War bond
Overview
 
War bonds are debt securities
Security (finance)
A security is generally a fungible, negotiable financial instrument representing financial value. Securities are broadly categorized into:* debt securities ,* equity securities, e.g., common stocks; and,...

 issued by a government for the purpose of financing military operations during times of war. War bonds generate capital for the government and make civilians feel involved in their national militaries. This system is also useful as a means of controlling inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...

 in such an overstimulated economy by removing money from circulation until hopefully after the war is concluded.
Encyclopedia
War bonds are debt securities
Security (finance)
A security is generally a fungible, negotiable financial instrument representing financial value. Securities are broadly categorized into:* debt securities ,* equity securities, e.g., common stocks; and,...

 issued by a government for the purpose of financing military operations during times of war. War bonds generate capital for the government and make civilians feel involved in their national militaries. This system is also useful as a means of controlling inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...

 in such an overstimulated economy by removing money from circulation until hopefully after the war is concluded. At that point, the funds could be liquidated and serve as a stimulus to encourage consumer spending
Consumer spending
Consumer spending or consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level...

 for the economy transitioning to peacetime activity. Exhortations to buy war bonds are often accompanied with appeals to patriotism and conscience. Government-issued war bonds tend to have a yield which is below market value and are often made available in a wide range of denominations to make them affordable to all citizens.

American Civil War

War bonds were issued by both the Union
Union (American Civil War)
During the American Civil War, the Union was a name used to refer to the federal government of the United States, which was supported by the twenty free states and five border slave states. It was opposed by 11 southern slave states that had declared a secession to join together to form the...

 and Confederate
Confederate States of America
The Confederate States of America was a government set up from 1861 to 1865 by 11 Southern slave states of the United States of America that had declared their secession from the U.S...

 governments during the American Civil War
American Civil War
The American Civil War was a civil war fought in the United States of America. In response to the election of Abraham Lincoln as President of the United States, 11 southern slave states declared their secession from the United States and formed the Confederate States of America ; the other 25...

 in order to raise funds for the war effort. 62% of the Union's war effort was financed by war bonds.(Source: Why the North Won the Civil War by David Herbert Donald)

World War I

Austria-Hungary

The government of Austria-Hungary
Austria-Hungary
Austria-Hungary , more formally known as the Kingdoms and Lands Represented in the Imperial Council and the Lands of the Holy Hungarian Crown of Saint Stephen, was a constitutional monarchic union between the crowns of the Austrian Empire and the Kingdom of Hungary in...

 knew from the early days of the First World War that it could not count on advances from its principal banking institutions to meet the growing costs of the war. Instead, it implemented a war finance policy modeled upon that of Germany: in November 1914, the first funded loan was issued. As in Germany, the Austro-Hungarian loans followed a prearranged plan and were issued at half yearly intervals every November and May. The first Austrian bonds had five percent rates of return and a five year maturity. The smallest bond denomination available was 100 kronen.

Hungary issued loans separately from Austria in 1919, in the form of stocks that permitted the subscriber to demand repayment after a year's notice. Interest was fixed at six percent, and the smallest denomination was 50 kronen. Subscriptions to the first Austrian bond issue amounted to the equivalent of $440,200,000; those of the first Hungarian issue were equivalent to $235,000,000.

The limited financial resources of children were tapped through campaigns in schools. The initial minimum Austrian bond denomination of 100 kronen still exceeded the means of most children, so the third bond issue, in 1915, introduced a scheme whereby children could donate a small amount and take out a bank loan to cover the rest of the 100 kronen. The initiative was immensely successful, eliciting funds and encouraging loyalty to the state and its future among Austro-Hungarian youth. Over 13 million kronen was collected in the first three "child bond" issues.

