In Front of the Iron Curtain:

How a Soviet spy gave the global economy to America — and sought to give Communism to the rest of the world

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Surprisingly, most of the actions and decisions made by this man did not happen out of view in back alleys or in secret meeting spots — they were made in International Forums, various governmental meetings and memoranda, and within the walls of the US Treasury.

Due to dying of a heart attack mere days after defending himself before the House Subcommittee’s hearing on Un-American Activities, we may never know the true allegiance or the motivation of Assistant Secretary of the Treasury Harry Dexter White.

First let’s step back so we can appreciate the scope of what we’re talking about; how trade and currency play a part, and to ultimately understand how the actions taken by this virtually unheard of Assistant Director of the US Treasury had such huge ramifications in today’s world.


International trade was happening earlier than you probably think — we may not have called it “Globalization” yet, but there was a time when the Portuguese represented a good amount of money on the world’s accounting ledgers. Portuguese transatlantic exploration began in the 1400’s, prior to Columbus’ time. Here’s a nifty way to remember this period, courtesy of my late Grandfather:

In 1492,
Columbus shit in his shoe,
Went out in the grass
To Wipe his ass
In 1492

After Portugal, Spain came to have the most used currency in transatlantic trade. Then in the early 1600’s, the Dutch East-India company rolled in, like a Wal-Mart with government backing and cannons blazing, and dominated trade with their currency, the Guilder, paving the way for how future multi-national corporations might act.

Gold had always played a part of course, as often these empire’s coins were made of the shiny yellow metal. As the continents became more connected, the notion of a major “trade” currency gave way to a “reserve currency”, which major bank-like entities would hold. Countries began to follow the United Kingdom’s lead, backing their paper currencies with gold, and creating central banks and treasuries. By the early 1800’s, the UK had become the largest exporter of goods, and with London becoming the financial capital of the world, the standard to settle international trade payments came to be British Pounds Sterling.

Enter the US Dollar

From 1816 to about 1920, British pounds sterling were the de facto reserve currency. Amazing things were happening in America however — electricity was becoming a huge driver of growth combined with improved industrial processes like Ford’s moving assembly line. Car ownership increased and built up the suburbs, where home ownership was booming. America was really coming into it’s own in the Roaring Twenties, and Sterling started to slip, being replaced by good ol’ US dollars. After Black Tuesday’s stock market crash and the ensuing Great depression in 1929–1932, the dollar lost ground to Sterling, however, the US dollar not only re-gained dominance, but officially became the global reserve currency, agreed upon by 44 nations after World War II.

Both John Maynard Keynes, the famous British economist, and Harry Dexter White, the US economist that few today have heard of, were each batting around their own ideas for a method of cooperation in international trade and exchange rate management.

Gold had been great, but with governments having to set its price, and have an exchange standard that only partially backed their national currencies, the “gold exchange standard” framework lacked the flexibility to adjust overall volume quickly — such as the need to print a lot of new money to prepare for a war. You can only dig up so much gold any given year, but dollars can simply be printed.

Bretton Woods and the IMF

Near the end of World War II in 1944, with the defeat of Germany in sight, 44 of the Allied nations convened at Bretton Woods, New Hampshire, to discuss how the world’s economy would work moving forward. The huge task of rebuilding Europe was at hand, and in large part they had to make a plan — because the former economic powerhouse of Britain was now almost completely out of gold, as was the rest of Europe. The United States was the clear winner, as by then we held between 65% to 80% of the world’s official gold holdings, having been the provider of multitudes of things to much of the world throughout the Second World War.

International trade with the second largest economy — Britain — doesn’t exactly work when you’re trading partner has no gold, so clearly something needed to be worked out.

Keynes and White both brought their ideas to the table, and after conferring with many others over a period of three weeks in July 1944, ultimately hammered out a plan in which the majority of White’s ideas won the day. Britain — and particularly Keynes — did not like the idea of a world where America could call the shots economically, but they were in no position to bargain about it.

White was the architect for what became the IMF — the International Monetary Fund, which still exists today. He had worked on the plans for such an international system for nearly three years. The IMF can be seen as a kind of global savings bank for members who pay dues of a sort, can vote, and if needed, can borrow money and purchase another country’s currency to help resolve trade imbalances (such as when a country is exporting much more than it imports).

The Sneak

The IMF Articles to be signed contained vague references to currencies being able to be exchanged for “gold or a gold convertible currency”, however it was not until the end of the three-week conference that this terminology was struck out, and was changed to read “United States dollars” — and this just prior to all the signatures being gathered.

It is very likely that some countries did not even realize they were now beholden to the US dollar, and had to recognize it to be ‘as good as gold’. In order to take part in this new monetary body, they would be required to hold US dollars as the official reserve currency.

