When a government can’t afford fighting anymore, it has to make peace. That’s what counter-insurgents and guerrillas often count on - the governing principle of asymmetrical warfare:
If you can’t defeat the enemy on the battlefield, raise the costs of the war until he can no longer afford it.
Look at Spain after the Spanish Armada - the nation was bankrupt, the armies - which had not been paid for months - were in a state paralyzing mutiny.
Look at what happened to Germany after WW1 - even though the armies had also been bled dry on the battlefield (something that, ironically, the Germans had planned to do with the French, not expecting the major British/Commonwealth support) - another major reason for the German surrender was also that the Empire was bankrupt, and the state was effectively unable to function. That’s also the reason why after WW2, the US put billions of US-Dollars into the European economies, so that they can continue to function and could be rebuild effectively - otherwise Europe would have been in a state of chaos and anarchy - almost none of the European governments could afford to rebuild at the time. (The financial aid was, of course, not a purely selfless act - America needed a strong Europe to help counterbalance the Soviets - a bankrupt state would have been the perfect feeding ground for communists. America’s denial to waive British war debts after WW1 was a major factor for the British inability to re-arm in the face of an aggressive Third Reich, and America had learned its lesson.)
In order to understand war bonds, you have to understand the principle of a currency:
In the US at the time, the value of the US Dollar was bound to the federal Gold reserves - that means, theoretically, everybody who had a US-Dollar, owned a share of the federal financial reserves. The value of a single US-Dollar was determined by the amount of dollars X over the market value of the US-financial reserves Y.
By buying war bonds, and therefore giving the US some of their financial shares back, the government its financial obligation to its citizens temporarily reduced, and could use those resources to buy more weaponry without endangering its economy by devaluing the Dollar.
The alternative route, namely that if a government does not have enough financial resources/people don’t buy war bonds, would be to print more money. However, this changes the ratio of currency in circulation to the actual financial value of the state, therefore devaluing the currency.
If X (currency) is 100 and Y (financial resources in Gold) is 1000, that means that each currency, is worth 1000/100 = 10.
Now, if a government is broke and prints large sums of currency, X goes up, for example to 200. Then the worth of every currency is 1000/200 = 5.
This is called inflation of the currency (the opposite would be called deflation).
It would give the warring nation more money to purchase arms, but would at the same time devalue the currency, slowly wrecking the economy. That’s the reason why Post-WW1, a loaf of bread could cost up to 10,000,000 Reichsmark. The government had printed so much currency, that its value had gone done drastically, and basically destroyed the lifetime savings of its citizens. Just imagine if tomorrow, the Dollar was suddenly worth 1/1000 of its current value, and instead of $2.99, a Big Mac was $2,990.00 - how much would your savings be worth then?
If anything is wrong with the way I explained things (in, admittedly a basic manner), please correct me - this is the best I know, and I’d hate to live under wrongful assumptions.