What are Liberty Bonds? - Definition & Uses in WWI

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  • 0:00 What Is a Liberty Bond?
  • 0:45 Different Kinds of…
  • 1:37 Marketing of Liberty Bonds
  • 2:53 After the War
  • 3:29 Lesson Summary
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Lesson Transcript
Instructor: Jennifer Keefe

Jennifer Keefe has taught college-level Humanities and has a Master's in Liberal Studies.

Liberty Bonds were government-issued bonds and were an attempt by the U.S. to finance its involvement in World War I. In this lesson, you'll learn about the Liberty Bond and how the nation promoted this important cause.

What Is a Liberty Bond?

Today the United States has a defense budget of over $500 billion, but that wasn't the case 100 years ago. When the American government entered the Great War in 1917, it was faced with a difficult question: how was the country going to pay for it? Out of that problem the Liberty Bond was born.

Liberty Bonds were the result of a law passed by Congress that allowed the government to petition the people to help pay for the war. The bonds were a major step forward for Americans as investors, as they were the first time Americans invested in individual securities. They were also a way for Americans not fighting in the war to show their support and patriotism.

Different Kinds of Liberty Bonds

In total, five instances of Liberty Bonds were issued by the U.S. government. In April and October of 1917 and in April and September of 1918 bonds were issued. The fifth bond issue in April 1919 was named the Victory Bond, and the government used that to consolidate short-term war debts.

Liberty Bonds were sold to businesses at high dollar amounts, but an individual could buy one for as low as $50. To cater to the desire of poorer Americans to support the war, the government created War Savings Certificate Stamps starting in 1917. Stamps costing 25 cents could be collected, and when $5 in stamps was collected the stamps could be traded in for a $5 savings certificate. The stamp program was meant to combat the idea that only the rich were making money on the war.

Marketing of Liberty Bonds

When the original Liberty Bond was first issued in April 1917, the rate of return for investors was 3.5%. The low rate didn't sell well, especially since railroad bonds offered a return rate of 5% at the time, so the government mounted a massive propaganda campaign to drum up support. The government staged bond rallies at cities around the country and gave towns quotas of how many of the bonds they needed to sell.

The government also called on Hollywood to advance the Liberty Bond initiative. Famous actors such as Douglas Fairbanks publicly promoted the purchase of the bonds. Charlie Chaplin, at his own expense, made a short movie titled 'The Bond' and a famous cartoonist of that time, Windsor McCay, created a well-known propaganda poster.

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