Bonds are debt securities issued by the government to finance military operations and other expenses in times of war. In practice, modern governments finance the war by putting extra money into the circulation, and the function of bonds is to remove money from circulation and help control inflation. War Bonds are retail bonds that are marketed directly to public or wholesale bonds traded on the stock market. The urge to buy war bonds is often accompanied by calls for patriotism and conscience. Retail war bonds, like other retail bonds, tend to have yields below those offered by the market and are often available in various denominations to make them affordable to all citizens.
Video War bond
Before World War I
Governments throughout history must borrow money to fight. Traditionally they are dealing with a small group of wealthy financiers like Jakob Fugger and Nathan Rothschild but no specific distinction is made between debt arising in war or peace. The earliest use of "war ties" was for the $ 11 million raised by the US Congress in the March 14, 1812 Act, to fund the War of 1812, but this was not aimed at the general public. By July 2015, perhaps the oldest bond still in circulation due to the war was the British Consul, some of which were the result of refinancing debt incurred during the Napoleonic Wars, but this was redeemed after the passage of the 2015 Financial Law.
Maps War bond
World War I
Austria and Hungary
The Austrian-Hungarian government knows from the early days of the First World War that it can not rely on advances from its major banking institutions to meet the rising costs of war. Instead, he applied a war finance policy that mimics Germany: in November 1914, the first loan funded was issued. As in Germany, Austro-Hungarian loans follow pre-arranged plans and are issued every half year every November and May. The first Austrian bonds paid 5% interest and had a term of five years. The smallest denominated bond available is 100 kronen.
Hungary issued loans separately from Austria in 1919, after the war and subsequently separated from Austria, in the form of shares allowing customers to request repayment after one year's notice. The interest remains at 6%, and the smallest denomination is 50 corona. Subscriptions for the first Austrian bond issue amounted to $ 440 million; the people of the first Hungarian problem is equivalent to $ 235 million.
Limited financial resources of children are tapped through school campaigns. Minimum denominations of the early 100 kronen Austrian bonds still exceeded the means of most children, so the issuance of the third bond, in 1915, introduced a scheme in which children could donate a small amount and take out a bank loan to cover the remaining 100 kronen. The initiative was very successful, generating funds and encouraging loyalty to the country and its future among the Austrian-Hungarian youth. More than 13 million kronen are collected in the first three "child bonding" issues.
Canada
Canadian involvement in the First World War began in 1914, with Canadian war bonds called "Victory Bonds" after 1917. 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 is a 5.5% stock of 5, 10, and 20 year old gold bonds in denominations as small as $ 50. It is quickly oversubscribed, accumulating $ 398 million or about $ 50 per capita. Second and Third Victory Loans floated in 1918 and 1919, bringing another $ 1.34 billion. For those who can not afford Victory Bonds, the government also publishes War Savings Certificates. The government rewards people who buy large amounts of Victory Loan Honor Flags.
German
Unlike France and Britain, at the outbreak of the First World War Germany found itself largely excluded from international financial markets. This became very clear after an attempt to float a large loan on Wall Street failed in 1914. Thus, Germany was largely confined to domestic borrowing, caused by a series of credit bills that passed the Reichstag. This happens in various forms; however, the most publicized is the public battle ties ( Kriegsanleihe ) drive.
Nine bond drives were made during the war and, as in Austria-Hungary, loans were issued in six-month intervals. The impulse itself often lasts several weeks, in which there is much use of propaganda through all possible media. Most bonds have a 5% return rate and can be redeemed for a period of ten years, in semi-annual payments. Like other war bonds in other countries, German war bonds are designed to display extraordinary patriotism and bonds sold through banks, post offices, and other financial institutions.
As in other countries, the majority of investors are not individuals, but institutions and large corporations. Industry, university support, local banks and even municipalities are major investors in war bonds. Partly due to strong public pressure and partially due to patriotic commitments, the bond impetus proved to be very successful, raising about 10 billion marks in the form of funds. Though very successful, the war ties only account for two-thirds of war-related expenditures. In the meantime, the interest payable on the bond represents an increased cost that requires further resources to pay for it.
