WWII where did the US borrow $

Did the US borrow money from other nations to finance Defense spending in WWII? If so from what nations?
I know there was war bond drives to get support by civilians. There was a movie, ( I know dubious source ), no too long ago that said something like “We are going to run out of money to finance this war if we don’t sell more war bonds”.
(Flags of Our fathers?)

I am inquiring because of this quote from a blog:
“The difference is that we’ve already spent more than we spent on WWII, on nothing - on keeping the ride going around one more time. We’ve already borrowed nearly as much as a percentage of GDP as we did in WWII - the difference is that we’re borrowing not from allies that need us desperately, in a position of strength,…” (http://sharonastyk.com/

I can not think of what country would of loaned money to the US in the 1940’s.


The US government borrowed the money from its citizens; the financing took two forms:

  1. “War Bonds”-basically long duration bonds. This was a minor source of capital.
  2. Forced savings via supression of consumption: the government rationed gasoline, tires, food, etc. In addition, factories were switched from consumer production to war production (manufacture of automobiles ceased in 1941). While workers in war industries were well paid, there was little to spend the money on (forced savings).
    Of course, people back then were capable of making sacrifices for the good of the country-nobody would do this today.:smack:

We Brits paid a lot.

I am a fan of old time radio and all the WWII shows were big on bonds.

George) But Gracie we have to give the children toys for Christmas.
Gracie) But we WILL George, only we’ll give them toys made out material not needed for the war effort.


Gracie) But George the hat only cost $2.00
George) But Gracie that is a luxury good. Don’t you realize your using materials friviously. Those materials could help fight the war. And you could’ve boughten a war bond.

[Geroge leaves and Blanche the neighbor comes over]

Blanche) I heard George yelling at you, is he trying to be a man again?
Gracie) Yeah but this time he actually had a point.


George) Gracie, how could you you gasoline to clean the car seats. Don’t you realize gasoline is rationed? The government says to only use gasoline for very important things like driving the man of the house to work.

Gracie) Gee George we won’t use any gas at all


Or Gracie’s speech after D-Day:

I know when you hear the latest war news you all get worried, maybe your children are listening and you don’t know what to say, but tell them we are fighting, fighting for freedom and bring the walls of fortress Europe down. You may ask, what can I do? Here’s what you can do, buy bonds, dig deep, buy as many as you can, then buy one more.

George) Yes give till it hurts

Gracie) Don’t say that George, because it hurts NO ONE to invest in their freedom, the freedom that our European friends had taken from them and are desperately trying to reclaim.

George) Yes back the attack

Gracie) Yes our boys are doing their part, let’s show them how much we care for them


<and now back to the thread>

Simply, in WWII the U.S. citizens bought the bonds. Today, the Chinese (along with the Japanese and a few others) buy the bonds.

It used to be common for employers to have Savings Bond drives. Some money would be deducted from the paycheck and you would receive a bond in the mail. Savings Bonds were given as gifts, especially to children so they would have money in their future. It was common for there to be advertisements to buy Savings Bonds on television. That was the old days.

Based on what we’ve seen lately, you start to wonder if that wasn’t a far better way to finance the national debt.

We borrowed it from ourselves, mostly. We ‘loaned’ money to our allies (to buy stuff from us) using Lend-Lease, we ran up our debt (in the form of bonds and other things). AFAIK, there was no significant loans to the US from allied (or other) countries…quite the opposite, as many of our allies chalked up considerable debt buying arms and munitions from us.

Of course, after the war, we made much of that debt back because our industry was one of the few untouched by the war, and we had a virtual monopoly on consumer goods and manufacturing for years. The money we spent on reconstruction in Europe and Japan really helped give our own industries markets for our products and services as well.


Keep in mind that the common idea that we’re just borrowing everything from foreigners is a myth. Most American government debt is still borrowed within the United States as it always has been.

So buy some Savings Bonds. They’re still available and you can buy one at any bank.

OTOH, one reason no one buys them any more (except as gifts, it seems) is that financial advisors thing they are for investment dummies. They’d rather you get zero coupon bonds instead. :)*

The big knock is that you have to pay the interest in one lump when the bonds are cashed in.

*Essentially the same thing, only from private sources.

I own a United States Savings Bond. A relative living in the US bought for me as a gift when I was about four years old. It matured long ago, but living in Canada, I had no way to cash it when it matured. It wasn’t for very much though ($50?), so I keep it now as a souvenir. It’s worth more to me as a souvenir of a favourite relative who has long since passed away than its monetary value.

You can only borrow US$ from people who have US$ to lend to you.
The more the US imports, the more non-residents there are holding US$ which they have got by selling the goods and services imported to the US.

There are basically only three things non-residents can do with US$:

  • Buy goods and services within the US. This depends on the US producing goods and services that non-residents wish to buy and import back into their own countries. To the extent that this happens, US exports rise. However US imports substantially exceed US exports.

  • Buy US assets - stocks, land, etc. To the extent that this happens, the proportion of US assets held by foreigners goes up.

  • Lend the money to someone who wants to borrow US$, and the largest (and safest) such borrower is the US government. The US government does not care whether it borrowers from residents or non-residents; it pays the same interest rate to everyone. So if non-residents are offereing more US$ to lend than residents, newly-issued debt will tend to be taken up by non-residents.

Bear in mind that while savings bonds had a face value, if held past maturity many of them continue to earn interest at whatever rate the treasury set. The actual period of time they continue to earn is dependent on the class of bond, but you oughta take a look before you decide the one you’re holding is a quaint souvenir.

In days even older you could buy stamps for twenty-five cents or so, that when collected into a book would eventually total the $18.75 it took at the time to buy a $25.00 face value bond. It was a way to get those nickels and dimes out of children’s pockets. I can remember collecting deposit bottles, $0.02 for a small bottle, $0.05 for a quart sized, and using the money to buy those stamps.

I bought some of them in the 60s in the main office of the elementary school that I attended. In perspective, it is amusing, but the stamps and books were pretty cool looking.

An earlier thread on war bonds during WW2: http://boards.straightdope.com/sdmb/showthread.php?t=396952

And taxes to pay off the debt were sky-high during the 50s. Taxes were so high that major Hollywood stars negotiated with the studios to get payed in studio stock rather than cash. The Republican administration under Eisenhower oversaw a tax rate so high that if we had the same rates today Republicans would be calling for armed revolution.

As shown the movie Flags of Our Fathers they had war heroes go around to rallies to promote buying war bonds. In the movie the survivors who raised the flag on Iwo Jima went to rallies and in some cases re-enacted raising the flag.

There was a higher marginal rate perhaps, but total tax revenue as percentage of gdp has been pretty flat since WWII.