War Bonds: Difference between revisions
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=== Lowering Inflation === | === Lowering Inflation === | ||
Generally during times of War, the inflation rate rises because goods produced do not produced for domestic benefit. More money is spent, but less goods are available on the market. The monetary policy for fighting inflation is to decrease the money supply. In a normal economy, the Federal Reserve will sell treasury bonds to lower the monetary base. | Generally during times of War, the inflation rate rises because goods produced do not produced for domestic benefit. More money is spent, but less goods are available on the market. The monetary policy for fighting inflation is to decrease the money supply. In a normal economy, the Federal Reserve will sell treasury bonds (to banks) to lower the monetary base. | ||
MS = mm x MB | |||
However, the Federal Reserve does not have power over the sale and purchase of savings bonds purchased by individuals. When Americans purchased war bonds, they were effectively removing money from circulation. | |||
Revision as of 21:58, 27 November 2007
War Bonds
War bonds were savings bond sold to individuals by the government during World War II. These types of bonds were known as Series E bonds (later replaced by Series EE bonds in 1980) and were first made available for purchase on May 14, 1941. The main function of these bonds was to give funding to the government, however they also served other purposes.
Lowering Inflation
Generally during times of War, the inflation rate rises because goods produced do not produced for domestic benefit. More money is spent, but less goods are available on the market. The monetary policy for fighting inflation is to decrease the money supply. In a normal economy, the Federal Reserve will sell treasury bonds (to banks) to lower the monetary base.
MS = mm x MB
However, the Federal Reserve does not have power over the sale and purchase of savings bonds purchased by individuals. When Americans purchased war bonds, they were effectively removing money from circulation.
