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Treasury Bond History

In 1914, the assassination of Archduke Franz Ferdinand of Austria, the heir to the throne of Austria-Hungary, launched the nations of Europe on a collision course. Tensions escalated as Germany threw its support behind Austria-Hungary in a campaign of invasion, and soon most other European nations, fearful of Germany's growing ambitions, declared war on Germany. The U.S. didn't want to become involved in the war, but as the German Navy sunk U.S. merchant ships carrying supplies to Britain, it soon appeared to the U.S. government that a war was probably inevitable.

The U.S. government knew that the costs of the war would be great, and the question of how to pay for the war was a matter of intense debate. In the years before 1914, the U.S. government had borrowed needed money from European countries, but now they had their own financial difficulties and couldn't lend the U.S. any money. The government's final decision was to pay for the war with an increase in taxes (the War Tax Act) and government debt (Treasury bonds). The U.S. citizens would have to fully finance the war through both higher taxes and the purchase of war bonds.

On April 6, 1917, when the United States declared war on Germany, the Treasury floated a $21.5 billion in bonds which were called Liberty bonds. Officials allowed interested investors to subscribe (putting their intentions of how many bonds they want to buy in writing), and then the officials decided on what the par value of the bonds was going to be.

LIberty bonds were in high demand and many were sold. After the war was over, the Liberty bonds reached maturity and had to be paid in full, but the Treasury was unable to pay all that was owed because of limited budget surpluses. Government officials resolved this problem by deciding to refinance the debt with variable short and medium-term maturities. Again the Treasury issued bonds through a fixed-price subscription, where both the coupon (indicating one of the interest payments), and the price of the full debt were decided on by the treasury department before the bonds were issued.

Since this period, U.S. bonds have gone through many changes, but still remain a very secure investment.

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Since this period, U.S. bonds have gone through many changes, but still remain a very secure investment.

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Germany has been behind both the world wars, World War I and World War II. The name Hitler is familiar even to the kids of this generation. The US government made huge profits from the war. A lot of money is said to be earned by the US government selling war bounds to the citizens.

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The price of the full debt were decided on by the treasury department before the bonds were issued.

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