First published in The Price Report on 6 August 2020

“This is not some game. You get noticed, and that gets us noticed. And us being noticed gets us all shot.”

– Josef Gabčík (Cillian Murphy), in Sean Ellis’ 2016 film Anthropoid

Reinhard Heydrich was without doubt one of the most evil men ever to have existed. Dubbed by Adolf Hitler “the man with the iron heart”, Heydrich helped organise Kristallnacht, a coordinated anti-Jewish pogrom across Nazi Germany and Austria on 9-10 November 1938, and was directly responsible for the Einsatzgruppen, death squads that followed the German army into foreign territory, and which are held accountable for more than two million deaths. Heydrich also chaired 1942’s Wannsee Conference, at which the Nazis formalised plans for their “Final Solution”.

SS Obergruppenführer Heydrich was Heinrich Himmler’s right-hand man. As head of the Reich’s main security office, he was in control of the most terrifying arms of the Nazi regime, including the SD (intelligence), Gestapo (secret police), Sipo (security police) and Kripo (criminal police).

Under the guise of Protector of Bohemia and Moravia, he also became known to Czechoslovaks as “the Butcher of Prague”. And on 27 May 1942, Sergeant Josef Gabčík and Sergeant Jan Kubiš from the 1st Czechoslovak Mixed Brigade, under the direction of Churchill’s Special Operations Executive (SOE), set out to assassinate him.

Heydrich would make a daily commute from the centre of Prague to his office in Prague Castle. As a sign of his overconfidence – and of his command over the occupied territory – he would travel in an open-top Mercedes (registration number “SS-3”). At 10.35am, as the car slowed to take a hairpin bend in the road, Gabčík stepped out in front of it, took out a Sten submachinegun, and fired.

The gun jammed. Heydrich vaingloriously leapt out in pursuit, Luger in hand. Kubiš then threw a modified tank grenade at him.

He missed. But the grenade came to rest against the rear wheel and exploded. Heydrich gave chase, but then suddenly collapsed. A piece of the car’s metalwork had shattered one of his ribs and wedged itself in his spleen, together with some of the car’s horsehair upholstery.

Himmler, Heydrich’s superior, sent his personal physician, Karl Gebhardt, to attend on him. Although it initially seemed as if he would pull through, on 3 June while having lunch in his hospital bed, Heydrich went into shock. He slipped into a deep coma, and died on the morning of 4 June.

Hitler’s rage was uncontrollable. He ordered widespread reprisals. More than 13,000 were arrested. Thousands more would probably have been killed, but Hitler was ultimately persuaded to limit his fury, if only to maintain industrial productivity in the region, a key engine of the German war effort. Gabčík and Kubiš managed to elude their captors for three weeks, but were eventually betrayed by a countryman lured by the promised one million Reichsmarks bounty.

They were ultimately surrounded by 750 members of the Waffen-SS in Prague’s Orthodox Church of Saints Cyril and Methodius. Kubiš died during the subsequent exchange of fire; Gabčík ended up committing suicide rather than be taken alive.

The Nazis vowed revenge. Beginning on 10 June, all males over the age of 16 in the Czech villages of Lidice and Ležáky – erroneously believed to have links with the assassins – were murdered. Several thousands were massacred during the bloodletting. The final tally will likely never be known, nor the precise consequences of the ultimately successful plot.

Although the first three true death camps (Treblinka, Sobibór and Belzec) were built after Heydrich’s assassination, his removal from the murderous regime also probably saved thousands of others, emboldened the Czech and wider European will to resist Hitler, and led to the repeal of the infamous Munich Agreement that had parcelled out Czechoslovakia to the Nazis in the first place.

Hollywood, perhaps understandably, has been irresistibly drawn to the story. Within a year of Heydrich’s death, both Fritz Lang (Hangmen Also Die) and Douglas Sirk (Hitler’s Madman) had made films about it. 1975 brought Operation Daybreak. 2016 saw the release of Sean Ellis’ Anthropoid, starring Jamie Dornan, Cillian Murphy and Toby Jones. I can’t speak for the others, but the 2016 version is quite simply shattering to watch, especially as events spiral down to their sombre, inevitable denouement.

One question, above all, remains. In the light of all that followed in its aftermath, was Operation Anthropoid worth it? Could anyone, before the fact, have rationally assessed all the attendant risks?

Happily, as investors, the challenges we face in our day-to-day activities are somewhat more mundane. But the lingering role of risk is ever-present as we try to shepherd our scarce savings and investments from today to tomorrow and thereafter. Some things are forecastable. Others – and coronavirus is a good example – are not.

To Gabčík and Kubiš, the primary risk wasn’t that they’d get caught – they probably realised from the get-go that they were on what amounted to a suicide mission. The primary risk was that they’d fail to kill Heydrich. For SOE and for the Czech leaders in exile, their primary risk – which they may well have foreseen, but overruled – was the human cost of reprisals against their own people.

For investors today, a risk previously unforeseen at the start of the year was not just the spread of a new virus (one that turns out to be not particularly deadly, especially for those near or below middle age) but how panicky governments would respond to it – namely, by putting their populations under house arrest, by quarantining the healthy, by shutting down vast portions of domestic industry with no certainty of how to reopen them, and then by responding to their own panic measures by fire-hosing money at a knackered economy.

Like many, I initially understated the risks of coronavirus. I underestimated the ability of government to consistently delay making decisions, only to finally decide on doing precisely the wrong thing. I also underestimated the ability of the mainstream media to i) distort, abuse and ultimately traduce the already questionable Covid-19 data emanating haphazardly from government agencies and the dismal Public Health England, and ii) in the process, scare half the population out of their minds.

