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The US propaganda campaign to raise money for World War One · Economy & Finance

• 0:00
  Speaker 1: The Liberty Loan Program was basically the genesis moment for
• 0:03
  Speaker 1: the mightiest, biggest, baddest financial market on the planet.
• 0:08
  Speaker 2: We have to go back to the horror and hell
• 0:11
  Speaker 2: of World War I.
• 0:12
  Speaker 1: It was apocalyptic. They even got celebrities involved in the
• 0:15
  Speaker 1: selling campaign. Charlie Chaplin, Douglas Fairbanks, Mary Pickford, lots of
• 0:19
  Speaker 1: the biggest movie stars of the era. They got Girl
• 0:22
  Speaker 1: Scouts to go around and sell bonds door to door.
• 0:24
  Speaker 1: They even used a captured German submarine. They turned it
• 0:27
  Speaker 1: into a bond selling booth in Central Park. called You
• 0:30
  Speaker 1: Buy a Bond.
• 0:36
  Speaker 3: Today on the story of money, how the First World
• 0:39
  Speaker 3: War transformed the United States into a nation of investors.
• 0:43
  Speaker 1: Our story begins at the depths of World War I,
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  Speaker 1: one of the deadliest, most destructive conflicts in human history,
• 0:50
  Speaker 1: when America rode to the Allies' defence.
• 0:53
  Speaker 3: And thanks to a creative Treasury Secretary, the country became
• 0:56
  Speaker 3: hooked on a branding campaign unlike anything that anyone had
• 1:00
  Speaker 3: ever seen before.
• 1:01
  Speaker 1: He hatched a plan to make Americans part with their
• 1:04
  Speaker 1: hard-earned cash and created something called the Liberty Loan Program
• 1:09
  Speaker 1: to finance it all.
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  Speaker 3: Now, we all know who won the First World War,
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  Speaker 3: but what you probably don't know is how America funded it.
• 1:16
  Speaker 1: Yes, the Liberty Loan Program was basically the genesis moment
• 1:20
  Speaker 1: for the mightiest, biggest, baddest financial market on the planet.
• 1:25
  Speaker 1: the US Treasury market. And it also laid the groundwork
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  Speaker 1: for how investing became such a central part of the
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  Speaker 1: American culture.
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  Speaker 3: So to illustrate this, we're going to be talking about
• 1:37
  Speaker 3: a book that Robin has written called A Fabulous Debt.
• 1:43
  Speaker 2: I'm Gillian Tett.
• 1:45
  Speaker 1: And I'm Robin Wigglesworth. It's fabulous to be talking about
• 1:47
  Speaker 1: the Liberty Loan Program. And this is the story of money.
• 1:56
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• 1:59
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• 2:06
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• 2:14
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• 2:16
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• 2:17
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• 2:20
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• 2:29
  Speaker 3: So Robin, today we're going to be talking about these
• 2:31
  Speaker 3: World War I bonds. And I gather that you've been
• 2:35
  Speaker 3: out on a sleuthing campaign to actually find a physical one,
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  Speaker 3: haven't you?
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  Speaker 2: Did you get one?
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  Speaker 1: No, not yet. You know, I always thought I'd use
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  Speaker 1: some of my book advance to buy myself a little
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  Speaker 1: bit of a certificate from the Liberty Loan Programme because
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  Speaker 1: it's such an important market in the history of the
• 2:54
  Speaker 1: bond market. They look pretty. It's full of eagles and
• 2:57
  Speaker 1: American flags and heavily ornate borders and all sort of
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  Speaker 1: iconography and I thought I'll buy it I'll frame it
• 3:05
  Speaker 1: when I finally sort of the book is.
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  Speaker 3: Out yeah most people go off and get a holiday
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  Speaker 3: or a nice bottle of wine but you want a
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  Speaker 3: certificate of a bond go for it I'm a very.
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  Speaker 1: Sad person or a heroic one depending on your.
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  Speaker 3: Perspective well that's officially very geeky but we're going to
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  Speaker 3: talk today about what drove that whole propaganda campaign with
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  Speaker 3: the liberty bonds and to understand that we have to
• 3:24
  Speaker 3: go back to the horror and hell of world war
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  Speaker 3: one don't we Yes.
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  Speaker 1: Well, it started in 1914. And we're not going to
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  Speaker 1: dive all in way into it. But obviously, it was
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  Speaker 1: enormously destructive. I mean, entire generations were almost wiped out.
