War bond

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 $ 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. ==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: in November 1914, the first funded loan was issued. 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. 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 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 in denominations as small as $50. It was quickly oversubscribed, collecting $ or about $50 per capita. The second and third victory loans were floated in 1918 and 1919, bringing another $. For those who could not afford to buy victory bonds, the government also issued war savings certificates. The government awarded communities who bought large amounts of bonds victory loan honour flags. The first campaign to be issued a flag as a prize was the fifth campaign in 1918. It featured a white field within a red border and bore five diagonal blue stripes in the canton representing the fifth campaign. The fly featured the 1907 variant of the Royal Canadian Coat of Arms quartered with all nine provincial arms. A crown was awarded for every additional 25% raised over the initial fundraising goal. This became most apparent after an attempt to float a major loan on Wall Street failed in 1914. This took place in many forms; however, the most publicised were the public war bond () drives. Most bonds had a rate of return of 5% and were redeemable over a ten-year period, in semi-annual payments. Industries, university endowments, local banks and even city governments were the prime investors in the war bonds. Although extremely successful the war bond drives only covered two-thirds of war-related expenditures. 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 £ (equivalent to £ in 2013) of paper banknotes, without the backing of gold, with which the banks could repay their obligations. The first interest-bearing War Loan was issued in November 1914 at an interest rate of 3.5%, to be redeemed at par value in 1925–28. It raised £; £ at face value as it was issued at a 5% discount. It was revealed in 2017 that public subscriptions amounted to £91m, and the balance had been subscribed by the Bank of England, under the names of the then governor, John Gordon Nairne, and his deputy Ernest Harvey. It was followed by £ of a second War Loan in June 1915, at 4.5%. £ of this was accounted for by conversion of the 3.5% issue, and a further £ by holders of 2.5% and 2.75% Consols, who were also allowed to transfer to the higher interest rate. 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%. Policy changed when Asquith's government fell in December 1916 and Bonar Law became Chancellor in the new coalition government. The third War Loan was launched in January 1917 at a 5% discount to face value and paying 5% interest (or 4% tax-free for 25 years), a rate Lloyd George described as "penal". only £ was new money; the rest was conversions of £ of 4.5% Loan, £ of Exchequer Bonds and £ of Treasury Bills. 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. United States Liberty Bonds 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 to popularize the bonds, grounded largely as patriotic appeals. The Treasury Department worked closely with the Committee on Public Information in developing Liberty Bond campaigns. The resulting propaganda messages often borrowed heavily from military colloquial speech. Chaplin also made a short film, The Bond, at his own expense for the drive. Even the Boy Scouts and Girl Scouts 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, "Because the first World War cost the federal government more than $ (by way of comparison, total federal expenditures in 1913 were only $), these programs became vital as a way to raise funds." ==World War II==

Canada 's Canadian Victory Bonds poster Give Us The Tools 1941 Canada's involvement in the Second World War began when Canada declared war on Nazi Germany 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 World War I. 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 authorised dealers. Although the effort raised $ 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. 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. radio commercials and full page advertisements in most major daily newspapers and weekly magazines. 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. Germany The Nazi regime 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. 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% of investments held by Czechoslovak banks. Of principal concern were issues surrounding war financing. Many of President Franklin D. Roosevelt's advisers favored a system of tax increases and enforced savings program as advocated by British economist John Maynard Keynes. Henry Morgenthau Jr. sought the aid of Peter Odegard, a political scientist specialised 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". The name of the bonds was eventually changed to War Bonds after the Japanese attack on Pearl Harbor 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 Any Bonds Today?, a 1942 Warner Bros. theatrical cartoon. 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's painting series, the Four Freedoms, toured in a war bond effort that raised $. Bond rallies were held throughout the country with famous celebrities, usually Hollywood film stars, to enhance the bond advertising effectiveness. Many motion pictures during the time, especially war dramas (a form of propaganda itself), included a graphic shown during the closing credits advising patrons to "Buy War Bonds and Stamps", which were sometimes sold in the lobby of the theater. 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 $. 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, Franklin Pangborn, Barbara Stanwyck, Humphrey Bogart, and others. " poster, 1943 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. According to one source, the auctioning of "Hitler's goat" in Nebraska in 1942 raised $90,000 in War Bond sales. The National Service Board for Religious Objectors offered civilian bonds in the United States during World War II, primarily to members of the historic peace churches 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 $, mostly to Mennonites, Brethren, and Quakers. Research has shown that parties to a conflict at the beginning of warfare can obtain cheap financing. As the conflict develops, bond yields increase but only to a certain level. Once a certain threshold is exceeded, there is no increase in the yield. The phenomenon was explained by the clientele effect, i.e., the differentiation of groups that purchase financial instruments. The first issuances of war bonds are mainly covered by investors seeking profit and the so-called "patriotic demand". As the conflict develops, the risk increases, and only patriotic demand persists. ==After World War II==

South Africa In the late 1970s and 1980s, South Africa issued Defence Bonus Bonds in order to fund the border wars in Angola and Namibia and to fund its defence industry. Iraq During the Iran–Iraq War, the Iraqi government started a campaign to gather war bonds. Each war bond cost 100 dinars. The government also requested Iraqis donate any extra/spare gold to the war effort; this possibly raised over 700 kilos to a ton of gold. Ukraine On 1 March 2022, following the Russian invasion of Ukraine, the Ukrainian government announced it would issue war bonds to pay its armed forces. Between March and May 2022, around $270 million equivalent of bonds were sold, maturing in one year and yielding 11 percent. The bonds were sold in small units of 1,000 hryvnias, with over 70,000 buyers. Canada On 28 October 2022, during the Russian invasion of Ukraine, the Government of Canada announced the issuance of 5-year bonds to raise funds for Ukraine. In late November 2022, the C$500 million raised from the bond issuance was directed to the IMF's Administered Account for Ukraine. ==Notes==