What were War Bonds?
In: Economics
Bonds are a certificate of debt which are still used.
When someone purchases a bond they give cash for the certificate of debt and the issuer of the bond gains cash to run the business or government but has to repay it later plus interest.
So “war bonds” were issued during times of war to raise money so the government could pay for the war effort.
TL;DR
It’s a way to raise money by issuing debt, specifically for running the war machine.
A bond is a loan.
It has an agreed amount at a specified interest rate.
Simplistically speaking, There are two major types/classification of bonds.
Corporate and treasury.
Corporate would be bonds issued by companies.
Treasury would be bonds issued by a country.
Eg a country needs cash for whatever reason (say paying for a war today). They would do this as a way to raise the cash today.
So it issues a bond.
People with savings, buy these at the agreed upon price, and in return at the end of the term (say 1-30 years), they also get interest compounded per year.
The people are happy because they get a guaranteed interest return.
The country is happy because they can pay for whatever objective they wanted to accomplish which needed the cash today.
I am unsure if the “war bond” itself has any special clause within in, but I’m sure someone else can pick it up from here.
Basically about the same way that US Savings Bonds work today. You bought a Bond, held it, earned interest, than at some point cashed it for your original investment plus interest. Typically Bonds have a fixed Interest rate, usually very low, and the terms you must hold them can be long, 5, 10, even 20 years, so they are not typically liquid, meaning if you needed the money you could cash them quick.
Latest Answers