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Capitalizing patriotism: the Liberty loans of World War I

Published online by Cambridge University Press:  20 May 2015

Sung Won Kang
Korean Economic Research Institute
Hugh Rockoff*
Rutgers University
H. Rockoff (corresponding author), Department of Economics, Rutgers University, New Brunswick, NJ 08901, USA; and NBER;


Although taxes were raised substantially in the United States during World War I, recourse was had to five bond issues, the famous Liberty loans, to finance the bulk of war expenditures. The Secretary of the Treasury, William Gibbs McAdoo, hoped to create a broad market for the Liberty bonds and to limit their yields by following an aggressive policy of ‘capitalizing patriotism’. He called on everyone from Wall Street bankers to the Boy Scouts to volunteer for campaigns to sell the bonds. The campaigns have become legendary. Some of the nation's best-known artists were recruited to draw posters depicting the contribution to the war effort to be made by buying bonds, and giant bond rallies featuring Hollywood stars were organized. These efforts, however, enjoyed limited success. The yields on the Liberty bonds were kept low mainly by making the bonds tax exempt and by making sure that a large proportion of them were purchased directly or indirectly by the Federal Reserve, turning the Federal Reserve into an engine of inflation. Patriotism proved to be a weak, although not powerless, offset to normal market forces.

Copyright © European Association for Banking and Financial History e.V. 2015 

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