Financing the Great War: The Unsavory Creation of Central Banking

Britain's initial World War I bond issuance disastrously fell short of its target, necessitating a secret bailout by the Bank of England to prevent a financial crisis and negative propaganda. This cover-up, recently uncovered through ledger analysis, reveals the extent of the shortfall and the Bank's crucial, albeit concealed, role in financing the war. The failure exposed the limitations of relying solely on voluntary capital contributions, leading to increased government intervention in the economy and a shift towards a more centralized banking system. Subsequent war bonds offered higher yields to attract investment, highlighting the government's evolving approach to wartime finance and the long-term consequences of this initial failure. The episode fundamentally altered the Bank of England's role, ultimately paving the way for its nationalization.