War Bonds: How Governments Sold Debt as Patriotism

In 2015 the United Kingdom closed out a debt that partly originated in the Napoleonic Wars, rolled over for two centuries through perpetual bonds. That fact opens a deep dive into the war bond: a debt security that gives the military immediate cash while soaking up civilian money to prevent inflation. We trace how war finance shifted from elite banking families like the Fuggers and Rothschilds to the collective savings of millions once World War I broke every traditional model, and how governments had to teach ordinary people what a bond even was.

Because retail war bonds usually paid below-market interest, states built an emotional architecture to override rational finance. The episode covers Austria-Hungary's leveraged bond loans to schoolchildren, Charlie Chaplin's film The Bond, Canada's staged Nazi invasion of Winnipeg on If Day in 1942, Treasury Secretary Morgenthau's rejection of Keynes's mandatory savings, and a Nebraska auction that sold Hitler's goat for 90,000 dollars in bonds. It also exposes the darker side: the Bank of England secretly buying its own failed 1914 loan under executives' names, Nazi Germany's silent confiscation of bank deposits, and the clientele effect that keeps yields flat as patriots replace investors. It ends with Ukraine's smartphone-era sovereign war bonds.

• The two economic functions of a war bond: liquidity for the military and an inflation sponge for the home front
• How the Austrian child campaigns raised over 13 million kronen by putting kids in debt to the state
• Why the UK's secret 1914 bond shortfall fuelled inflation and led to a penal 5 percent rate
• The clientele effect and why war bond yields do not spike as the risk of defeat rises
• Civilian bonds for Quakers and Mennonites and the digital evolution of war finance in 2022