Canada

Canada's involvement in the First World War began in 1914, with Canadian war bonds called "Victory Bonds" after 1917. The first domestic war loan was raised in November 1915, but not until the fourth campaign of November 1917 was the term Victory Loan applied. The First Victory Loan was a 5.5% issue of 5, 10 and 20 year gold bonds (some as small as $50) and was quickly oversubscribed, collecting $398 million or about $50 per capita. The Second and Third Victory Loans were floated in 1918 and 1919, bringing another $1.34 billion. For those who could not afford to buy Victory Bonds, the government also issued War Savings Certificates.

Germany

Unlike France and Britain, at the outbreak of the First World War Germany found itself largely excluded from international financial markets. This became most apparent after an attempt to float a major loan on Wall Street failed in 1914. As such, Germany was largely limited to domestic borrowing, which was induced by a series of war credit bills passing the Reichstag
Reichstag
Reichstag may refer to:*Reichstag – the diets or parliaments of the Holy Roman Empire, of the Austrian-Hungarian monarchy, and of Germany from 1871 to 1945** Reichstag ** Reichstag...

. This took place in many forms however the most publicized was the public war bond drives .

Nine bond drives were conducted over the length of the war and, as in Austria-Hungary, the loans were issued at six month intervals. The drives themselves would often last several weeks and during which there was extensive use of propaganda via all possible mediums. Most bonds had a rate of return of 5 percent and were redeemable over a ten year period, in semi-annual payments. Like war bonds in other countries, the German war bonds drives were designed to be extravagant displays of patriotism and were sold through banks, post offices and other financial institutions.

Like in other countries, the majority investors were not individuals but institutions and large corporations. Industries, university endowments, local banks and even city governments were the prime investors in the war bonds. In part because of intense public pressure and in part due to patriotic commitment the bond drives proved extremely successful, raising approximately 100 billion marks in funds. Although extremely successful the war bond drives only covered two-thirds of the war related expenditures. Meanwhile, the interest on the bonds represented an accumulating expense which claimed further resources.

United States

In 1917 and 1918, the United States government issued liberty bonds to raise money for its involvement in World War I. An aggressive campaign was created by Secretary of the Treasury William Gibbs McAdoo
William Gibbs McAdoo
William Gibbs McAdoo, Jr. was an American lawyer and political leader who served as a U.S. Senator, United States Secretary of the Treasury and director of the United States Railroad Administration...

 to popularize the bonds, grounded largely as patriotic appeals. The Treasury Department worked closely with the Committee on Public Information
Committee on Public Information
The Committee on Public Information, also known as the CPI or the Creel Committee, was an independent agency of the government of the United States created to influence U.S. public opinion regarding American participation in World War I...

 in developing Liberty Bond campaigns. The resulting propaganda messages often borrowed heavily from military colloquial speech.

The government used famous artists to make posters, and used movie stars to host bond rallies. Al Jolson
Al Jolson
Al Jolson was an American singer, comedian and actor. In his heyday, he was dubbed "The World's Greatest Entertainer"....

, Elsie Janis
Elsie Janis
Elsie Janis was an American singer, songwriter, actress, and screenwriter. Entertaining the troops during World War I immortalized her as "the sweetheart of the AEF" .-Early career:...

, Mary Pickford
Mary Pickford
Mary Pickford was a Canadian-born motion picture actress, co-founder of the film studio United Artists and one of the original 36 founders of the Academy of Motion Picture Arts and Sciences...

, Douglas Fairbanks
Douglas Fairbanks
Douglas Fairbanks, Sr. was an American actor, screenwriter, director and producer. He was best known for his swashbuckling roles in silent films such as The Thief of Bagdad, Robin Hood, and The Mark of Zorro....

 and Charlie Chaplin
Charlie Chaplin
Sir Charles Spencer "Charlie" Chaplin, KBE was an English comic actor, film director and composer best known for his work during the silent film era. He became the most famous film star in the world before the end of World War I...

 were among the celebrities that made public appearances promoting the patriotic element of purchasing Liberty Bonds. Chaplin also made a short film, The Bond
The Bond
The Bond is a propaganda film created by Charlie Chaplin at his own expense for the Liberty Load Committee for theatrical release to help sell U.S. Liberty Bonds during World War I....

