To distract me from studying, here's a thread entitled "What Did War Bonds Actually Do - For the Layperson"
Tl;dr: the goal of war bonds is to get you to stop spending your money at the store. /1
Tl;dr: the goal of war bonds is to get you to stop spending your money at the store. /1
The basic problem of wartime economics is this: workers are getting paid to produce war goods that are not available for them to buy. This is money that's burning a hole in your pocket, but that doesn't correspond to any real goods/services that it can be spent on. /2
If workers tried to spend all this income, then they would be competing for consumer goods at a time when these are very scarce, because so much of the economy needs to be devoted to winning the war. That could drive up prices - inflation. /3
What the gov needs to do to prevent conflict and inflation is prevent this money from getting spent. There are many ways to do this, eg. tax it away, or ration consumer goods. One important way is through savings drives: get people to save their income rather than spend. /4
This could be voluntary, where people choose to save more than they otherwise would have, or involuntary, where the government forces people to save somehow.
It doesn't really matter what form the savings take, whether you hold it in cash, or bonds, or whatever, what matters /5
It doesn't really matter what form the savings take, whether you hold it in cash, or bonds, or whatever, what matters /5
is that people aren't buying stuff at the store. But war bonds can help with both voluntary or involuntary saving.
They help with voluntary saving by making you feel like you contributed to the war effort. Buying a war bond lets me say "I've done my part!" This makes people /6
They help with voluntary saving by making you feel like you contributed to the war effort. Buying a war bond lets me say "I've done my part!" This makes people /6
think twice about sellling or redeeming their bonds in order to get cash to buy consumer goods - that's unpatriotic!
They can also serve an involuntary saving rule if they are structured so as to be difficult or costly to convert back to cash. For instance, if the bonds /7
They can also serve an involuntary saving rule if they are structured so as to be difficult or costly to convert back to cash. For instance, if the bonds /7
don't mature for 5 years, can't be redeemed early, and aren't allowed to be sold or borrowed against, then once you buy a bond (or, get involuntarily paid partly in bonds instead of money), you're stuck. You might want to spend that money at some point, but you can't. /8
In the US during WW2, (rationing aside) we primarily went for voluntary saving. War bonds (esp Series E Savings Bonds) were redeemable on demand w/ Treasury agents. People holding them *could* have converted that money to cash and spent it...but the bonds served as /9
patriotic appeal to not do so. They gov would exhort people to buy bonds instead of buying consumer goods, and then hold those bonds until they matured, even though they weren't forced to. Here's an example of some of the messaging /10
This was a rare moment in history when our leaders actually understood how the economy worked, *and* were vocally trying to explain it to the masses. You can read more about that here: /Fine
