greenbonds.com

Commentary by Jack Uldrich and reprinted here courtesy of Jump the Curve.

There are two main types of bonds offered. The Inflation Indexed - or I Bond - is designed to offer all Americans a way to save that protects the purchasing power of their investment by assuring them a real rate of return over and above inflation. I Bonds have features that make them attractive to many investors. They are sold at face value in denominations of $50, $75, $100, $200, $500, $1,000, $5,000 and $10,000 and earn interest for as long as 30 years. I Bond earnings are added every month and interest is compounded semiannually. They are state and local income tax exempt and federal income tax on I Bond earnings can be deferred until the bonds are cashed or stop earning interest after 30 years. Investors cashing I Bonds before five years are subject to a 3-month earnings penalty.

In 1941, in an effort to control inflation, the U.S. Treasury began marketing the new Series E bonds U.S. Savings Bonds as “defense bonds”. The government used the hype of the war to market the bonds to the country as a way to raise money for the war, when in fact they were used to remove money from the economy to control inflation. The first one was sold to President Franklin D. Roosevelt on May 1, 1941, by Secretary of the Treasurter the formal entry of the United States into the war in December of that year, these bonds became known as “war bonds”.   These bonds were simply the latest offering of the U.S. Savings Bonds program that had begun in 1935, which replaced U.S. Postal Savings Bonds, and continues to this day. However, the mood of the nation at that time allowed the U.S. government to market Series E bonds as “war bonds”, “war loans”, “victory bonds”, and by other names meant to appeal to a sense of patriotism.