Liberty Bonds

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What Freedom Bonds

The U.S. government first issued liberty bonds during the First World War in the spring of 1917. Federal leaders initially introduced bonds as a means of financing the war in Europe. The US sold liberty bonds again after the terrorist attacks of 11 September 2001—this time to Fund the recovery of “zero” and other damaged areas.

Breaking down the ‘loan’

Freedom Bonds act of Congress known as the law On freedom of the Bonds. Congress later would call it the original legislation, the first act of the freedom of bond, as was the subsequent act to authorize additional rounds of bonds. Liberty bonds offered many Americans their first experience with a personal investment.

Through this program, Americans mostly borrowed state money to help pay for the cost of military operations in wartime. After a certain number of years, those who invested in these bonds would get their money back, plus interest. The government created these bonds through the so-called “Freedom loan”, a joint effort of the U.S. Treasury and the Federal reserve system, itself created in 1914.

The Federal government encourages these securities as a way for U.S. citizens to show their Patriotic spirit of the nation and its army. But the Liberty Bonds were only moderately successful when it was first published in April 1917, which embarrassed the Treasury. The government to provide bonds were more successful next time, organized a large-scale awareness-raising campaign using eye-catching posters, billboards, advertising contracts with movie stars and other promotional tactics for the second offering of liberty bonds at the end of 1917. During the fifth issuance of bonds in April 1919, they became known as “Victory bonds” to celebrate the end of the war.

Liberty bonds as investments

The first issue of liberty bonds are offered with an interest rate of 3.5 percent, which is lower than through a conventional Savings account at the time. For several subsequent editions, the interest rate gradually increases slightly. Still, the main appeal of these securities were domestic, not for financial gain. One economic advantage at the beginning of the Liberty Bonds that the interest on these bonds is exempt from taxation, except the estate tax or inheritance. More liberty bonds issued in earlier rounds, were cashed or converted into bonds offer a higher interest rate. As a result of these bond certificates are rare and prized by collectors.

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