This was a brilliant move by Harry Dexter White, and by extension, America — as it ensured a demand (and long-term stability) for US dollars on the global market.

This Bretton Woods conference gave birth to another organization — The World Bank, which also still exists to this day. While the IMF largely deals with “Developed” nations, the World Bank handles loans to “Developing Nations” for infrastructure projects, aid, and other purposes.

The seeds of what would later become the WTO (World Trade Organization) were also planted at Bretton Woods in a framework of generally agreed-upon Tariff and Trade rules, though it would be many years before the WTO officially came into existence in 1995.

Agent of Influence?

As to White being a spy, it’s important to remember this was during a time when, (however uncomfortable it seems now), Russia was actually an ally of the US. Stalin didn’t join the Axis Powers in the war, and ultimately many Soviet soldiers gave their lives fighting against Hitler Third Reich Army.

There are historians on both sides of the debate as to whether White was truly a spy, or was simply being unknowingly exploited for information by the multitude of spies discovered in FDR’s Treasury Department.

The creation of the IMF is a cause for pause — after all, why would a Communist sympathizer want to help ensure American economic dominance? A fair question — It certainly serves as quite a backstop to spy allegations. However it’s very important to note that Mr. White was involved in several other situations. Though there may be nothing obvious to suggest that his potential spy status specifically influenced the decisions in Bretton Woods NH that summer, or on the US dollar becoming the dominant global currency, there are other cases (we know of) to examine. One of which may have cost US lives, and another which cost US taxpayers about $250,000,000.

That was quite a bit of money back in 1945.

The Hull Note

We need to back up a few years prior to the US getting involved in WWII. Japan had been on the move, attacking China with increasing frequency in hopes to expand the Japanese empire. The US was actually a trading partner with China in the late 1930’s, as China was seen by many countries as a very promising land of milk and honey. When Japan wouldn’t relent and we felt they were overstepping their bounds, the US began to place sanctions on Japan, which itself was a resource poor island nation — they completely depended upon International Trade and particularly oil — to move their war machine. Their hunger for attacking China was largely due to the Great Depression’s effect on trade, causing Japan to lash out to make claims on nearby resources, and if possible, all of Southeast Asia.

The memories of WWI were still fresh enough that Americans really didn’t want another war, however Japan pushed us far enough that a note from US Secretary of State Cordell Hull was seen as an ultimatum. So how does White figure into all this?

At the least, White was a Communist sympathizer. The Soviet Union was Communist. The Soviets already had a fiery gallbladder (Germany) on one side of a probably too big to defend country, and now were also in Japan’s sights. Declassified KGB and GRU documents by both the US, and in Russia under Gorbechav, show that White was meeting with his Soviet contact, discussing the hope that the US would become involved, thus diverting Japan from attacking the Soviet Union. It is believed the harsh language in the ‘ultimatum’ from Hull to the Japanese was largely influenced by White’s previous memorandum to Henry Morgenthau Jr, the Secretary of the Treasury. The jury may be out on whether White’s influence was quite so significant, but the attack at Pearl Harbor commenced rather quickly after the Hull Note was received.

The Printing Plates

When WWII was over, the defeated Germany was temporarily split into four occupation zones, managed by the US, the Soviet Union, Britain and France. The US would take the lead on rebuilding, and so a temporary currency was created — The “Allied Military Mark” — to be used in postwar Europe until things stabilized. The US kindly sent this new currency to Britain and France to cover their soldiers’ salaries and the war efforts of the Allies, but the Soviets held out. They said “We’ll just make a temporary currency too” but the US very much did NOT want that — we may have been allies with the Soviets at the moment, but we were treating them with kid gloves, knowing their propensity for wanting to spread communist ideology into the weakened region, particularly what would become of Germany.

We were willing to help the Soviets, but we weren’t going to let them be seen as the good guys. Discussions on providing these Allied Marks kept failing, and the demand of the Soviets turned into “Just send us the currency printing plates, or else we’ll print our own occupation currency.” White was extremely well-respected in the Treasury, and heavily influential on Secretary Morgenthau — because in part, White made Morgenthau look good to the President. White was ultimately able to make a convincing argument that sending the printing plates to the Soviets would be the right move.

It wasn’t. Granted, it did appease the Soviets enough not to create a separate currency, but I’d think any country would have been overjoyed at the prospect of printing US-backed money to their heart’s content. And print they did.

I’d think any country would have been overjoyed at the prospect of printing US-backed money to their heart’s content. And print they did.

