War bond
War bonds (sometimes referred to as victory bonds, particularly in propaganda) are debt securities issued by a government to finance military operations and other expenditure in times of war without raising taxes to an unpopular level. They are also a means to control inflation by removing money from circulation in a stimulated wartime economy.[1] War bonds are either retail bonds marketed directly to the public or wholesale bonds traded on a stock market. Exhortations to buy war bonds have often been accompanied by appeals to patriotism and conscience. Retail war bonds, like other retail bonds, tend to have a yield which is below that offered by the market and are often made available in a wide range of denominations to make them affordable for all citizens.
Before World War I
Governments throughout history have needed to borrow money to fight wars. Traditionally they dealt with a small group of rich financiers such as Jakob Fugger and Nathan Rothschild, but no particular distinction was made between debt incurred in war or peace. An early use of the term "war bond" was for the $11 million raised by the US Congress in an Act of 14 March 1812, to fund the War of 1812, but this was not aimed at the general public. Until July 2015, perhaps the oldest bonds still outstanding as a result of war were the British Consols, some of which were the result of the refinancing of incurring debts during the Napoleonic Wars, but these were redeemed following the passing of the Finance Act 2015.[2][3]
World War I
Austria and Hungary
The government of Austria-Hungary 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:[4] in November 1914, the first funded loan was issued.[5] 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 paid 5% interest and had a five-year term. The smallest bond denomination available was 100 kronen.[5]
Hungary issued loans separately from Austria in 1919, after the war and after it had separated from Austria, in the form of stocks that permitted the subscriber to demand repayment after a year's notice. Interest was fixed at 6%, and the smallest denomination was 50 korona.[5] Subscriptions to the first Austrian bond issue amounted to $440 million; those of the first Hungarian issue amounted to $235 million.[5]
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,[6] 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.[6] The initiative was immensely successful, eliciting funds and encouraging loyalty to the state and its future among Austro-Hungarian youth.[6] Over 13 million kronen was collected in the first three "child bond" issues.[6]
Canada
Germany
Unlike France and Britain, at the outbreak of the First World War Germany found itself largely excluded from international financial markets.[10] This became most apparent after an attempt to float a major loan on Wall Street failed in 1914.[10] As such, Germany was largely limited to domestic borrowing, which was induced by a series of war credit bills passing the Reichstag.[11] This took place in many forms; however, the most publicised were the public war bond (Kriegsanleihe) drives.[10]
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, during which there was extensive use of propaganda via all possible media.[12] Most bonds had a rate of return of 5% and were redeemable over a ten-year period, in semi-annual payments.[10] Like war bonds in other countries, the German war bonds drives were designed to be extravagant displays of patriotism and the bonds were sold through banks, post offices and other financial institutions.[10]
As in other countries, the majority investors were not individuals but institutions and large corporations.[13] Industries, university endowments, local banks and even city governments were the prime investors in the war bonds.[13] In part because of intense public pressure and in part due to patriotic commitment the bond drives proved extremely successful, raising approximately 10 billion marks in funds.[14] Although extremely successful the war bond drives only covered two-thirds of war-related expenditures.[14] Meanwhile, the interest payable on the bonds represented a growing expense which required further resources to pay it.[14]
United Kingdom
In August 1914, the gold reserves of the Bank of England, and effectively of all banking institutions in Great Britain, amounted to £9 million.[15] The banks feared the declaration of war would trigger a run on the banks, so the Chancellor David Lloyd George extended the August bank holiday for three days to allow time for the passing of the Currency and Bank Notes Act 1914, by which Britain left the gold standard. Under this Act the Treasury issued £300 million (equivalent to £25.1 billion in 2013) of paper banknotes, without the backing of gold, with which the banks could repay their obligations.[15] Leading banker Walter Leaf described these Treasury notes as "essentially a War Loan free of interest, for an unlimited period, and as such was a highly profitable expedient from the point of view of the Government".[16]
The first interest-bearing War Loan was issued in November 1914 at an interest rate of 3.5%, to be redeemed at
