Liberty Bonds

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LIBERTY BONDS


During World War I (19141918) the U.S. Treasury sold war bonds (certificates of indebtedness backed by the federal government) to help pay for the high cost of the war effort. Posters advertising the bonds were emblazoned with an image of the Statue of Liberty and the certificates themselves were called Liberty bonds. Patriotism and the motivational messages of Hollywood stars, such as Charlie Chaplin, Mary Pickford, and Douglas Fairbanks, who spoke at bond rallies, encouraged Americans to buy billions of dollars worth of Liberty bonds to help finance the fight in Europe. Towns were even given quotas of bonds to sell. In 1917 alone U.S. citizens bought $18.7 billion worth of the bonds, which would pay a fixed 3.5 percent interest rate compared with railroad bonds, which yielded nearly five percent in fixed interest. The success of the Liberty bond sales enabled the federal government to borrow money from its citizens, promising to pay the sum back (plus 3.5 percent interest). The bond sales served to introduce many U.S. citizens to the practice of investing, which they continued after the war. Some analysts believe this mind-set helped fuel overconfidence in the stock market, which contributed to its escalation during the 1920s and to its crash at the end of the decade (1929). During World War II (193945) the government again sold war bonds to help raise funds for the fight for freedom.

See also: Bonds, World War I, World War II