U.S. President Donald Trump has dubbed this “a time of war” while morphing Canada from ally to one of his many targets.
Since 1775, America has periodically tried to take over by force the land that is now Canada. Each time it has failed as we proved our strengths as formidable fighters.
Today, faced with an unprovoked economic attack, we must call on another of our strengths: being among the world’s fiercest savers.
Canadians outpace the U.S. and most other G7 nations in household savings rates (except Germany and France, both of which have stronger social safety nets). We’re saving at rates not seen since 1996.
My last Star column presented a three-point plan for government action, focusing on reforms to Employment Insurance, establishing guardrails on foreign direct investment and launching victory bonds. But it was the victory bonds that really seized readers’ imaginations.
“This is the mental shift we urgently need,” wrote Peter MacLeod. “We need to return to the WW2 formula,” said Joseph Polito. “I would definitely love to invest in Canada bonds like this in my TFSA. Let’s go!” enthused another reader, a sentiment echoed by many.
Your responses and questions pointed to a desire and need for more information on how to advance this citizen-driven wartime funding effort. Policymakers, take note.
Creating a wartime savings vehicle
During the First World War, the Canadian government created victory bonds as a way for all citizens, not just seasoned investors, to help pay for the wartime effort. They received a guaranteed, government-backed return during a time of huge economic uncertainty.
Catchy artwork, parades and celebrities marketed the bonds in an appeal to shared spirit. It was a spectacular success. More money was raised from the voluntary purchase of victory bonds than from obligatory taxes during the First World War and bond sales almost doubled tax revenues during the Second World War.
The first war bond raised $100 million in 1915. In 1917, the term “victory bond” was coined. That campaign sold five-, 10- and 20-year bonds in denominations as small as $50, with a guaranteed annual return of five and 5.5 per cent. While the federal government hoped to raise $150 million that year, it wildly underestimated the degree of Canadians’ interest, raising $398 million ($8.7 billion in today’s dollars) at a time when most workers made a few dollars a day.
During the Second World War, victory bonds were again sold in denominations from $50 to $100,000, with maturities from six to 14 years. Interest rates ranged from 1.5 per cent for short-term bonds and three per cent for long-term bonds, at a time when the central bank’s rate was 2.5 per cent. The first issue in 1940 sold out in 48 hours. Over the course of nine fundraising campaigns during the Second World War, almost $12 billion was raised ($248 billion in today’s terms, or 54 per cent of current federal revenues). Half were purchased by corporations, half by individual citizens.
Even children were encouraged to participate by buying war stamps at 25 cents each, about $5 today. When they had saved $4 worth of stamps, they got a $5 war savings certificate, a tidy 25 per cent return.
Some readers may remember the postwar continuation of the victory bond, called Canada Savings Bonds, which ended in 2017. For decades it was the nation’s most popular savings vehicle, until returns fell to an uncompetitive rate of 1.5 per cent when the prime rate averaged 2.9 per cent.
Here’s what we could do today.
The artfulness of the deal
Returns on the 2025 version of victory bonds should be tax free, as they were in the past, and returns should be guaranteed at five per cent, roughly the current prime rate, for the first year.
As in the past, people buying bonds of $1,000 or more could do so on an instalment plan, with 20 per cent down and completion of the pledge over six months. Children could contribute small monthly amounts to registered savings plans for such bonds. Workers could make automatic payroll deductions, in denominations as small as $10 a week.
Reminder: Canadian workers’ pension plans are one of the biggest pools of capital in the world, with more than $2.4 trillion in trusteed funds, of which only $186 billion is invested in federal bonds. The Maple Eight (Canada’s eight largest public pension plans) invest only about a quarter of Canadian workers’ savings in Canada. Prepare for tomorrow’s retirees by supporting today’s workers.
While other nations have lower savings rates than Canadians, there are also deep-pocketed foreign investors. There should be an upper limit on foreign sales. More than 33 per cent of the second federal green bond issued in 2024 was bought by foreign interests. The foreign-owned share of victory bonds, designed to fight a hostile corporate takeover of Canada, should be capped at 20 per cent.
Given rising inequality, individual purchases of tax-free victory bonds should also be capped and vested as contributions to Tax-Free Savings Accounts, which should also have a lifetime cap.
What’s in a name
Selling bonds to the general public was a marketing challenge when victory bonds were introduced. The transition from “war bonds” to “victory bonds” was no accident, leaning into growing popular sentiment. Similarly, it was no accident that by the Second World War, victory bond campaigns evolved from deadly earnest to increasingly cheeky. It fed the sense that our side was winning a gruesome fight.
A national naming contest is in order. Like the bonds themselves, everyone can play.
A can-do spirit has been reawakened in this country, along with a taste to go beyond a “Buy Canada” consumer response. Let’s save Canada like we did once, twice before; and finance the fight of our lives, together.