Compared to France, the British government relied more on short-term financing in the form of treasury bills and exchequer bonds during World War I.[19] Treasury bills provided the bulk of British government funds in 1916, and were available for terms of 3, 6, 9 and 12 months at an interest rate of 5%.[19] Although these were not formally designated as war bonds, advertising was explicit about their purpose. This April 1916 advertisement for 5% Exchequer bonds was typical of the time: "Lend Your Money to Your Country. The soldier does not grudge offering his life to his country. He offers it freely, for his life may be the price of Victory. But Victory cannot be won without money as well as men, and your money is needed. Unlike the soldier, the investor runs no risk. If you invest in Exchequer Bonds your money, capital and interest alike, is secured on the Consolidated Fund of the United Kingdom, the premier security of the world."[20]
Policy changed when
On 30 June 1932 Neville Chamberlain announced that the Government would exercise its right to call in the 5% War Loan, offering a choice of taking cash or continuing the loan at 3.5%.[22] Although they were obliged to give 90 days' notice of such a change, a 1% tax-free cash bonus was offered to holders who acted by 31 July.[22] This conversion saved the government about £23 million net per year.[22] On 3 December 2014 the UK Government announced it would redeem the outstanding war loans on 9 March 2015.[23]
United States
In 1917 and 1918, the United States government issued Liberty Bonds to raise money for its involvement in World War 1. An aggressive campaign was created by
The government used famous artists to make posters and used movie and stage stars to host bond rallies.
World War II
Canada
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.[30] The bonds were issued with maturities of between six and fourteen years with interest rates ranging from 1.5% for short-term bonds and 3% for long-term bonds and were issued in denominations of between $50 and $100,000.[30] Canadians bought $12.5 billion worth of Victory Bonds or some $550 per capita with businesses accounting for half of all Victory Bond sales.[30] The first Victory Bond issue in February 1940 met its goal of $20 million in less than 48 hours, the second issue in September 1940 reaching its goal of $30 million almost as quickly.[31]
When it became apparent that the war would last a number of years the war bond and certificate programs were organised more formally under the National War Finance Committee in December 1941, directed initially by the president of the Bank of Montreal and subsequently by the Governor of the Bank of Canada.[31] 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.[31] The government spent over $3 million on marketing which employed posters, direct mailing, movie trailers (including some by Walt Disney in cooperation with the newly established National Film Board of Canada's animation department that the former partner helped establish),[32] radio commercials and full page advertisements in most major daily newspapers and weekly magazines.[33] Realistic staged military invasions, such as the If Day scenario in Winnipeg, Manitoba, were even employed to raise awareness and shock citizens into purchasing bonds.[34]
Germany
The
United Kingdom
In the United Kingdom, the National Savings Movement was instrumental in raising funds for the war effort during both world wars. During World War II a War Savings Campaign was set up by the War Office 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".
United States
By the summer of 1940, the victories of
Henry Morgenthau Jr. sought the aid of
The War Finance Committee was placed in charge of supervising the sale of all bonds, and the
Named after the 1942 Hollywood Victory Caravan, a 1945 Paramount-produced film promoted bond sales after the end of World War II. The short subject included Bing Crosby, Bob Hope, Alan Ladd, William Demarest, Franlin Pangborn, Barbara Stanwyck, Humphrey Bogart, and others.
Aside from movies and music, there were countless other programs held throughout the states to encourage the purchasing of war bonds. One such promotion that was held, at the least, in Nebraska and Montana, allowed for citizens to "get Hitler's goat," a play on the phrase "to get someone's goat" meaning to make someone angry or annoyed. The goat would be held up for "auction" with the money going directly towards war bonds.[44] According to one source, the auctioning of "Hitler's goat" in Nebraska in 1942 raised $90,000 in War Bond sales.[45]
The
After World War II
South Africa
In the late 1970's and 1980's South Africa issued Defence Bonus Bonds in order to fund the border wars in Angola and Namibia and to fund the Defence Industry that was necessary due to sanctions.[48]
Ukraine
On 1 March 2022, following the
Canada
On 28 October 2022, during the Russian invasion of Ukraine, Canada announced that they will sell government-backed, 5-year bonds to raise money for Ukraine.[52]
Notes
- ^ "War Bond Stamp Book from World War II". Museum of American Finance. Retrieved 6 May 2021.
