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Liberty Bonds

Started by brandm24, December 29, 2021, 01:40:44 PM

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Liberty Bonds...or Liberty Loans...were debt obligations issued in four installments by the US Treasury Department in an effort to assist in the funding of the country's participation in World War 1. These war bonds were sold in 1917 and 1918 and would go on to raise nearly 17 billion dollars.

Through their purchases the American people were loaning the government money to finance the war effort. It was to be paid back with interest over a specified number of years. Initially a rete of 3.5% was offered but was raised slightly to 4.25% for later offerings. The 3.5% rate was less than paid by a bank for a typical savings account. The rates were kept low to discourage speculators and wealthy citizens. The program was meant to stimulate patriotism not large profit for the bond holders.

While the initial term was for 25 or 30 years many were later converted to higher yielding bonds with maturities of 15 or 20 years. The smallest denomination was $50 but lesser amounts of 25 cents could be invested in what was known as War Thrift Stamps or $5 in War Savings Certificates. Both instruments could later be converted into Liberty Bonds when the minimum threshold was met. The proceeds from these investments were tax free.

This interesting counterstamped coin is apparently an "advertisement" for their sale. The symbol at the top of the coin on the obverse and the initialed arrow on the reverse look to be inspector's quality stamps. This suggests that the example was struck at a government manufacturing site or a private contractor doing government work. The anchors might indicate that it was a naval facility. Though it appears to have been punched with a prepared die, some slight differences in spacing and alignment suggest otherwise. Any skilled machinist or mechanic would be capable of this quality of craftsmanship. Depending on how it was stamped would give us an indication as to whether other examples were struck or this was simply a one-off.

Always Faithful


You describe it pretty well in terms of the up-front reasoning, but there is a hidden agenda behind that motivation.

War leads to a large increase in government spending, that results in extra liquidity in the market. Part of that will be consumed and the rest will be saved. If the part consumed is not met with extra production, it leads to inflation (this is all basic macro-economics, even before Keynes). In war times, the trick is to siphon money into savings, rather than consumption, to prevent inflation. That is exactly what these war bonds were doing. By aiming them at low income households, the state went for the largest effect. Savings in low income households prevent more consumption, as the rich would save most of the extra income even without the bonds.

The text on the coin becomes clear by remembering that these are very long-term bonds. Today, long-term is defined as having a maturity of 10 years or more. Only US Treasury bonds go beyond 10 years. Much can change in 15 to 25 years. In the case of these bonds, the first world war ended, giving way to the roaring twenties. Both would have depressed interest rates. What was an unattractive rate in 1916 was a very attractive rate in 1926 or so, when the bonds would have had a remaining maturity of 5 years (they had become medium-term bonds).

Now picture a low income household facing a need for liquidity. They hold attractive bonds for which there is demand if they are offered in quantity. This creates a role for middle-men, who buy the bonds in small quantity and probably at a significant discount and sell them in large quantities at full market price to pros. Compare the middle-men who offer to buy old jewellery gold and gold coins today. My guess is that this coin was counterstamped by such a middle-man (JLM from NY) and used as cheap advertising.

An unidentified coin is a piece of metal. An identified coin is a piece of history.


 Your expertise on the economics of it all is an interesting read and one that I agree with, Peter. My knowledge is limited so i defer to you on this. And of course hidden agendas are a given in politics and many other disciplines in life.

However, I don't agree with your opinion on the origin of the coin. The symbolism...M NY and the initialed arrow look very much like US inspector stamps to me which suggests it was issued at a defense plant either private or governmental. Whether it was a systematic effort or simply a unique piece is just a guess. Reminds me vaguely of the Irish Troubles stamped coins produced in large quantities at Belfast machine shops in support of Loyalist causes.

Thanks for your comments. They're much appreciated.

Always Faithful


Here are examples of a 25 cent War Thrift Stamp and a $5 War Savings Certificate. The low value stamps could be converted into certificates when $5 worth of stamps were accumulated. The certificates in turn could be exchanged for a bond worth $50.

All of these financial instruments are rare today for obvious reasons and highly sought after by collectors. Prices fetched at auction or in private treaty transactions can reach many hundreds of dollars.

Always Faithful