, at his own expense for the drive. Even the Boy Scouts
Boy Scouts of America
The Boy Scouts of America is one of the largest youth organizations in the United States, with over 4.5 million youth members in its age-related divisions...

 and Girl Scouts
Girl Scouts of the USA
The Girl Scouts of the United States of America is a youth organization for girls in the United States and American girls living abroad. It describes itself as "the world's preeminent organization dedicated solely to girls". It was founded by Juliette Gordon Low in 1912 and was organized after Low...

 sold bonds under the slogan "Every Scout to Save a Soldier". The campaign spurred community efforts across the country to sell the bonds and was a great success resulting in over-subscriptions to the second, third and fourth bond issues. According to the Massachusetts Historical Society
Massachusetts Historical Society
The Massachusetts Historical Society is a major historical archive specializing in early American, Massachusetts, and New England history...

, "Because the first World War cost the federal government more than 30 billion dollars (by way of comparison, total federal expenditures in 1913 were only $970 million), these programs became vital as a way to raise funds."

Through the selling of Liberty Bonds, the government raised $21.5 billion for the war effort. However, the majority sales were not to individuals but to banks and financial groups that ignored the patriotic appeal and sought the bonds as principally an investment opportunity. The bond campaigns themselves proved relatively ineffective at gaining widespread public support. The majority of Americans were simply uncomfortable converting a significant portion of their savings into, what was for them, a new and uncertain form of investment. The forceful sales atmosphere associated with the Liberty Bond campaigns ultimately produced disappointing sales figures. As such, the bond campaigns are remembered more for their associated level of coercion and bullying than its patriotic and voluntary nature. Secretary of the Treasury Henry Morgenthau, Jr.
Henry Morgenthau, Jr.
Henry Morgenthau, Jr. was the U.S. Secretary of the Treasury during the administration of Franklin D. Roosevelt. He played a major role in designing and financing the New Deal...

 would face a balancing act between coercion and volunteerism in his bond campaigns during World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...

.

United States

By the summer of 1940, the victories of Nazi Germany
Nazi Germany
Nazi Germany , also known as the Third Reich , but officially called German Reich from 1933 to 1943 and Greater German Reich from 26 June 1943 onward, is the name commonly used to refer to the state of Germany from 1933 to 1945, when it was a totalitarian dictatorship ruled by...

 against Poland
Poland
Poland , officially the Republic of Poland , is a country in Central Europe bordered by Germany to the west; the Czech Republic and Slovakia to the south; Ukraine, Belarus and Lithuania to the east; and the Baltic Sea and Kaliningrad Oblast, a Russian exclave, to the north...

, Denmark
Denmark
Denmark is a Scandinavian country in Northern Europe. The countries of Denmark and Greenland, as well as the Faroe Islands, constitute the Kingdom of Denmark . It is the southernmost of the Nordic countries, southwest of Sweden and south of Norway, and bordered to the south by Germany. Denmark...

, Norway
Norway
Norway , officially the Kingdom of Norway, is a Nordic unitary constitutional monarchy whose territory comprises the western portion of the Scandinavian Peninsula, Jan Mayen, and the Arctic archipelago of Svalbard and Bouvet Island. Norway has a total area of and a population of about 4.9 million...

, Belgium
Belgium
Belgium , officially the Kingdom of Belgium, is a federal state in Western Europe. It is a founding member of the European Union and hosts the EU's headquarters, and those of several other major international organisations such as NATO.Belgium is also a member of, or affiliated to, many...

, the Netherlands
Netherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...

 and France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...

 brought urgency to the government discreetly preparing for possible United States involvement in World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...