We have no earthly idea just how goddamn much they printed. As far as the amount that was able to be reconciled back to the US — that figure was $250M–$280M. In today’s money, that’s upwards of $4 Billion. This was not a definitive amount by any means. The initial concerns by, well, the handful of people in the US Treasury who weren’t actually spies, was that the moment we delivered Russia the printing plates, paper, and dyes needed to independently print Allied Marks, we effectively had no control whatsoever, no means of possible reconciliation, and no level of real accountability on top of that. It is believed by some the value of Allied Military Marks printed was in the double-digit billions.

We may never know how many Russian billionaires have been created that are still around today; no idea how much land or other property around Germany and Europe as a whole were purchased with this effectively counterfeit currency. At the least, we know Russia was able to pay it’s own soldiers 6x over. When the postwar black market in Germany is taken into account, in which even US soldiers got into the action, there’s no telling what real gains came from this debacle. Good salesmanship in the black market could likely have turned a single cigarette into several US dollars.

Although ultimately the day came when the US stopped accepting the Allied Military Mark for US dollars, nothing would’ve really stopped it from being circulated among Russians and Europeans, as long as there were enough parties who decided it still had value.

In this case, there can be no doubt that White was the chief orchestrator for providing the US printing plates to Russia. He had Morgenthau’s utmost trust; even so, a memorandum exists to White from Morgenthau which documents specifically that White made the decision, and would be accountable to any issues that arose. White had very much hoped to assist Russia by bankrolling their longer-term plan to swallow up all of Eastern Europe into Communism.

Hearing and Hindsight

Although White has many defenders to this day, I am convinced of his guilt in these matters. Two former Soviet agents that had defected, Elizabeth Bentley and Whittaker Chambers, not only named White as part of a Soviet spy ring without hesitation, but also gave accounts independently of one another that corroborated White’s involvement. Although the IMF’s creation seems curious if orchestrated by a spy, who knows — after all, White was named as the Director of the IMF in February 1946, and perhaps his plan was to funnel money to the Soviets from that position.

With hindsight being our guide to history, it’s much more convincing to believe White was acting as a Soviet Agent of Influence — a title actually more elite than a “regular” spy, due to the ability to shape policy at such a high level. The ramifications of the actions he set in motion almost always pointed to some possibility to strengthen or reinforce Communism, or else give it room to bloom or to spread.

On August 13, 1948, White went on a powerful offensive at the House Un-American Activities Committee (HUAC) Hearing — a hearing that he himself requested, specifically and proactively, to clear his name after having been named part of the Communist movement by Bentley and Chambers. White read a prepared statement, defining his personal creed — the “American” creed — that could make anyone doubt he could possibly have been a Communist. It was very evocative of the core of what being an American means. He then vigorously defended himself under questioning, denying he was a Communist but largely agreeing to the facts. The tricky thing is that the vast majority of things White had done were in fact, above-board — he just happened to be highly-intelligent and so well-respected that, being in such a place of decision-making, his judgement was rarely questioned.

Three days after this hearing, on August 16, White had a fatal heart attack at age 55. It is believed he had taken a fatal dose of Digitalis, a heart medication he was prescribed from a recent heart attack. Digitalis is a medication that can strengthen a weak heart, but in higher doses, it would effectively cause a heart attack. We have no reason to believe this was a murder; but a suicide? We’ll likely never know.

The documents I’ve read go back and forth on White, but the most even-handed paper I read was by Tom Adams, named “The Trial of Harry Dexter White, Soviet Agent of Influence” (2004), which presents in my opinion, a very convincing argument that White was a Soviet spy, and likely a very good one, as most other alleged associate spies in White’s circle, when testifying afterward in a Red Scare resurgence of McCarthyism, pled the fifth amendment consistently when White’s name arose.

Dasvidaniya, comrades, and stay safe.

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Adams, Tom, “The Trial of Harry Dexter White: Soviet Agent of Influence” (2004). University of New Orleans Theses and Dissertations. Paper 177.

Boughton, James M., “Case Against Harry Dexter White: Still Not Proven” (2000), International Monetary Fund Working Paper

Military Establishment Appropriations Bill for 1948, Hearing Before the Subcommittee of the Committee on Appropriations, United States Senate, Eightieth Congress, Oct 20–21, (1947) H.R. 3678

Transfer of Occupation Currency Plates — Espionage Phase. Hearing before the Subcommittee on Government Operations Abroad of the Permanent Subcommittee on Investigations of the Committee on Government Operations, United States Senate, Eighty-Third Congress, Oct 20–21, 1953

Koster, John — “Operation Snow: How a Soviet Mole in FDR’s White House Triggered Pearl Harbor”, (2012) Regnery Publishing, Inc.

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I write about Economics and Social issues that affect us all, because my country, America, has problems and change is needed now.

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