The economic impact is still too difficult to call. For as long as governments continue to shower the largesse of future taxpayers at an ailing economy, it will be difficult to assess the precise nature or duration of the damage. But it’s already clear that not all sectors in the economy are equal in 2020. Critical players in our digital infrastructure, like Amazon, Apple and Zoom? Happy days. Pub owners? Not so much.

But the main characteristic of coronavirus may be that, for all the “new” damage it wreaks upon the economy, its primary impact will be to accelerate trends that we were already experiencing before the virus hit – such as the astronomical build-up in government debts, and the attendant hyper-growth in the money supply required, not least to maintain debt service, globally. Gold and, more recently, silver have certainly been paying attention.

I have written several times about my concerns over Modern Monetary Theory (MMT) and how it threatens what remains of any stability within our monetary system. MMT essentially advocates that for any country that has control over the issuance of its currency (EU members take note), it need never worry about internal solvency because it can always simply print more currency to satisfy the notional needs of its creditors.

This is technically true, but it overlooks the fact that any fiat currency needs the confidence of its users to maintain its integrity and perception of value in the marketplace. In November 2002, the man who would be Alan Greenspan’s successor at the US Federal Reserve, Ben Bernanke, acknowledged as such in an address to the National Economists Club in Washington (emphasis mine):

Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.

Alan Greenspan himself admitted as much:

The United States can pay any debt it has because we can always print money to do that. So there is zero probability of default.

Again, strictly true. But again, it glosses over the fact that most if not all Treasury investors will abandon the market if they fear any meaningful loss of purchasing power – through excess currency printing, for example. The only way of locking them into holding bonds is through financial repression.

A warning from history. Jens O. Parsson in Dying of Money – Lessons of the great German and American inflations writes as follows:

Everyone loves an early inflation. The effects at the beginning of an inflation are all good. There is steepened money expansion, rising government spending, increased government budget deficits, booming stock markets, and spectacular general prosperity, all in the midst of temporarily stable prices. Everyone benefits, and no one pays. That is the early part of the cycle. In the later inflation, on the other hand, the effects are all bad. The government may steadily increase the money inflation in order to stave off the later effects, but the later effects patiently wait. In the terminal inflation, there is faltering prosperity, tightness of money, falling stock markets, rising taxes, still larger government deficits, and still roaring money expansion, now accompanied by soaring prices and ineffectiveness of all traditional remedies. Everyone pays and no one benefits. That is the full cycle of every inflation.

For any investor, there is a whole array of risks that must be borne in mind as potential threats to our savings and investments. Most of the time, we worry about individual, bottom-up risks (default, corporate bankruptcy and so on, and normally just “plain old” price risk). Only rarely do we consider forms of systemic structural risk that we have yet to personally experience. But nature sometimes surprises. As John Lennon once said (and sang),

Life’s what happens to you while you’re busy making other plans.

The following Ian Fleming quotation (From Russia With Love) seems eerily relevant today:

You think the odds look right, that they are in your favour?

This is a billiard table. An easy, flat, green billiard table. And you have hit your white ball and it is travelling easily and quietly towards the red. The pocket is alongside. Fatally, inevitably, you are going to hit the red and the red is going into that pocket. It is the law of the billiard table, the law of the billiard room.

But outside the orbit of these things, a jet pilot has fainted and his plane is diving straight at that billiard room, or a gas main is about to explode, or lightning is about to strike.

And the building collapses on top of you and on top of the billiard table. Then what has happened to that white ball that could not miss the red ball, and to the red ball that could not miss the pocket? The white ball could not miss according to the laws of the billiard table. But the laws of the billiard table are not the only laws in this particular game.

The message from all the above, for all investors, must surely be: expect the unexpected. Always. In other words, ensure that you own a sufficiently diverse array of investments, and where possible in such a way/structure/platform, that even the most incompetent government policy or the most severe exogenous shock won’t sink your portfolio in entirety.

Back, in conclusion, to Operation Anthropoid. Wartime poses uniquely difficult problems. The planners at the Special Operations Executive probably expected what we might politely call “pushback” from the Nazi regime, irrespective of whether Gabčík and Kubiš succeeded in their mission, or not. The assassins themselves would have known that they were likely risking death, but they chose to proceed anyway.

SOE and the Czech resistance could not have foreseen the extent to which the Nazis would inflict a terrible revenge on their countrymen, but does that invalidate the mission to kill Reinhard Heydrich – incidentally the only government-sponsored killing of a senior Nazi during the entire Second World War?

Some think the mission was worth it, for all its cost. “If it wasn’t for Jan [and Josef], I wouldn’t be here today,” Alois Denemarek, a childhood friend of Kubis’s told the BBC in 2012. “Half the Czech nation wouldn’t be here today. Heydrich had terrible plans for us Czechs.”

Perhaps the lesson of Operation Anthropoid is, as it is at all times of hardship and acute stress, simply to expect the worst – but hope for the best, regardless. In light of the events of 2020, every holding in your portfolio should be considered through a very particular prism. By all means think of what your returns might be, but also give some thought to what you could possibly lose.

The story of Operation Anthropoid is one of unspeakable cruelty – but also of unimaginable bravery. It tells of hard choices, of sacrifices by deeply honourable people, of the long shadow of unintended consequences, and of the dangers of arbitrary state power. I hope somebody within the current Cabinet gets round to watching the film sometime.


Tim Price
Editor, Southbank Investment Research