World War I bonds

Media propaganda through posters…

War bonds are debt securities issued by governments to finance military operations and other expenditures during wartime. They also serve as a means of controlling inflation by removing money from circulation in a wartime economy. War bonds are either retail bonds marketed directly to the public or wholesale bonds traded on the stock market. Advice to buy war bonds is often accompanied by appeals to patriotism and conscience, and we will review some of the most notable examples of such bonds issued during World War I.,

Germany

At the outbreak of World War I, Germany found itself largely excluded from international financial markets, and this became even more apparent after the failure of a major loan float on Wall Street in 1914. As such, Germany was largely limited to domestic borrowing, which resulted in a series of war credit bills. However, the most publicized of these was the general war bond campaign (Kriegsanleihe).

Nine bonds were issued during the First World War, with loans released every six months, accompanied by extensive propaganda across all available media. Most bonds carried a 5% yield and could be redeemed over ten years in semi-annual payments.

Austria and Hungary

From the early days of World War I, the Austro-Hungarian government knew it could not rely on the advances of its main banking institutions to meet the rising costs of the war. Instead, it implemented a war finance policy similar to Germany's. In November 1914, the first funded loan was issued. As in Germany, the Austro-Hungarian loans followed a pre-established plan and were issued semi-annually, every November and May. The first Austrian bonds paid 5% interest and had a five-year term. The smallest denomination available was 100 kroner.

UK

In August 1914, the Bank of England's gold reserves, and effectively those of all banking institutions in Great Britain, stood at £9 million. Banks feared a bank run following the declaration of war, so Chancellor David Lloyd George extended the August bank holiday by three days to allow time for the passage of the Currency and Bank Notes Act 1914, under which Britain abandoned the gold standard. Under this Act, the Treasury issued £300 million in paper currency, unbacked by gold, which banks could use to settle their obligations. These Treasury notes were issued as "essentially an interest-free war loan, for an indefinite term, and as such a highly profitable instrument from the point of view of the government.".

USA

In 1917 and 1918, the United States government issued Liberty Bonds to raise funds for its participation in World War I. A vigorous campaign was launched by Treasury Secretary William Gibbs MacAdo to promote the bonds, relying heavily on patriotic appeals. The Treasury Department worked closely with the Information Committee in developing the Liberty Bond campaigns.

France

In 1915, France urged its citizens to deposit their gold coins in the French coffers, using the slogan "Gold fights for victory." The French government needed gold to purchase wartime supplies from the United States and other countries, hence the appeal to citizens to convert their gold coins into bank deposits.

Italy

Italy entered World War I on May 23, 1915, and by declaring war on Austria-Hungary, financed its war effort mainly through domestic and international loans, along with some tax increases.

Between December 1914 and early 1916, the Italian government issued three national loans to support the war effort. War was not popular in Italy, and these loans were not particularly well-received by domestic investors. Posters were used to advertise the Italian government bonds, which were sold mostly in northern Italy to lower-middle-class buyers. The Banca Italiana di Sconto went bankrupt in 1921, amidst the national financial crisis that followed the war, partly due to bad loans it had extended to the Italian arms manufacturer Ansaldo.

Many posters and bonds were issued for the countries participating in the First World War. We reviewed some of those posters, which were designed with the addition of pictures of the currencies of those countries. Similar bonds and posters were issued during the Second World War by other countries such as Canada and others.