. Of principal concern were issues surrounding war financing. Many of President Franklin D. Roosevelt
Franklin D. Roosevelt
Franklin Delano Roosevelt , also known by his initials, FDR, was the 32nd President of the United States and a central figure in world events during the mid-20th century, leading the United States during a time of worldwide economic crisis and world war...

's advisers favored a system of tax increases and enforced savings program as advocated by British economist John Maynard Keynes
John Maynard Keynes
John Maynard Keynes, Baron Keynes of Tilton, CB FBA , was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics, as well as the economic policies of governments...

. In theory, this would permit increased spending while decreasing the risk of inflation. Secretary of the Treasury Henry Morgenthau, Jr. however preferred a voluntary loan system and began planning a national defense bond program in the fall of 1940. The intent was to unite the attractiveness of the baby bonds that had been implemented in the interwar period with the patriotic element of the Liberty Bonds from the First World War.

Morgenthau sought the aid of Peter Odegard, a political scientist specialized in propaganda, in drawing up the goals for the bond program. On the advice of Odegard the Treasury began marketing the previously successful baby bonds as "defense bonds". Three new series of bond notes, Series E, F and G, would be introduced, of which Series E
Series E bond
Series E U.S. Savings Bonds were marketed by the United States government as war bonds from 1941 to 1980. When Americans refer to war bonds, they are usually referring to Series E bonds. Those issued from 1941 to November 1965 accrued interest for 40 years; those issued from December 1965 to June...

 would be targeted at individuals as "defense bonds". Like the baby bonds, they were sold for as little as $18.75 and matured in ten years, at which time the United States government paid the bondholder $25 Large denominations of between $50 and $1000 were also made available, all of which, unlike the Liberty Bonds of the First World War, were non-negotiable bonds. For those that found it difficult to purchase an entire bond at once, 10 cent savings stamps
War savings stamps
The war savings stamp was a patriotic program used by the United States Treasury to help fund participation in World War I and World War II, and was principally aimed at school-age children. Savings stamps were available in ten cent and twenty-five cent versions, and provided interest...

 could be purchased and collected in Treasury approved stamp albums until the recipient had accumulated enough stamps for a bond purchase. The name of the bonds was eventually changed to War Bonds after the Japanese attack on Pearl Harbor
Attack on Pearl Harbor
The attack on Pearl Harbor was a surprise military strike conducted by the Imperial Japanese Navy against the United States naval base at Pearl Harbor, Hawaii, on the morning of December 7, 1941...

 on 7 December 1941, which resulted in the United States entering the war.

The War Finance Committee was placed in charge of supervising the sale of all bonds, and the War Advertising Council promoted voluntary compliance with bond buying. Popular contemporary art was used to help promote the bonds such as the Warner Brothers theatrical cartoon, Any Bonds Today?
Any Bonds Today?
"Any Bonds Today?" is a song written by Irving Berlin, featured in a 1942 animated propaganda film starring Bugs Bunny. Both were used to sell war bonds during World War II.-The song:...

. More than a quarter of a billion dollars worth of advertising was donated during the first three years of the National Defense Savings Program. The government appealed to the public through popular culture. Norman Rockwell
Norman Rockwell
Norman Percevel Rockwell was a 20th-century American painter and illustrator. His works enjoy a broad popular appeal in the United States for their reflection of American culture. Rockwell is most famous for the cover illustrations of everyday life scenarios he created for The Saturday Evening...

's painting series, the Four Freedoms
Four Freedoms (Norman Rockwell)
The Four Freedoms or Four Essential Human Freedoms is a series of oil paintings produced in 1943 by the American artist Norman Rockwell. The paintings are approximately equal in dimension with measurements of ×...

, toured in a war bond effort that raised $132 million. Bond rallies were held throughout the country with famous celebrities, usually Hollywood film stars, to enhance the bond advertising effectiveness. The Music Publishers Protective Association encouraged its members to include patriotic messages on the front of their sheet music like "Buy U.S. Bonds and Stamps". Over the course of the war 85 million Americans purchased bonds totalling approximately $185.7 billion.