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  Speaker 1: One of the deadliest conflicts in the world up until then.
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  Speaker 1: Over 20 million people died. I mean, we've all seen
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  Speaker 1: pictures of the trench warfare. It was apocalyptic almost.
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  Speaker 3: And all of which has a horrible sense of deja
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  Speaker 3: vu today. I mean, I've just come back recently from
• 3:54
  Speaker 3: the front lines of the war in Ukraine. which is
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  Speaker 3: once again trench warfare, but with a drone related twist.
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  Speaker 2: It was hell.
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  Speaker 3: But what we're talking about today is a moment in
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  Speaker 3: 1917 when America joined the war.
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  Speaker 2: Tell us why that really mattered.
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  Speaker 1: Well, the U.S. at first didn't want to join the war.
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  Speaker 1: It did so belatedly. There was an overwhelming sense that
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  Speaker 1: we should stay out of this. Woodrow Wilson, the US president,
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  Speaker 1: actually won re-election in 1916 on a platform of, I
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  Speaker 1: kept us out of the war. But then by 1917,
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  Speaker 1: things had started to change.
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  Speaker 3: What made America in 1917 change its mind and decide
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  Speaker 3: to jump in?
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  Speaker 1: Well, it was a lot of things, because there was
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  Speaker 1: a huge shift in public opinion. It was public opinion
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  Speaker 1: that changed rather than the politicians driving this. German atrocities
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  Speaker 1: in Belgium started changing the view of a sort of
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  Speaker 1: who were the baddies, essentially, in this conflict. German U-boats
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  Speaker 1: sank the American passenger ship to Lusitania in 1915. That
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  Speaker 1: sounds a.
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  Speaker 3: Bit of a self-defeating move, if you suddenly get the
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  Speaker 3: American public angry.
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  Speaker 1: They stopped some of the unrestricted U-boat warfare after that.
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  Speaker 1: But later on, when Germany started getting desperate itself, they
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  Speaker 1: restarted this unrestricted U-boat campaign, also targeting American ships that
• 5:09
  Speaker 1: were bringing supplies to Britain. And then there was this
• 5:12
  Speaker 1: famous Zimmermann telegram scandal one of the greatest intelligence coups
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  Speaker 1: in history, where the British managed to basically intercept and
• 5:19
  Speaker 1: decrypt a message sent by Zimmerman, Arthur Zimmerman, the German
• 5:23
  Speaker 1: foreign minister, to his Mexican counterpart, offering a secret alliance
• 5:27
  Speaker 1: where they would help Mexico regain territories in America if
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  Speaker 1: Mexico sided with Germany, if America did enter the war.
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  Speaker 1: And this just massively inflamed public opinion in the U.S.,
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  Speaker 1: and the U.S. belatedly joined.
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  Speaker 3: So as a classic example of what Winston Churchill said
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  Speaker 3: is that America always does the right things, after trying
• 5:45
  Speaker 3: all the wrong things first.
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  Speaker 2: So after trying to.
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  Speaker 3: Ignore World War I, it then perhaps reluctantly jumped in.
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  Speaker 3: But it had to pay for it, didn't it? Because,
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  Speaker 3: and a bit like today, there was a real issue
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  Speaker 3: about the public being angry or potentially concerned about not
• 6:00
  Speaker 3: wanting to spend taxpayer money on yet another war.
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  Speaker 1: Just also just the taxpayers couldn't really front up that
• 6:05
  Speaker 1: kind of money. I mean, as you've seen in Ukraine,
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  Speaker 1: wars are incredibly expensive. And this was a total war.
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  Speaker 1: where every senior of the national economy is subsumed by
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  Speaker 1: the war effort. The U.S. had only introduced an income
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  Speaker 1: tax in 1913, just a few years before. It didn't
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  Speaker 1: really have the capacity. It had to borrow the money.
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  Speaker 1: The problem was the U.S. government bond market. It's massive now,
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  Speaker 1: of course. At the time, it was less than a billion.
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  Speaker 1: It was just a few paltry bond issues. They were
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  Speaker 1: sold to pay for the Panama Canal. So it just
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  Speaker 1: wasn't really set up to either tax or borrow to
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  Speaker 1: pay for you know, building a navy from scratch, almost
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  Speaker 1: building an army from scratch. America didn't really have military
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  Speaker 1: to speak of in 1917. Right.
