Britain tried war bonds before — and savers paid the price

Crowds in Trafalgar Square during a rally to promote war bonds in December, 1917.Topical Press Agency | Hulton Archive | Getty ImagesThis report is from this week's CNBC UK Exchange newsletter. Like what you see? You can subscribe here.The dispatchIn 1914, the United Kingdom was one of the world's wealthiest countries, but by the end of the year it still needed to finance the war it had been fighting with Germany and its allies since August.The solution was to borrow from investors via a so-called "war loan," offering a coupon of 3.5%, repayable between 1925 and 1928.Evidence unearthed by Norma Cohen, a former Financial Times journalist and now honorary research fellow at Queen Mary University of London, suggests it failed — with just £91 million ($121 million) raised of the £350 million ministers had targeted.The Bank of England made up the shortfall and kept the details hidden from the public for decades.Just over two years later, David Lloyd George, the chancellor (finance minister) responsible, became prime minister and decided to attempt a second issue of war loans.In a speech at the Guildhall on Jan. 11, 1917, he said: "I want to see cheques hurtling through the air … every w...