The National Service Board for Religious Objectors
Center on Conscience & War
The Center on Conscience & War is a United States non-profit anti-war organization dedicated to defending and extending the rights of conscientious objectors. The group is located in Washington, D.C., and attempt to find creative ways to support anyone who opposes participation in war. The group...

 offered civilian bonds in the United States during World War II, primarily to members of the historic peace churches
Peace churches
Peace churches are Christian churches, groups or communities advocating Christian pacifism. The term historic peace churches refers specifically only to three church groups among pacifist churches: Church of the Brethren, Mennonites including the Amish, and Religious Society of Friends and has...

 as an alternative for those who could not conscientiously buy something meant to support the war. These were U.S. Government Bonds not labelled as defense bonds. In all, 33,006 subscriptions were sold for a total value of $6,740,161, mostly to Mennonite
Mennonite
The Mennonites are a group of Christian Anabaptist denominations named after the Frisian Menno Simons , who, through his writings, articulated and thereby formalized the teachings of earlier Swiss founders...

s, Brethren
Church of the Brethren
The Church of the Brethren is a Christian denomination originating from the Schwarzenau Brethren organized in 1708 by eight persons led by Alexander Mack, in Schwarzenau, Bad Berleburg, Germany. The Brethren movement began as a melding of Radical Pietist and Anabaptist ideas during the...

 and Quakers
Religious Society of Friends
The Religious Society of Friends, or Friends Church, is a Christian movement which stresses the doctrine of the priesthood of all believers. Members are known as Friends, or popularly as Quakers. It is made of independent organisations, which have split from one another due to doctrinal differences...

.

Canada

Canada's involvement in the Second World War
Military history of Canada during the Second World War
The Second World War officially began on September 1, 1939, with the German invasion of Poland. Britain and France declared war on the Nazi Third Reich on September 3, 1939...

 began when Canada declared war on Nazi Germany
Nazi Germany
Nazi Germany , also known as the Third Reich , but officially called German Reich from 1933 to 1943 and Greater German Reich from 26 June 1943 onward, is the name commonly used to refer to the state of Germany from 1933 to 1945, when it was a totalitarian dictatorship ruled by...

 on September 10, 1939, one week after the United Kingdom. Approximately half of the Canadian war cost was covered by War Savings Certificates and war bonds known as "Victory Bonds" as in WWI. War Savings Certificates began selling in May 1940 and were sold door-to-door by volunteers as well as at banks, post offices, trust companies and other authorized dealers. They matured after seven years and paid $5 for every $4 invested but individuals could not own more than $600 each in certificates. Although the effort raised $318 million in funds and was successful in financially involving millions of Canadians in the war effort, it only provided the Government of Canada with a fraction of what was needed.

The sale of Victory Bonds proved far more successful financially. There were ten wartime and one postwar Victory Bond drives. Unlike the War Savings Certificates, there was no purchase limit to Victory Bonds. The bonds were issued with maturities of between six and fourteen years with interest rates ranging from 1.5 percent for short-term bonds and 3 percent for long-term bonds and were issued in denominations of between $50 and $100,000. Canadians bought $12.5 billion worth of Victory Bonds or some $550 per capita with businesses accounting for half of all Victory Bond sales. The first Victory Bond issue in February 1940 met its goal of $200 million in less than 48 hours, the second issue in September 1940 reaching its goal of $300 million almost as quickly.