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  Speaker 3: So today, of course, the US Treasuries market is 40 trillion,
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  Speaker 3: more or less. And the question is, do we even
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  Speaker 3: have the capacity in America to borrow anymore? But in
• 6:55
  Speaker 3: those days, the issue was the Treasuries market was just
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  Speaker 3: $ 1 billion in size.
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  Speaker 2: And did it.
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  Speaker 3: Have the infrastructure to actually even borrow a little bit?
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  Speaker 3: And the person in the hot seat trying to solve
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  Speaker 3: that problem was William McAdoo, who was the Treasury Secretary.
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  Speaker 2: How did he end up in that position?
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  Speaker 1: Well, he was a former streetcar executive.
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  Speaker 2: Streetcar executive?
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  Speaker 1: Yes, exactly.
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  Speaker 2: Doesn't that look like an obvious background to become a
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  Speaker 2: big borrower? But anyway.
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  Speaker 1: A big donor as well, let's say. And he was
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  Speaker 1: very plugged into the democratic establishment. He was a Southern Democrat.
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  Speaker 1: He was born during the Civil War, in fact. He
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  Speaker 1: married Woodrow Wilson's daughter. So he was also the president's son-in-law.
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  Speaker 3: So big donor and the son-in-law. All of that is
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  Speaker 3: very smart. Again, very similar to where we are today
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  Speaker 3: in American politics.
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  Speaker 1: He had extremely retrograde views on racial politics. I mean,
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  Speaker 1: he introduced segregation to the treasury. He was also weirdly
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  Speaker 1: progressive in his gender views. He was for equal pay
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  Speaker 1: and votes for women. And, you know, he was a
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  Speaker 1: complicated man. I actually have a picture of him here.
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  Speaker 1: Here you can see him in 1914 when he married
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  Speaker 1: Woodrow Wilson's daughter.
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  Speaker 3: He doesn't look like a lot of fun, I've got
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  Speaker 3: to say. I mean, he's looking very stiff, literally a
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  Speaker 3: stiff shirt kind of person or stuffy person with a
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  Speaker 3: very white collar and a rather grim expression.
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  Speaker 1: Yes, in a very dark suit. He's kind of turned
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  Speaker 1: in silhouette, half enshrouded in darkness as well. He looks confident, though.
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  Speaker 1: And he was a very, very, very confident, energetic man.
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  Speaker 1: And you can kind of see that in this picture.
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  Speaker 2: He looks like he's in love with himself, to be honest.
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  Speaker 2: But anyway.
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  Speaker 1: Yes, I think he had an extremely healthy self-regard.
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  Speaker 2: Well, people who change the world tend to have that.
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  Speaker 1: Yes, exactly. You know, he was the first head of
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  Speaker 1: the Federal Reserve. One of the reasons why he offered
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  Speaker 1: to resign when he married Wilson's daughter was But Wilson said, no,
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  Speaker 1: I need to keep you here because your main job
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  Speaker 1: is to birth the U.S. Federal Reserve, which the act
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  Speaker 1: to start the Federal Reserve had only been passed a
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  Speaker 1: year before the war in 1913. And, you know, that
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  Speaker 1: was an incredibly important thing for America. And that was
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  Speaker 1: his first job, really. And it's making sure that the U.S.
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  Speaker 1: was protected from the financial ramifications of the Great War
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  Speaker 1: that had broken out in Europe.
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  Speaker 3: Well, if you're going to work for the U.S. government,
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  Speaker 3: you might as well get parachuted into right at the top.
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  Speaker 1: Yes.
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  Speaker 3: But the question is, he came up with a pretty
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  Speaker 3: revolutionary idea to try and raise money for America. Tell
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  Speaker 3: us what it was and where he got that idea from.
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  Speaker 1: Well, he was a student of history, and he went
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  Speaker 1: back to look at what some of his predecessors had
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  Speaker 1: done at times of war and strife. And the best
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  Speaker 1: example was his predecessor, Salmon Chase, the Treasury Secretary at
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  Speaker 1: the time of the U.S. Civil War. Now, he was
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  Speaker 1: a slightly... Not a useless character, but certainly not as
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  Speaker 1: impressive as McAdoo was. They didn't have the same energy.
