investors.
What Operation Fish taught us is that gold is loved by all.
Many finance experts believe gold should be a part of people’s investment portfolio – to some extent.
How much?
That is an opinion. Different people have different opinions.
It is crucial for investors to not invest in gold just because everybody else is doing it.
Gold purchases and investments should align with investors’ long-term goals.
The images above were generated using AI tools.
Quick Takes
+India’s forex reserves rose by $4.54 billion in the previous week to an all-time high of $648.70 billion as of 17 May: RBI.
+India’s coffee exports rose 12.22% year-on-year to $1.28 billion in 2023-24. India is the 3rd largest coffee exporter among Asian countries: Commerce Ministry.
+Uber got a licence from Delhi Transport Dept to operate buses in Delhi NCR. It is the first company to get this licence under Delhi Premium Bus Scheme.
+RBI added 24 tonnes of gold in its foreign exchange reserves from Jan to April this year: RBI data.
+India’s manufacturing output growth (PMI) slowed to 58.4 in May (from 58.8 in April). Services PMI rose to 61.4 in May (from 60.8 in April): HSBC India Flash PMI data.
+RBI has approved a Rs 2.11 lakh cr dividend payment to the central government for 2023-24 (over 2 times compared to last year).
+Oravel Stays (parent company of Oyo Hotels) has reportedly cancelled its IPO application.
+Imports of paper and paperboard in India rose by 34% to 19.3 lakh tonnes in 2023-24: The Indian Paper Manufacturers Association (IPMA).
6-Day-Course
Theme of the week: biggest 1-day drops in the US markets
We’ve reached the end of this week’s course that started on Monday. Here’s a test you should take. Get pen and paper!
Question 1:
Whenever the markets fall heavily, there is a broad theme during that time period. Some of the themes are _____ ?
-The great depression
-COVID-19
-2008 depression
-All of the above
Question 2:
The biggest 1-day fall ever in the US markets was on _____ ?
-28 Oct 1929 (The Great Depression)
-19 Oct 1987 (Black Monday)
-16 Mar 2020 (Covid-19 pandemic)
Question 3:
During which time period did the markets fall by a higher margin?
-The Great Depression
-Covid 19 pandemic
Question 4:
A major fall in the US markets generally affects the rest of the markets in the world.
-True
-False
Question 5:
Black Monday happened due to _____ ?
-Trade deficit
-Algo trading
-Market overvaluation
-A combined effect of multiple reasons
Answers:
Q1: All of the above
Q2: 19 Oct 1987 (Black Monday)
Q3: The Great Depression
Q4: True
Q5: A combined effect of multiple reasons
The information contained in this Groww Digest is purely for knowledge. This Groww Digest does not contain any recommendations or advice.
Team Groww Digest