- ^ "About Gilts". UK Debt Management Office. Archived from the original on 2016-11-10. Retrieved 2015-11-04.
- ^ "Finance Act 2015: Section 124", legislation.gov.uk, The National Archives, 2015 c. 11 (s. 124)
- ^ Bogart, p. 240
- ^ a b c d Bogart, p. 239
- ^ a b c d Healy, p. 244
- ^ "CBC News In Depth: Canada Savings Bonds". CBC. 2007-10-03. Archived from the original on August 11, 2010. Retrieved 2010-08-16.
- ^ Hillier, Norman. "Victory Loans". The Canadian Encyclopedia. Historica-Dominion. Retrieved 2009-12-12.
- ^ "4 Reasons for Buying Victory Bonds". World Digital Library. 1917. Retrieved 2013-06-30.
- ^ a b c d e Chickering (2004), p. 104
- ^ "Reichstag Receives $2,856,000,000 Bill" (PDF). The New York Times. 1916-10-28. Retrieved 2011-07-12.
- ^ Chickering (2007), p. 196
- ^ a b Chickering (2007), p. 198
- ^ a b c Chickering (2004), p. 105
- ^ Johnston, Thomas (1934). The Financiers And The Nation. London: Methuen. pp. 45–52.
- ^ Leaf, Walter (1927). Banking. Home university library of modern knowledge. H. Holt and Company. p. 46.
- ^ a b c Lloyd George, David (1938). War Memoirs Volume I. London: Odhams Press. pp. 73–4.
- ^ "Bank governor covered up failure of war bonds". The Times. 8 August 2017. p. 20.
- ^ ISBN 978-0-7735-2294-7.
- ^ "Lend your Money to your Country". The Glasgow Herald. April 13, 1916. p. 9.
- ^ Another £52 million was raised from the 4% tax-free issue in 1917.
- ^ a b c "Mr. chamberlain's statement", Hansard, 267: 2121–26, 30 June 1932
- ^ United Kingdom Debt Management Office (3 December 2014). "Press notice Redemption of 3½% War Loan" (PDF). Archived from the original (PDF) on 2017-09-23. Retrieved 23 September 2017.
- ^ Kimble, p.15
- ^ a b Kimble, p.16
- ^ Gale Encyclopedia of U.S. Economic History
- ^ Chaplin, Charlie (1964). My Autobiography. New York, Simon and Schuster.
- ^ New York Times, March 27, 1918, page 4.
- ^ "Focus on: Women and War". Massachusetts Historical Society. 2002. Archived from the original on 2006-05-20. Retrieved 2006-10-18.
- ^ a b c d e f Keshen, p. 31
- ^ a b c Keshen, p. 32
- ^ Walt Disney Studios (1941). "All Together". archive.org. National Film Board of Canada. Retrieved 23 January 2020.
- ^ Keshen, p.33
- ^ Keshen, p. 34
- ^ a b c Aly & Chase, p. 294
- ^ Aly & Chase, p. 298
- ^ a b Aly & Chase, p. 295
- ^ a b c Kimble, p. 19
- ^ Kimble, p. 20
- ^ a b c d e Kimble, p. 23
- ^ Kimble, p. 24
- ^ "Michener Art Museum Pairs Famed American Illustrators Rockwell and Hargens for Fall Exhibitions in New Hope" (Press release). The James A. Michener Art Museum. 2007-08-08. Archived from the original on February 7, 2008. Retrieved 2008-04-05.
- ^ Saturday Evening Post, March 20, 1943, Vol. 215 Issue 38, p. 4-4, 1/5p; (AN 18990616).