United Kingdom
In August 1914 the Bank of England's gold reserves, and effectively from all banking institutions in the United Kingdom, amounted to Ã, £ 9 million (equivalent to Ã,  £ 779 million in 2015). The banks feared the war declaration would spark a run at the bank, so Chancellor David Lloyd George extended the August bank holiday for three days to give time to pass the Currency and Bank Notes Act of 1914, where the UK abandoned the gold standard. Under this Act, the Treasury issues Ã,  £ 300 million (equivalent to Ã,  £ 25.1 billion in 2013) banknotes, without gold backing, with banks that can repay their obligations. Leading banker, Walter Leaf, described this Treasury note as "essentially an Interest-free Warfare Loan, for an indefinite period of time, and thus a very lucrative effort from the Government's point of view".
Loans The first interest-bearing loan was issued in November 1914 at a rate of 3.5%, which will be exchanged at par 1925-28. It raised Ã,  £ 333 million; Ã,  £ 350 million at face value as incurred at a 5% discount. Revealed in 2017 that public subscriptions of Ã,  £ 91m, and the rest have been subscribed by the Bank of England, under the name of the governor, John Gordon Nairne, and his deputy Ernest Harvey. It was followed by Ã,  £ 901 million of the Second War Loan in June 1915, by 4.5%. Ã, £ 17.6 million was calculated with a conversion of 3.5% problem, and further Ã,  £ 138 million by 2.5% holders and 2.75% Consols, which was also allowed to transfer to higher interest rates. The government also promised that if they issue War Loans with higher interest, 4.5% bondholders may also convert to a new level. In his memoirs, Lloyd George expressed his regret that his successor Reginald McKenna raised interest rates when investors had several alternatives. Not only did it directly increase the annual interest payments of the country by Ã,  £ 100 million but that meant higher interest rates throughout the economy during the post-war depression.
Compared to France, the British government relied more on short-term financing in the form of treasury bonds and government securities during World War I. Treasury bills provided most of the UK government's funds in 1916, and were available for terms 3, 6, 9 and 12 months with rates 5% interest. While this is not officially designated as a war bond, advertising is explicit about their purpose. This April 1916 advertisement for 5% of the Exchequer bonds is typical of the time: "Lend YOUR MONEY to YOUR COUNTRY The soldier does not grudge to offer his life to his country, he offers it freely, because his life may be the price of Victory, but Victory can not be won without money like and you have the money needed.Unlike the army, investors are not at risk.If you invest in Treasury Bonds, your money, capital and interest, are guaranteed on the Royal Consolidated Fund of the United Kingdom, the world's major security. "
The policy changed when the Asquith government fell in December 1916 and Bonar Law became Chancellor in a new coalition government. The Third War Loan was launched in January 1917 with a 5% discount on the face value and paid 5% interest (or 4% tax-free for 25 years), a rate called Lloyd George as "criminal". Holders of War Loans, Treasury Bills, and War Expenditure Certificates can be converted to 5% of issues. Of the £ 2.08 billion raised by the 5% War Loan, only Ã, Â £ 845 million is new money; the rest is a conversion of £ 820 million from a 4.5% Loan, Ã, Â £ 281 million from the Exchequer Bond and Ã, Â £ 130Ã, million from Treasury Bills. Labor politician Tom Johnston later wrote of the 1917 War Loan "No alien conqueror can design a more complete robbery and slavery of the British Empire".
On 30 June 1932 Neville Chamberlain announced that the Government would exercise its right to call 5% of War Loans, offering the option of taking cash or resuming a loan of 3.5%. Although they are required to provide 90 days notice of the change, a 1% tax free bonus is offered to shareholders acting on 31 July. This conversion saves the government about Ã, Â £ 23 million net per year. On December 3, 2014, the British Government announced it would redeem a remarkable war loan on March 9, 2015.
United States
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 Finance Minister William Gibbs McAdoo to popularize bonds, mostly based on patriotic applications. The Ministry of Finance is working with the Public Information Committee to develop the Liberty Bond campaign. The resulting propaganda messages were often borrowed from everyday military language.