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  Speaker 1: And he essentially privatized the role to a banker called
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  Speaker 1: Jay Cook. So Jay Cook became basically the main financier
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  Speaker 1: of the North's war efforts. And he did this massive
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  Speaker 1: propaganda campaign and sold bonds. on a kind of a
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  Speaker 1: retail basis to Americans around the North. And he was
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  Speaker 1: hugely successful. And McAdoo studied this and thought he was
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  Speaker 1: going to do what Jay Cook had done, but he
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  Speaker 1: was going to do it as Treasury Secretary, and he
• 10:11
  Speaker 1: was going to supercharge it. He was going to do
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  Speaker 1: it on a grander scale than anybody had ever foreseen before.
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  Speaker 3: So it sounds pretty darn ambitious. But how did he
• 10:22
  Speaker 3: actually go about doing it?
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  Speaker 1: So at the eve of the war, he summoned some
• 10:25
  Speaker 1: bankers to the Treasury and talked to them like, how
• 10:27
  Speaker 1: do we do this? And they said, well, there's less
• 10:29
  Speaker 1: than a billion dollars worth of bonds. They're mostly socked
• 10:31
  Speaker 1: away in the vaults of some banks. There's no real market.
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  Speaker 1: So you should only issue $ 1 billion worth of bonds
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  Speaker 1: at a time. There were only around 350,000 bondholders in
• 10:41
  Speaker 1: the entire country. It was around 100 million people at
• 10:44
  Speaker 1: the time. It wasn't It wasn't really a bond market.
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  Speaker 2: So it was basically a pretty niche product.
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  Speaker 5: In those days.
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  Speaker 1: Yeah, exactly. It was a nothing book. And they said, therefore,
• 10:52
  Speaker 1: the bankers told him to be cautious, be careful, offer
• 10:55
  Speaker 1: a juicy interest rate to entice investors and build slowly
• 10:59
  Speaker 1: from there. And he said, and there's this phrase in his,
• 11:03
  Speaker 1: because Americans didn't understand bonds, the bankers said. And he
• 11:06
  Speaker 1: has this phrase in his diaries where he said, it
• 11:09
  Speaker 1: might be that Americans do not understand or know little
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  Speaker 1: about bonds, but we will tell them.
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  Speaker 3: So what he does is he wraps it up in
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  Speaker 3: a very clever brand, which is Liberty.
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  Speaker 1: Branding matters.
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  Speaker 2: Branding matters.
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  Speaker 3: And for America, the word Liberty is a bit like
• 11:24
  Speaker 3: motherhood and apple pie. Nobody dares hate on the concept
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  Speaker 3: of Liberty. So very clever. So he gets his plan
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  Speaker 3: to call them the Liberty Bonds. But when he starts
• 11:35
  Speaker 3: testing the water, the public doesn't seem very enthusiastic, does it?
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  Speaker 3: I mean, not nearly as enthusiastic as you are about
• 11:41
  Speaker 3: trying to find a bond yourself.
• 11:43
  Speaker 1: No, that's a very hard thing to top. Well, so
• 11:46
  Speaker 1: he went to Congress. And this is actually, you'll enjoy this.
• 11:48
  Speaker 1: This is actually the genesis for the debt ceiling as well.
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  Speaker 1: Because up until then, Congress controlled the power of the purse.
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  Speaker 1: And every bond issuance by the US government had to
• 11:57
  Speaker 1: be approved individually by Congress. But he goes to Congress
• 12:01
  Speaker 1: and gets authorization to borrow up $ 5 billion worth of
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  Speaker 1: bonds and $ 2 billion.
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  Speaker 2: Which was a lot of money then. It's chump change today.
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  Speaker 3: I mean, Scott Besson, the Treasury Secretary, would barely get
• 12:10
  Speaker 3: out of bed for $ 5 billion, but those days that
• 12:12
  Speaker 3: was a lot.
• 12:13
  Speaker 1: No, it was titanic. And so they basically said, like,
• 12:16
  Speaker 1: borrow up until this point, and if you need more,
• 12:19
  Speaker 1: come back to Congress for authorization. And it was hard,
• 12:24
  Speaker 1: but what he essentially did was set up an organization
• 12:28
  Speaker 1: that was called the War Loan Organization. And this was...
