A war bond is a type of debt security issued by a government to finance military operations and other wartime expenditures. These bonds are typically sold to the public and are a means for the government to raise funds without raising taxes to an unpopular level. War bonds are also used as a tool to control inflation by removing money from circulation in a stimulated wartime economy [1].
Here are some key points about war bonds:
- Purpose: War bonds are issued by governments to raise funds for military operations and wartime expenses without increasing taxes.
- Types: War bonds can be retail bonds, marketed directly to the public, or wholesale bonds traded on a stock market.
- Yield: Retail war bonds usually have a lower yield compared to the market, making them more affordable for citizens [1].
- Historical Significance: War bonds have a long history, with governments throughout history needing to borrow money to finance wars [1].
- World War I: During World War I, countries like Austria-Hungary, Germany, and the United Kingdom issued war bonds to finance their war efforts [1].
- Canada’s Involvement: Canada also issued war bonds called “Victory Bonds” during World War I, with multiple campaigns to raise funds [1].
- Germany’s Experience: Germany, unlike France and Britain, faced limitations in international financial markets during World War I. They relied on domestic borrowing and conducted multiple war bond drives to raise funds [1].
- United Kingdom’s Approach: The United Kingdom issued interest-bearing war loans during World War I, with the first loan issued in 1914. They also relied on short-term financing through treasury bills and exchequer bonds [1].
Reference: