During times of war, a war bond is a debt instrument issued by the government as a means of borrowing money to fund defense programs and military endeavors. A war bond is simply a government loan. The War Finance Committee oversaw the sale of war bonds in the United States. War bonds were first issued as Liberty Bonds in 1917 to fund the United States government’s participation in World War I. They were originally known as Defense Bonds. The government raised $21.5 billion dollars for its war operations by selling these bonds.
Key Points
- Despite President Franklin D. Roosevelt’s preference for higher taxes and mandatory savings programs to fund World War II, Secretary of the Treasury Henry Morgenthau, Jr.’s notion of establishing a national defense bond program won out in the fall of 1940. Three series of bond notes would be introduced, with Series E serving as “defense bonds” for individuals. The War Finance Committee was put in charge of overseeing all bond sales.
- The government paid for a large advertising campaign to urge people to buy military bonds.
- Over the course of the war, 85 million Americans bought bonds, raising $185.7 billion, which paid between 50 and 60 percent of the war costs.
Key Terms
- During World War II, the War Finance Committee was in charge of overseeing the sale of all war bonds.
- In times of war, a government may issue debt securities to fund military operations and other expenses. They are either retail bonds sold directly to the public or wholesale bonds traded on a stock exchange, and they remove money from circulation to help control inflation.
- Henry Morgenthau, Jr. was the United States Secretary of the Treasury during Franklin D. Roosevelt’s presidency. He was a key figure in the creation and financing of the New Deal. He devised a complex system of selling war bonds to fund World War II.
In WWI, how much did war bonds cost?
In drafting the bond program’s goals, Henry Morgenthau Jr. enlisted the help of Peter Odegard, a political scientist who specialized in propaganda. Treasury began promoting the previously successful baby bonds as “defense bonds” on Odegard’s advice. Three new series of bond notes, Series E, F, and G, would be created, with Series E serving as “defense bonds” for individuals. They were sold for as little as $18.75 and matured in ten years, at which point the bondholder received a $25 payment from the US government. Large amounts of $50 to $1000 were also made available, all of which were non-negotiable bonds, unlike the Liberty Bonds of the First World War. If buying an entire bond at once was too onerous, 10-cent savings stamps could be purchased and saved in Treasury-approved stamp albums until the receiver had amassed enough stamps to buy a bond. After the Japanese attack on Pearl Harbor on December 7, 1941, which prompted the United States to enter the war, the bonds’ name was changed to War Bonds.
The War Finance Committee was tasked with overseeing the sale of all bonds, while the War Advertising Council encouraged voluntary bond purchases. Any Bonds Today?, a 1942 Warner Bros. theatrical cartoon, was one example of popular modern art used to advertise the bonds. During the first three years of the National Defense Savings Program, more than a quarter of a billion dollars in advertising was contributed. The government used popular culture to reach out to the population. The Four Freedoms painting series by Norman Rockwell was toured as part of a $132 million war bond campaign. Bond rallies with well-known celebrities, mainly Hollywood movie stars, were staged around the country to boost bond advertising effectiveness. Many movies at the time, particularly war dramas (which were themselves propaganda), featured a graphic during the closing credits urging viewers to “Buy War Bonds and Stamps,” which were sometimes sold in the theater lobby. The Music Publishers Protective Association pushed its members to incorporate patriotic statements like “Buy U.S. Bonds and Stamps” on the front of their sheet music. Approximately $185 billion in bonds were acquired by 85 million Americans during the duration of the war.
A 1945 Paramount film encouraged bond sales following World War II, and was named after the 1942 Hollywood Victory Caravan. Bing Crosby, Bob Hope, Alan Ladd, William Demarest, Franlin Pangborn, Barbara Stanwyck, Humphrey Bogart, and others were among those featured in the short film.
During World War II, the National Service Board for Religious Objectors sold civilian bonds in the United States, primarily to members of historic peace churches, as an alternative for people who couldn’t buy something that supported the war. These were regular US government bonds, not defense bonds. In total, 33,006 subscriptions worth $6.74 million were sold, largely to Mennonites, Brethren, and Quakers.
What are war bonds, exactly?
During World War II, the US government spent $300 billion, or more than $4 trillion in today’s money. The majority of the funds had to be borrowed. The government issued savings bonds to fund the war. A savings bond is a mechanism for an American citizen to invest money by leasing it to the government; after a set length of time, the bond can be redeemed, or cashed in, with interest. Savings bonds sold to pay for the war were dubbed “war bonds” by the public.
War bonds had been sold to fund the United States’ participation in World War I, but World War II necessitated the government to borrow unprecedented sums of money. During the war, 85 million Americans bought bonds for a total of more than $180 billion. Children took part by purchasing little denomination stamps. “Bond drives” were organized by school and community groups. At rallies to sell bonds, celebrities appeared, and even record labels displayed reminders to buy war stamps and bonds.
Savings bonds also contributed to the war effort in another way. Because everyone was working now, everyone had money to spend, which was something that many people didn’t have during the Depression. However, supplies were scarce. Prices could have soared if people had battled for scarce items. The government kept inflation low during the war by convincing Americans that it was their patriotic duty to buy war bonds.
Are war bonds still redeemable?
Because war bonds are nontransferable, you won’t be able to cash one that isn’t in your name. There are a few exceptions, such as if you are the parent of a minor who is designated as an owner or co-owner, as a beneficiary, or as a legal agent demanding payment.
What is the value of a $100 bond?
You will be required to pay half of the bond’s face value. For example, a $100 bond will cost you $50. Once you have the bond, you may decide how long you want to keep it foranywhere from one to thirty years. You’ll have to wait until the bond matures to earn the full return of twice your initial investment (plus interest). While you can cash in a bond earlier, your return will be determined by the bond’s maturation schedule, which will increase over time.
The Treasury guarantees that Series EE savings bonds will achieve face value in 20 years, but Series I savings bonds have no such guarantee. Keep in mind that both attain their full potential value after 30 years.
Is it still possible to purchase bonds?
Although the current 2.2 percent interest rate on Series I savings bonds is appealing, purchasing the bonds has grown more difficult. Paper Series I and EE savings bondsthose handy envelope stuffer giftscan no longer be purchased in banks or credit unions; instead, you must purchase electronic bonds through TreasuryDirect, the Treasury Department’s Web-based system. Our correspondent discovered the procedure of purchasing a savings bond for her little nephew to be cumbersome. Here’s some assistance:
How do I purchase war bonds?
Purchase Series EE paper war bonds imprinted with “Patriot Bond” from your local financial institution. The owner’s full name and Social Security number, the address where the bond will be delivered, the kind of ownership, the bond denomination, and the purchaser’s name, address, phone number, and signature are all required.