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  Speaker 1: I mean, really, it was a propaganda campaign. It was this,
• 12:34
  Speaker 1: I mean, you can call it a marketing campaign, but
• 12:36
  Speaker 1: it is basically a multi-pronged organization with sub-organizations that was
• 12:42
  Speaker 1: all dedicated to this one thing, and that was to
• 12:44
  Speaker 1: sell bonds. He got Edward Bernays, who's kind of the
• 12:47
  Speaker 1: father of public relations, to work on a lot of
• 12:50
  Speaker 1: the campaigns. They used lots of patriotic language around it,
• 12:53
  Speaker 1: and they had to educate people from scratch. I mean,
• 12:55
  Speaker 1: lots of people didn't know what a bond was. In fact,
• 12:58
  Speaker 1: when they first started selling bonds, people would quite often
• 13:00
  Speaker 1: send a letter to the Treasury or to the new
• 13:03
  Speaker 1: Federal Reserve branch, for example, asking, where do we send
• 13:07
  Speaker 1: the interest? They didn't realize that we're lending money to
• 13:10
  Speaker 1: the government. They thought it was giving money to the
• 13:12
  Speaker 1: government and they'd have to pay a little bit of
• 13:13
  Speaker 1: money all the time. People just didn't understand this at all.
• 13:16
  Speaker 1: It was kind of a completely new concept for the
• 13:20
  Speaker 1: vast majority of Americans. So they needed to get the
• 13:22
  Speaker 1: mechanics up and running, educate people, organize everything around it,
• 13:28
  Speaker 1: and just make sure that Every part of the country
• 13:30
  Speaker 1: was involved. We actually have this clip from the Library
• 13:34
  Speaker 1: of Congress archives that has one of these public appeals.
• 13:38
  Speaker 1: It was given by a man called Richard Purdy. He
• 13:40
  Speaker 1: was a member of the Four Minute Men, and they
• 13:42
  Speaker 1: were called Four Minute Men because they'd go between the
• 13:45
  Speaker 1: reels being shifted in cinemas and give little four-minute speeches,
• 13:49
  Speaker 1: spiels about why you should buy liberty loans. And I'll
• 13:53
  Speaker 1: read up what Purdy said in this one because it's
• 13:55
  Speaker 1: quite interesting. In the great third Liberty Loan drive, just
• 14:00
  Speaker 1: one statement seems necessary before an American audience. It is
• 14:05
  Speaker 1: simply a question now of the survival of autocracy or democracy. Wow.
• 14:11
  Speaker 3: So he's got this is William McAdoo, who's a Treasury secretary.
• 14:16
  Speaker 3: So by 1917, he's got Congress on board. He's got
• 14:20
  Speaker 3: the bankers on board. He's got a propaganda campaign up
• 14:24
  Speaker 3: and running. But how does he think he can actually
• 14:27
  Speaker 3: market those bonds, ship those bonds, and actually pave the wall?
• 14:31
  Speaker 1: They even got celebrities involved in the silent campaign. Because
• 14:33
  Speaker 1: you need to kind of harness that fame. And again,
• 14:36
  Speaker 1: it's something we see very much in the present day
• 14:38
  Speaker 1: as well, that fame matters.
• 14:40
  Speaker 2: And people like Charlie Chaplin were involved, weren't they?
• 14:42
  Speaker 1: Yeah, Charlie Chaplin, Douglas Fairbanks, Mary Pickford, lots of the
• 14:45
  Speaker 1: biggest movie stars of the era.
• 14:47
  Speaker 3: It's a bit like getting a combination of Rihanna and...
• 14:51
  Speaker 3: you know, Tom Cruise and everyone else mixed up together
• 14:54
  Speaker 3: and trying to flog treasuries.
• 14:56
  Speaker 1: Yes, exactly. Well, maybe that's what they should be trying
• 14:58
  Speaker 1: to do. That's what Besson should be doing. There's a
• 14:59
  Speaker 1: little film you can see of Charlie Chaplin, moustacheless, playing
• 15:04
  Speaker 1: a fake orchestra in front of the crowd in DC.
• 15:07
  Speaker 5: Wow.
• 15:09
  Speaker 1: He was heavily involved. He gave a speech. There's a
• 15:12
  Speaker 1: great speech actually that he gave in New York with
• 15:16
  Speaker 1: Fairbanks and Pickford. I'll read out a little bit part
• 15:19
  Speaker 1: of it here because it's so good. So he's shouting
• 15:21
  Speaker 1: at a crowd of thousands of people gathered outside the
• 15:24
  Speaker 1: sub-treasury building down on Wall Street. You people out there,
• 15:28
  Speaker 1: I want you to forget all about the percentages in
• 15:31
  Speaker 1: this third liberty loan because it was done in parts.
• 15:35
  Speaker 1: Human life is at stake and no one ought to
• 15:37
  Speaker 1: worry about what rate of interest the bonds are going
• 15:39
  Speaker 1: to bring on or what he can make by purchasing them.
• 15:42
  Speaker 1: Money is needed. Money to support the great arms and
• 15:45
  Speaker 1: navy of Uncle Sam. This very minute, the Germans occupy
• 15:48
  Speaker 1: a position of advantage. and we have to get the dollars.
• 15:53
  Speaker 1: It ought to go over so we can drive that
• 15:55
  Speaker 1: old devil, the Kaiser, out of France.
• 15:57
  Speaker 3: So essentially what they're saying is this is a moment.
• 16:00
  Speaker 2: Of shared sacrifice.
• 16:02
  Speaker 3: We all need to pull together and we all need
• 16:04
  Speaker 3: to basically show that we're willing to do our own
• 16:08
  Speaker 3: little bit for the war effort. Not so much about
• 16:12
  Speaker 3: digging potatoes for peace, but rather digging into our wallets
• 16:16
  Speaker 3: and our pockets to actually try and fund this together collectively.
• 16:19
  Speaker 3: But we did have, didn't we, a film by Charlie
• 16:21
  Speaker 3: Chaplin called The Bond.
• 16:23
  Speaker 1: Yes, obviously my favourite film of all time.
• 16:25
  Speaker 3: It's not quite like James Bond, that'd be a bit
• 16:27
  Speaker 3: more sexy. But anyway, so tell us about The Bond film,
• 16:29
  Speaker 3: the other Bond film.
• 16:30
  Speaker 1: You know, James Bond was named James Bond because Fleming
• 16:33
  Speaker 1: thought it was the most boring name he'd ever heard of.
• 16:36
  Speaker 2: Right, so no one's going to spot a spy called Bond.
• 16:39
  Speaker 1: I should have words with Ian Fleming about that. Yes, no,
• 16:42
  Speaker 1: he financed this three-part reel called The Bond, and it
• 16:46
  Speaker 1: goes through essentially different types of bonds. So he talks
• 16:51
  Speaker 1: about the bonds of matrimony and the bonds of friendship.
• 16:55
  Speaker 1: But the greatest, in Charlie Chaplin's retelling, is the war bond,
• 17:00
  Speaker 1: essentially the liberty bond. You can see it. He's hammering
• 17:04
  Speaker 1: a Kaiser down. with a massive mallet, a fake mallet
• 17:09
  Speaker 1: called Liberty Bonds. It's not very subtle, but it is
• 17:13
  Speaker 1: pretty striking. But, you know, this was a completely new medium.
• 17:17
  Speaker 1: This was like TikTok for the early 20th century. And
• 17:21
  Speaker 1: it became a huge national unifying endeavor in America. The
• 17:26
  Speaker 1: 19th century had just been an incredible amount of immigration
• 17:30
  Speaker 1: from around the world. So we're talking about a really...
• 17:32
  Speaker 1: just a uniquely polyglot country in the history of the world.
• 17:36
  Speaker 1: And I'd say the Liberty Loan Program, in many respects,
• 17:40
  Speaker 1: became kind of glue that brought lots of groups together.
• 17:42
  Speaker 1: People would compete, like Polish Americans would compete against Italian Americans.
• 17:47
  Speaker 1: Who could subscribe the most? Who could be drafted the
• 17:50
  Speaker 1: most as well? Who would go fight? So it just
• 17:52
  Speaker 1: became this thing that you signal your fealty and your
• 17:55
  Speaker 1: loyalty to your new country by how much you signed
• 17:59
  Speaker 1: up for, how much you Liberty Loan marches you went on.
• 18:01
  Speaker 1: They got Boy Scouts and Girl Scouts to go around
• 18:05
  Speaker 1: and sell bonds door to door.
• 18:06
  Speaker 2: Instead of Girl Scout cookies.
• 18:07
  Speaker 1: Yeah, exactly. Not cookies, bonds. And they got priests to
• 18:11
  Speaker 1: give sermons about this. They just got everybody involved. Women
• 18:15
  Speaker 1: and black Americans were very implicitly, and in some cases explicitly,
• 18:19
  Speaker 1: told that by joining in and participating in these liberty
• 18:23
  Speaker 1: loan programs, they could basically show how loyal they were
• 18:29
  Speaker 1: to America. And this would manifest itself in the right
• 18:32
  Speaker 1: to vote for women after the war and greater civil
• 18:36
  Speaker 1: rights for black Americans.
• 18:39
  Speaker 3: It sounds like a brilliant piece of social engineering. And remember,
• 18:42
  Speaker 3: all of this was done in an era before we
• 18:44
  Speaker 3: had email or Instagram or Twitter or TikTok to actually
• 18:49
  Speaker 3: reinforce this kind of campaign. I'm curious, because they didn't
• 18:52
  Speaker 3: have social media in those days, how did they get
• 18:54
  Speaker 3: the message out apart from using silent movies with Charlie Chaplin?
• 18:59
  Speaker 1: Radios, cinema was a big thing. Newspapers, leaflets, people like
• 19:05
  Speaker 1: I said, Boy Scouts and Girl Scouts would be handing
• 19:07
  Speaker 1: out leaflets. At one point, they even used a captured
• 19:09
  Speaker 1: German submarine. They turned it into a Bond-selling booth in
• 19:13
  Speaker 1: Central Park called You Buy a Bond.
• 19:17
  Speaker 2: Well, that's pretty memorable. How the hell did they get
• 19:19
  Speaker 2: that submarine actually into Central Park?
• 19:21
  Speaker 1: I was thinking the same thing. I think if they
• 19:22
  Speaker 1: managed to capture it, they must be able to transport
• 19:24
  Speaker 1: it there.
• 19:25
  Speaker 3: Wow, wow.
• 19:25
  Speaker 2: Well, that's pretty... Pretty astonishing.
• 19:27
  Speaker 3: I'm sure lots of people would have flocked to it
• 19:29
  Speaker 3: just to actually see the darn thing.
• 19:30
  Speaker 5: No, exactly.
• 19:30
  Speaker 1: I mean, it would have been a spectacle.
• 19:32
  Speaker 3: And, of course, submarines in those days were pretty newfangled.
• 19:35
  Speaker 3: I mean, people would have been pretty blown away.
• 19:36
  Speaker 1: Yeah, that's like super hot technology. And it's fascinating. I
• 19:39
  Speaker 1: think they use that. They use fascination. And, you know,
• 19:44
  Speaker 1: there were some people that thought that the boring tactics
• 19:47
  Speaker 1: or the the kind of the almost virgin intimidation so
• 19:50
  Speaker 1: it got quite nasty at times i mean the people
• 19:53
  Speaker 1: were getting lynched if there were dollar slackers people that
• 19:56
  Speaker 1: didn't subscribe to liberty loan were known as dollar slackers
• 19:59
  Speaker 1: there was like some female clerks grounded took took one
• 20:03
  Speaker 1: uh one of their colleagues another female clerk who wasn't
• 20:06
  Speaker 1: subscribing in ohio and they wrapped her up in an
• 20:09
  Speaker 1: American flag and dragged her to the bank and forced
• 20:12
  Speaker 1: her to take out her money to buy a liberty loan.
• 20:15
  Speaker 1: So even in America, this was a future president, said Harding,
• 20:20
  Speaker 1: that said that this is going too far.
• 20:23
  Speaker 2: Taking too far, yeah.
• 20:24
  Speaker 1: They call it Prussianized tactics. But it was a genuinely
• 20:28
  Speaker 1: popular unifying campaign on the whole.
• 20:30
  Speaker 3: So we have this extraordinary situation where America is discovering
• 20:34
  Speaker 3: the joys of propaganda of creating a bond market infrastructure
• 20:40
  Speaker 3: and then trying to go out and flog it to
• 20:42
  Speaker 3: the public like never before the bad news is that
• 20:45
  Speaker 3: it created some nasty mob crowd psychology at times the
• 20:48
  Speaker 3: good news is that it got america to get really
• 20:51
  Speaker 3: excited about bonds for arguably the first time in history
• 20:55
  Speaker 3: but the big question is did this actually raise any
• 20:59
  Speaker 3: money in addition to raising all that attention we'll come
• 21:03
  Speaker 3: back to that after the.
• 21:04
  Speaker 5: Break Investors today are most worried about three key factors,
• 21:16
  Speaker 5: interest rates, the corporate credit cycle and the impact of
• 21:18
  Speaker 5: artificial intelligence. