When full employment collided with rationing during World War II, war bonds were considered as a mechanism to remove money from circulation while also reducing inflation.
They were originally known as Defense Bonds and were issued by the United States government.
After the Japanese attack on Pearl Harbor on December 7, 1941, the name was changed to War Bonds.
The bonds, known as debt instruments, were issued to fund military operations during wartime and yielded only 2.9 percent after a 10-year maturity.
During World War II, living in the United States on a median income meant earning around $2,000 per year.
Despite the difficulties of the war, 134 million Americans were invited to buy war bonds to help pay it.
Stamps, which start at ten cents each, can also be purchased to contribute to the bond.
Treasury Secretary Henry Morgenthau sold President Franklin D. Roosevelt the first Series ‘E’ US Savings Bond.
The bonds were sold for 75% of their face value in denominations ranging from $25 to $10,000, with some restrictions.
The war bonds were essentially a loan to the government to aid in the financing of the war effort.
The War Finance Committee was in charge of overseeing the sale of all bonds, while the War Advertising Council encouraged people to acquire bonds voluntarily.
The combined efforts of the two groups resulted in the most advertising ever created in the United States.
The public was constantly exhorted to acquire bonds in the sake of defending American liberty and democracy, as well as as safe havens for investment.
Advertising was used to make an emotional appeal to the population.
Despite the fact that the bonds paid a lower rate of return than the market, they constituted a moral and financial investment in the war effort.
The commercials began on the radio and in newspapers, and then expanded to include magazines in order to reach a wider audience.
The bond campaign was unique in that commercials were made by both the government and private enterprises.
Those that donated advertising space believed they were contributing even more to the war effort; others created their own war bond advertisements to show their patriotism.
To improve its appeal to Americans, the government enlisted the help of New York’s greatest advertising agencies, well-known entertainers, and even recognizable comic strip characters.
The New York Stock Exchange advised buyers not to cash in their bonds in their marketing.
During the first three years of the National Defense Savings Program, more than a quarter of a billion dollars in advertising was contributed.
Massive advertising campaigns made advantage of every available medium, and the campaign was a big success.
The word traveled swiftly; within only one month, polls showed that 90% of individuals polled were aware of war bonds.
Bonds became the ideal way for citizens at home to contribute to the nation’s defense.
To boost the advertising’s impact, Bond rallies were hosted across the country with well-known celebrities, generally Hollywood movie stars.
Free movie days were conducted in theaters across the country, with the purchase of a bond serving as entry.
Greer Garson, Bette Davis, and Rita Hayworth, among others, undertook seven tours in more than 300 cities and villages to support war bonds.
The “Stars Over America” bond blitz, which included 337 celebrities, exceeded its quota and collected $838,540,000 in bonds.
One promotional cardboard featured 75 quarter slots, totaling $18.75.
When it was full, it could be returned to the post office for a $25 war bond with a 10-year maturity.
With their own advertisements, local clubs, organizations, movie theaters, and hotels contributed as well.
Then there was the Civilian D-Day on June 6th, 1944, when tens of thousands of advertisements were dropped from the sky over Chicago in an attempt to catch the attention and hearts of potential donors.
Girl Scouts got engaged as well, with each scout providing one stamp.
These stamps, which cost 10 cents each, were then exchanged for war bonds through a nationwide organization.
In 1941, Norman Rockwell designed a series of pictures that became the focal point of war bond marketing. The Saturday Evening Post reprinted and distributed them, much to the delight of the public. While Norman Rockwell was the most well-known war bond artist, Irving Berlin was the most well-known composer. He wrote a song called “Any Bonds Today?” that became the theme song for the Treasury Department’s National Defense Savings Program. He is best known for his song “God Bless America.” The Andrew Sisters were one of the most well-known performers of this classic song.
A 16-hour marathon radio broadcast on CBS, during which approximately $40 million in bonds were sold, was one of the most successful single events.
Kate Smith, known for her rendition of “God Bless America,” performed during the marathon.
Purchases of war bonds could demonstrate patriotism and the spirit of sacrifice.
The war bond endeavor drew in millions of people.
The sports world contributed as well, with special football and baseball games featuring a war bond as the ticket fee.
The New York Yankees, New York Giants, and Brooklyn Dodgers played an odd baseball game in New York City.
In the same nine-inning contest, each side came to bat six times.
The Dodgers won 5 to 1 against the Yankees and 0 to 0 against the Giants, giving the US government $56,500,000 in war bond sales.
The last earnings from the Victory War Bond campaign were transferred into the US Treasury on January 3, 1946, at the end of World War II.
More than 85 million Americans, or half the population, bought $185.7 billion in bonds.
Those astounding achievements, thanks to mass selling initiatives that helped fund the war, have never been equaled since.
The Series E bond was phased out on June 30, 1980, and the Series EE bond took its place, making the War Bond a thing of the past.
Why did the government issue war bonds?
The government required funds for WWI, so it offered war bonds to the general public. This meant that factories that formerly produced consumer products were now generating military materials.
World War I
War bonds were made available to both retail and wholesale investors during World War I (WWI), with the goal of obtaining enough funds to fund the governments’ increasing military expenses. A massive propaganda operation was launched to appeal to the nation’s patriotism. The US government raised about $20 billion through the sale of four separate Liberty Bonds between 1917 and 1919.
The Liberty Bonds were not warmly accepted when they were first issued, and the bonds frequently traded below par value. In an attempt to fix the bond sales difficulty, the bonds were eventually re-issued at higher interest rates. In order to increase the popularity of the bonds, the government initiated a marketing effort. Famous people, like as Charlie Chaplin, took part in the effort to raise awareness of the bonds among the general public. Although the campaign was not totally effective, it did for the first time communicate the concept of financial securities to a significant number of individuals. In the end, commercial investors and financial institutions purchased Liberty Bonds for their investment potential rather than as a patriotic civic duty by regular investors.
World War II
During WWII, the US government issued war bonds known as Defense Bonds. After the attack on Pearl Harbor, they were renamed war bonds. The sale of war bonds in the United States helped the government raise $185 billion. Over 84 million Americans purchased bonds. The bonds were advertised all across the country, from sporting events to radio station promotions. The bond purchases were mostly motivated by patriotism and a sense of “doing one’s part” in the war.
Modern-Day War Bonds
Printing additional money is one of the strategies that governments utilize nowadays to pay increases in military spending. The disadvantage of printing more money is that it increases the money supply, which leads to inflation. To counteract the impacts of inflation, the government issues bonds, reducing the money supply and hence the inflationary pressure. This increases the pace with which the government may spend money on the military.
How War Bonds Work
For wartime, there is never enough time or preparedness. In general, governments want immediate access to huge quantities of finance during times of crisis. Conflict bonds are a mechanism for the government to borrow money from its citizens in order to fund greater military spending during times of war. As a result, they are attractive financial products during times of conflict, which are often associated with periods of inflation due to increased spending.
War bonds function similarly to regular government bonds, except they may pay a lower interest rate than the market rate. A bond is a fixed-income debt security that pays interest on a regular basis over a certain period of time. When the designated period of time comes to an end, the bond reaches maturity, and the bondholder receives the principal amount paid for the bond returned.
What was the purpose of the US government issuing and selling Liberty war bonds?
A Liberty bond (or liberty loan) was a World War I war bond marketed in the United States to support the Allies. Subscribing to the bonds became a sign of patriotism in the United States, and many Americans were introduced to the concept of financial instruments for the first time.
Quizlet: What was the primary goal of the United States government issuing war bonds during World War I?
During World War I, the United States sold bonds to raise funds for loans to the Allies. a government’s or people’s conviction or desire that a country should keep strong military compatibility and be ready to use it aggressively to defend or promote national interests. You’ve just completed 18 terms of study!
What methods did the government use to urge Americans to purchase bonds?
Political leaders used the help of financial institutions, fraternal organizations, religious and community organizations to persuade Americans that purchasing government bonds was a civic duty. As a result, financial institutions learned how to mass market securities, and middle-class Americans were accustomed to putting their money to work in places other than the corner bank.
To finance World War I, the Liberty Loans raised $22 billion, the equivalent of more than $5 trillion today. At least a third of Americans aged 18 and up purchased bonds. Banks lent money to consumers to buy bonds, preparing the way for margin loans, which were a big element of the stock market boom of the 1920s.
During the conflict, the researchers looked at data on bond sales in 869 counties across 17 states, controlling for other factors that could effect security purchases and commercial bank holdings. They discovered that counties with greater Liberty Bond subscription rates had lower levels of commercial bank assets following the war. In 1920 and 1929, a ten-percentage-point rise in a county’s rate of wartime bond subscription was linked to lower commercial bank assets of 7.3 percent and 9.7 percent, respectively.
The researchers also look at data from a poll performed by George Gallup in 1937–38, which asked people if they held any stocks or bonds. A 0.3 percent rise in the chance of residents owning securities two decades later was linked to a single percentage point increase in a state’s Liberty Bond subscription rate. According to the researchers, there would have been 22% fewer investment banks in 1929 if the Liberty Bond campaign had not taken place, and commercial bank assets would have been roughly a fifth higher.
The researchers believe that the transfer of assets from commercial banks to the securities market has hampered the expansion of industry and farming in certain of the areas studied. They conclude, however, that the Liberty Bond campaign unlocked a new source of investment finance “that likely helped fuel the large-scale expansion of American industry in the mid-20th century” through boosting financial literacy.
What else did the government’s bond-selling operations achieve?
What else did the government’s bond-sale effort achieve? Raised funds for the war effort. It sparked patriotism and served as a fantastic rallying point for the populace.
Are war bonds still available for purchase?
While war bonds are no longer available for purchase, old bonds issued by the US government to fund the country’s participation in conflicts may still be worth something today. The value of your war bond is determined by several criteria, including the series type, denomination, and issue date.
If you’ve recently unearthed these types of bonds that you purchased years ago, we can help you determine whether you can cash them in and how much value they still have.
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.
What justifications did American WWI propaganda posters present for buying Liberty Bonds to support the war effort?
The poster was designed to be dramatic in order to persuade the American public to continue to financially support the war by purchasing liberty bonds. It implies that purchasing liberty bonds will prevent the Germans from invading America. In actuality, the Germans had a slim possibility of invading the United States. They were preoccupied with fighting in Europe, and their ships were unable to pass through the English Channel. The poster’s power, like that of much war propaganda, was partly due to how well it touched into the public’s deepest fears–an enemy on one’s doorstep is undoubtedly a more tangible menace than one across the ocean. Looking at the red pattern on the boots, my colleague wondered if it was supposed to imitate a map, possibly implying territorial conquest. What are your thoughts?
John Warner Norton, the artist who designed the poster, had some military experience, having served with Theodore Roosevelt’s Rough Riders during the Spanish-American War a few decades before.
During World War I, Norton’s design was one of many that advertised Liberty Bonds. Here are two examples of persuasion that took a very different approach.