When it became apparent that the war would last a number of years the war bond and certificate programs were organized more formally under the National War Finance Committee
National War Finance Committee
The National War Finance Committee was set up in Canada in December 1941 by the Department of Finance. It was initially chaired by George Wilbur Spinney, president of the Bank of Montreal, and later by Graham Towers, the Governor of the Bank of Canada. The Committee was responsible for raising war...

 in December 1941, directed initially by the president of the Bank of Montreal
Bank of Montreal
The Bank of Montreal , , or BMO Financial Group, is the fourth largest bank in Canada by deposits. The Bank of Montreal was founded on June 23, 1817 by John Richardson and eight merchants in a rented house in Montreal, Quebec. On May 19, 1817 the Articles of Association were adopted, making it...

 and subsequently by the Governor of the Bank of Canada
Bank of Canada
The Bank of Canada is Canada's central bank and "lender of last resort". The Bank was created by an Act of Parliament on July 3, 1934 as a privately owned corporation. In 1938, the Bank became a Crown corporation belonging to the Government of Canada...

. Under the more honed direction the committee developed strategies, propaganda and the wide recruitment of volunteers for bonds drives. Bond drives took place every six months during which no other organization was permitted to solicit the public for money. The government spent over $30 million on marketing which employed posters, direct mailing, movie trailers, radio commercials and full page advertisement in most major daily newspaper and weekly magazine. Realistic staged military invasion, such as the If Day
If Day
If Day was a simulated Nazi invasion of the Canadian city of Winnipeg, Manitoba, and surrounding areas on February 19, 1942, during the Second World War. It was organized by the Greater Winnipeg Victory Loan organization, which was led by prominent Winnipeg businessman J. D. Perrin...

 scenario in Winnipeg
Winnipeg
Winnipeg is the capital and largest city of Manitoba, Canada, and is the primary municipality of the Winnipeg Capital Region, with more than half of Manitoba's population. It is located near the longitudinal centre of North America, at the confluence of the Red and Assiniboine Rivers .The name...

, Manitoba
Manitoba
Manitoba is a Canadian prairie province with an area of . The province has over 110,000 lakes and has a largely continental climate because of its flat topography. Agriculture, mostly concentrated in the fertile southern and western parts of the province, is vital to the province's economy; other...

, were even employed to raise awareness and shock citizens into purchasing bonds.

Germany

The Nazi regime
Nazi Germany
Nazi Germany , also known as the Third Reich , but officially called German Reich from 1933 to 1943 and Greater German Reich from 26 June 1943 onward, is the name commonly used to refer to the state of Germany from 1933 to 1945, when it was a totalitarian dictatorship ruled by...

 never attempted to convince the general populace to buy long-term war bonds as had been done during the First World War. The Reich government did not want to present any perceived form of public referendum on the war, which would be the indirect result if a bond drive did poorly. Rather, the regime financed its war efforts by borrowing directly from financial institutions, using short-term war bonds as collateral. German bankers, with no demonstration of resistance, agreed to taking state bonds into their portfolios. Financial institutions transferred their money to the Finance Department in exchange for promissory notes. Through this strategy, 40 million bank and investment accounts were quietly converted into war bonds, providing the Reich government with a continuous supply of money. Likewise, German bank commissioners compelled occupied Czechoslovakia to buy up German war bonds. By the end of the war, German war bonds accounted for 70 percent of investments held by Czechoslovakian banks.

United Kingdom

In the United Kingdom, the National Savings Movement
National Savings Movement
The National Savings Movement 1916 to 1978 was a British mass savings movement created to raise funds from the public to finance the deficit of government spending over tax revenues. The movement was instrumental during World War II in raising funds to support the war effort. In peacetime the...

 was instrumental in raising funds for the war effort
War effort
In politics and military planning, a war effort refers to a coordinated mobilization of society's resources—both industrial and human—towards the support of a military force...

 during both world wars. During World War II a War Savings Campaign was set up by the War Office
War Office
The War Office was a department of the British Government, responsible for the administration of the British Army between the 17th century and 1964, when its functions were transferred to the Ministry of Defence...

to support the war effort. Local savings weeks were held which were promoted with posters with titles such as "Lend to Defend the Right to be Free", "Save your way to Victory" and "War Savings are Warships".

External links

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