The government used famous artists to create posters, and used movie stars to host the bond rally. Al Jolson, Elsie Janis, Mary Pickford, Douglas Fairbanks, and Charlie Chaplin were among the celebrities who made a public appearance promoting the patriotic element of purchasing Liberty Bonds. Chaplin also made a short film, The Bond , at his own expense for the drive. Even Scouts and Boy Scouts sell bonds with the slogan "Any Spies to Save Soldiers". This campaign encourages the efforts of people across the country to sell bonds and great successes that result in excess subscriptions to the second, third and fourth bond issues. According to the Massachusetts Historical Society, "Because the first World War weighed the federal government over $ 30 billion (by comparison, total federal spending in 1913 was only $ 970 million), these programs became vital as a way to raise funds."
Through the sale of Liberty Bonds, the government collected $ 21.5 billion for war effort. Most sales are not to individuals but to banks and financial groups that ignore patriotic appeal and buy bonds primarily as investment opportunities. The bond campaign itself proved relatively ineffective in gaining broad public support. The majority of Americans are uncomfortable converting most of their savings into what, for them, forms new and uncertain investments. The strong sales atmosphere associated with the Liberty Bond campaign ultimately resulted in disappointing sales figures. Thus, the bond campaign is remembered more for the degree of coercion and related intimidation of patriotic and voluntary nature. Finance Minister Henry Morgenthau, Jr. will face a balancing act between coercion and volunteerism in its binding campaign during World War II.
World War II
Kanada
Canadian involvement in the Second World War began when Canada declared war on Nazi Germany on September 10, 1939, one week after Britain. About half of the cost of the Canadian war was covered by the War Savings Certificate and the war bonds known as the "Victory Bonds" as in World War I. The War Savings Certificate went on sale in May 1940 and was sold door-to-door by volunteers as well as in banks, post offices , trust companies and other authorized dealers. They mature after seven years and pay $ 5 for every $ 4 invested but the individual can not have more than $ 600 each in the certificate. Despite efforts to raise $ 318 million and financially successful involving millions of Canadians in the war effort, it only gives the Government of Canada a fraction of what it needs.
The sale of Victory Bonds proved to be much more financially successful. There are ten wars and one Drive Victory Bond drive. Unlike War Savings Certificates, there is no purchase limit for Victory Bonds. The bonds are issued with maturities of between six and fourteen years with interest ranging from 1.5% for short-term bonds and 3% for long-term bonds and issued in denominations of between $ 50 and $ 100,000. Canada purchased a $ 12.5 billion Victory Bond or about $ 550 per capita with business accounting for half of all Victory Bond sales. The first Victory Bond edition in February 1940 reached its goal of $ 20 million in less than 48 hours, the second issue of September 1940 reaching its $ 30 million goal almost as fast.
When it became clear that the war would last for several years of war ties and certification programs were organized more formally under the National War Finance Committee in December 1941, initially directed by the president of Bank of Montreal and subsequently by the Governor of the Bank of Canada. Under a more precise directive, the committee developed a broad volunteer strategy, propaganda and recruitment for bonds. Bond drives occur every six months in which no other organization is allowed to request money to the public. The government spends more than $ 3 million on marketing using posters, direct mailing, movie trailers, radio ads and full-page ads in most of the daily newspapers and weekly magazines. A realistic staged military invasion, like the If Day scenario in Winnipeg, Manitoba, was even used to raise awareness and shock people into buying bonds.
German
The Nazi regime never attempted to convince the public to buy long-term war bonds as it had done during the First World War. The Reich government does not want to present any form of public referendum seen about war, which would be an indirect result if the bond drive is not good. Instead, the regime finances its war effort by borrowing directly from financial institutions, using short-term war bonds as collateral. German bankers, without demonstrations of resistance, agree to take state bonds into their portfolios. Financial institutions transfer their money to the Ministry of Finance in return for a promissory note. Through this strategy, 40 million bank accounts and investments are secretly converted into war bonds, providing the Reich government with a sustainable money supply. Similarly, the German bank commissioner was forced to occupy Czechoslovakia to buy German war bonds. At the end of the war, German war bonds accounted for 70% of the investment held by Czechoslovakia banks.
United Kingdom
In the United Kingdom, the National Savings Movement plays an important role in raising funds for war effort during both world wars. During World War II, the War Savings Campaign was established by the War Office to support the war effort. Local saving week was held promoted with posters with titles like "Borrow to Keep Rights for Free", "Save your way to Victory" and "War Savings is a War Ship".
United States
In the summer of 1940, the Nazi Germany's victory against Poland, Denmark, Norway, Belgium, the Netherlands and France brought urgency to the government secretly preparing for possible US involvement in World War II. The main concern is the issue of war financing. Many of President Franklin D. Roosevelt's advisers favor a system of tax hikes and savings programs enforced as advised by British economist John Maynard Keynes. In theory, this will allow increased spending while reducing the risk of inflation. Finance Minister Henry Morgenthau, Jr. however preferred a voluntary lending system and began planning a national defense bond program in the fall of 1940. The aim was to unify the appeal of baby bonds that have been implemented in the interwar period with the patriotic elements of the Liberty Bonds from the First World War.
Morgenthau sought help Peter Odegard, a political scientist specializing in propaganda, in devising a goal for the bond program. On the advice of Odegard, the Treasury began to market the previously successful baby bonds as "defense bonds". Three new series of bonds, Series E, F and G, will be introduced, which Series E will be targeted at individuals as "defense bonds". Like baby bonds, they sold for $ 18.75 and matured in ten years, at which time the US government paid $ 25 bondholders. A large denomination between $ 50 and $ 1000 is also available, all of which, unlike the Liberty Bonds of the War First World, is a non-negotiable bond. For those who find it difficult to buy all the bonds at once, a 10-cent coupon can be purchased and collected in stamp albums that have been approved by the Treasury until the recipient has collected enough stamps for the purchase of the bond. The name of the bond was eventually converted into Battle of War after the Japanese attack on Pearl Harbor on December 7, 1941, which resulted in the United States entering the war.
The War Finance Committee is assigned to oversee the sale of all bonds, and the War Ads Council promotes voluntary compliance with the purchase of bonds. Popular contemporary art is used to help promote bonding like the Warner Brothers theater cartoons, Any Bonds Today? . More than a quarter of a billion dollars worth of advertising was contributed during the first three years of the National Defense Savings Program. The government calls on people through popular culture. The Norman Rockwell painting series, Four Freedoms , toured in a bond effort that generated $ 132 million. Rally Bond is held across the country with famous celebrities, usually Hollywood movie stars, to improve the effectiveness of bond advertising. Many films during that period, especially the war drama (the propaganda form itself), included graphs shown during the closing credits advising customers to 'Buy War Bonds and Stamps', which are sometimes sold in the lobby of the theater. The Music Publishing Protection Association encourages its members to include patriotic messages on the front of their music sheets such as "Buy Bonds and US Seals". During the war 85 million Americans bought bonds totaling about $ 185 billion.
The National Service Agency for Religious Opponents offered civilian bonds in the United States during World War II, especially for members of historic peace churches as an alternative to those who could not afford something that was meant to support the war. This is a US Government Bond that is not labeled as a defense bond. Overall, 33,006 subscriptions were sold for a total of $ 6.74 million, mostly for Mennonites, Brethren, and Quakers.
Note
References
External links
- University of North Carolina at Chapel Hill: World War I 1914-1918 poster and bond writing
- Brief History of the World War Two Ad Campaigns
- Civil War Bonds, 1865, at Staten Island Historical Society Online Database Collection
- War of war movies from World War I in europeanfilmgateway.eu
- GCD: Four Favorites # 11
- Text on Wikisource:
- May, George Ernest (1922). "Mobilization of Dollar Securities". At Chisholm, Hugh. EncyclopÃÆ'Â|dia Britannica (12th ed.). London & amp; New York.
- Vogel, Martin (1922). "Liberty Loan Publicity Campaign". At Chisholm, Hugh. EncyclopÃÆ'Â|dia Britannica (12th ed.). London & amp; New York.
- Chambers, Theodore Gervase; Lewis, William Mather (1922). "Savings Movement". At Chisholm, Hugh. EncyclopÃÆ'Â|dia Britannica (12th ed.). London & amp; New York.
- Sutton, George Augustus (1922). "War Loan Publicity Campaign". At Chisholm, Hugh. EncyclopÃÆ'Â|dia Britannica (12th ed.). London & amp; New York.
- World War II Economy
- Advertisement for Purchase of War Bonds, 1918
Source of the article : Wikipedia
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