What is a Liberty Bond?
The United States government issued freedom bonds for the first time during the First World War in the spring of 1917. Federal leaders initially introduced the bonds as a means of financing the war effort in Europe. The United States sold Liberty Bonds again after the September 11, 2001 terrorist attacks in the United States – this time to finance the reconstruction of “Ground Zero” and other damaged areas.
Liberty Bonds explained
Liberty Bonds was launched by an act of Congress known as the Liberty Bond Act. Congress would later call this initial legislation the First Liberty Bond Act because there were subsequent laws to authorize additional sets of bonds. Liberty Bonds has offered many Americans their first individual investment experience.
With this program, the Americans have essentially loaned money to the government to help pay for the costs of military operations in wartime. After a number of years, those who invested in these bonds would receive their money plus interest. The government created these bonds as part of the so-called “Liberty Loan” program, a joint effort between the United States Treasury and the Federal Reserve System created in 1914.
The federal government has promoted these titles as a way for American citizens to show their patriotic spirit and to support the nation and its military. However, the Liberty Bonds had only moderate success when they were first issued in April 1917, which hampered the Department of the Treasury. The government, to ensure the success of the bonds next time, has organized a massive public awareness campaign using eye-catching posters, billboards, movie star endorsements and other promotional tactics for the second offering of Liberty Bonds late 1917. During the fifth by releasing these bonds in April 1919, they became “victory bonds” to celebrate the end of the war.
Liberty Bonds as investments
The first Liberty bond issue offered an interest rate of 3.5%, which was lower than that available through a typical savings account at the time. In several subsequent versions, the interest rate increased slightly. However, the main attraction of these titles was as patriotic support, and not for financial gain. One of the economic advantages of the early Liberty Bonds was that interest on these bonds was tax-exempt, with the exception of inheritance or inheritance tax. Most Liberty bonds issued in the first rounds were cashed or converted into bonds offering a higher interest rate. Consequently, these bond certificates are rare and appreciated by collectors.