- ^ "Getting Hitler's Goat is Montana Pastime". Sarasota Herald Tribune. No. 21. October 26, 1942. p. 2.
- ISBN 9781341677878.
- OCLC 1247191.
- ^ "Mennonite Central Committee Peace Section". Global Anabaptist Mennonite Encyclopedia Online. 1987.
- ^ Lunderstedt, Steve (2024-01-29). "TODAY IN KIMBERLEY'S HISTORY 29 JANUARY". Kimberley City Info. Retrieved 2024-02-26.
- ^ "Ukraine to sell 'war bonds' to fund armed forces". BBC News. 1 March 2022. Retrieved 1 March 2022.
- ^ "Analysis | What are War Bonds and Why Did Ukraine Sell Them?". Washington Post. 25 June 2022. Retrieved 11 October 2022.
- ^ Wang, Weizhen Tan,Christine (2022-03-02). "Ukraine raises $270 million from sale of war bonds to fund army as Russia's invasion continues". CNBC. Retrieved 2023-11-24.
{{cite web}}
: CS1 maint: multiple names: authors list (link) - ^ Nickel, Rod (2022-10-28). "Canada raising money for Ukraine with sale of bonds". Reuters. Retrieved 2022-10-29.
References
- Address of President Franklin D. Roosevelt in connection with the opening of the fifth war loan drive. 2009. Essential Speeches.
- Aly, Götz; Chase, Jefferson (2007). Hitler's beneficiaries: plunder, racial war, and the Nazi welfare state. New York: Macmillan. ISBN 978-0-8050-7926-5.
- Bird, William L. Jr; Rubenstein, Harry R. (1998). Design for victory : World War II posters on the American home front. New York: Princeton Architectural Press.
- ISBN 0-7748-0923-X.
- Chickering, Roger (2004). Imperial Germany and the Great War, 1914–1918 (2nd ed.). Cambridge: Cambridge University Press. ISBN 0-521-54780-6.
- Chickering, Roger (2007). The Great War and urban life in Germany: Freiburg, 1914–1918. Cambridge: Cambridge University Press. ISBN 978-0-521-85256-2.
- Keshen, Jeff (2004). Saints, sinners, and soldiers: Canada's Second World War. Vancouver: UBC Press. ISBN 0-7748-0923-X.
- Kimble, James J. (2006). Mobilizing the home front: war bonds and domestic propaganda. Dallas: Texas A&M University Press. ISBN 1-58544-485-5.
- Sparrow, J.T. (2008). "Buying our boys back": The mass foundations of fiscal citizenship in World War II. Journal of Policy History, 20(2), 263–286.
- Streib, G.F. (1948). Idealism and war bonds: Comparative study of the two world wars. Oxford Journals, Public Opinion Quarterly 12, 272–279.
- Witowski, Terrence H. (2003). World War II Poster Campaigns: Preaching Frugality to American Consumers. Journal of Advertising: Volume 32, number 1/spring 2003. pp. 69–82.
External links
- Bugs Bunny, Porky Pig and Elmer Fudd pitch War Bonds
- The University of North Carolina at Chapel Hill: World War I 1914–1918 bond posters and writings
- Texts on Wikisource:
- May, George Ernest (1922). "Dollar Securities Mobilization". In Chisholm, Hugh (ed.). Encyclopædia Britannica(12th ed.). London & New York: The Encyclopædia Britannica Company.
- Vogel, Martin (1922). "Liberty Loan Publicity Campaigns". In Chisholm, Hugh (ed.). Encyclopædia Britannica (12th ed.). London & New York: The Encyclopædia Britannica Company.
- Chambers, Theodore Gervase; Lewis, William Mather (1922). "Savings Movement". In Chisholm, Hugh (ed.). Encyclopædia Britannica (12th ed.). London & New York: The Encyclopædia Britannica Company.
- Sutton, George Augustus (1922). "War Loan Publicity Campaigns". In Chisholm, Hugh (ed.). Encyclopædia Britannica (12th ed.). London & New York: The Encyclopædia Britannica Company.