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What are War Bonds?

The United States appealed to patriotism to sell the war bonds it used to finance its efforts in World War Two.
During World War I, war bonds were made available as affordable stamps.
"Liberty Bonds" helped finance America's military in World War 1.
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  • Written By: Mary McMahon
  • Edited By: Bronwyn Harris
  • Last Modified Date: 08 October 2014
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War bonds are government-issued savings bonds that are used to finance a war or a military action. In the United States, the last official war bond was the Series E Bond issued during the Second World War. These bonds generate capital for the federal government and they make civilians feel involved in their national militaries; exhortations to buy war bonds are often accompanied with appeals to patriotism and conscience.

Bonds are a special type of security. They are issued by an agency that wants to generate capital, and the people who purchase them are essentially loaning money to the issuing agency. In return for the loan, the bond earns a set interest rate, and the purchaser can redeem the security for its face value at a later date. Government issued bonds tend to have a yield that is below market value, but they are considered very safe, stable investments.

In World War I, Americans could buy “Liberty Bonds,” while other nations issued an assortment of bonds and savings stamps to finance their war efforts. The language used in the promotion of war bonds was often quite florid, drawing the purchaser into the transaction with an appeal to his or her patriotism. These bonds were available in a wide range of denominations to make them affordable to all, ranging from small stamps that school children could purchase to bonds in very large denominations for wealthier individuals.

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During World War II, a number of companies encouraged citizens to buy war bonds. In addition to funding the government, these securities also reduced the amount of currency on the open market, with the hope of keeping inflation rates down. Many Americans think of the Series E Bond when they hear the term. This bond was initially marketed as a “defense bond” in 1935 and, with the outbreak of war, the Treasury switched to calling it a “war bond.” Series E Bonds were available from the Treasury until 1980.

The funds from the sale of these bonds were used to finance the military. American Patriot Bonds may seem similar, but their sale proceeds actually go into a general fund, rather than supporting the military specifically. For people who dislike the idea of supporting military action but want the safety and stability of government securities, other Treasury securities are available for sale, including treasury bills, notes, and general bonds.

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Discuss this Article

anon327719
Post 18

How does someone find a collector of bonds issued in the early years?

anon277989
Post 16

I have some war bonds dated 1865 from a bank in New Jersey. Where can I go to find out info on these?

anon263606
Post 15

It's simple. For example, you would buy a war bond for 5 dollars. There would be an interest rate of 2.5-4.5%. After so many years, you would go to a bank and cash it in. The value would be $5 plus the interest.

anon263085
Post 14

How did they get money from the war bonds? That doesn't make sense because you lose money from them.

anon159681
Post 12

What type of war bonds were offered in Australia during World War 1?

anon117164
Post 11

I have a War Bond dated Dec 1941 and one dated Jan 1942. My Dad bought them for me when I was 12 years old. They cost $18.75 and had a 10 year maturity value of $25. I was told by my bank in 1975 that they were then worth about $85 each. At that time I was told that $85 was the most that they would ever be worth.

anon113124
Post 10

my mum has been told someone is trying to contact her over a war bond that my great grandmother purchased for my grandad. this was done in 1947. the company trying to contact my mother say they need personal information on my grandad before disclosing the amount she will receive. she is very optimistic over the amount she will receive, as they are going to some lengths. Will it be a good amount?

anon86558
Post 9

So, why aren't War Bonds being offered now, to support our very expensive wars in Iraq and Afghanistan? Wouldn't this help a bit to defray some of our outrageous national debt?

anon61500
Post 6

I want to know how did you get war bonds. Like did you just go to a bank and get one or what?? i need an answer!

anon54723
Post 5

I still don't understand what a war bond is. How do they work? Would I 'buy' one? Can I cash it in after years of 'growth, like you would with a savings bond? None of this is explained.

anon45969
Post 4

A bit vague: were all war bonds honoured after World War I and Wolrd War II, especially in relation to australia?

montmist
Post 3

Do war bonds expire?

anon22650
Post 2

Can you please give an example on how people earned from buying war bonds and how did they claim it?

-thanks

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