Why aren’t we hearing about the sale of War Bonds to help meet the financial committment from Congress? I’m sure we’d all be proud to start buying some!
- Jinx
I saw on CNN that Congress will be bringing up a proposal on Thursday to have the Treasury Dept start issuing War Bonds. And I believe your right about everyone will be buying some, proudly.
Can someone please explain what War Bonds are and how they work?
IANAE (I Am Not An Economist), but in general this is how they work I believe. War Bonds are basically “stocks” you buy in the US Government. You buy the Bonds at a fixed price and the government promises to pay you ‘X’ amount more when you cash the bonds in at the end of the war. This benefits everybody as the government gets lots of cash which it needs to maintain the war effort and the folks back home who can’t do the fighting feel like they’re contributing to the war effort.
War Bonds work pretty much the same way as any other type of bond. You buy the bond and are guaranteed a certain interest rate. The money goes directly towards supporting the war, so people buy them as a sign of patriotism.
War Bonds haven’t been issued since the Second World War.
Can someone explain, though: If the US sells War Bonds to help finance the war effort, then where does all the extra money come from to pay off the bonds (plus interest) when they get cashed in? I WAG the saving grace for the US is that not everyone will be cashing in their bonds all at the same time.
- Jinx
The money gets raised to pay off war bonds the same way it gets raised to pay off any bond. The gov’t either raises taxes, cuts spending, takes out other loans to cover it, or prints more money.
During WWII, War Bonds were similar to Savings Bonds (I actually cashed one of my grandmother’s war bonds when I went off to college – they were treated like Savings Bonds). You bought them for less than the denomination, and redeemed them at face value once they matured. After the maturity date, they continued to earn interest (I believe I got over $2000 for a $1000 war bond).
Congress can decide how they want to run things this time, but I suspect they will just create special U.S. Savings Bonds and sell those.
Often the Treasury just issues more bonds.
This is a good idea. Really. 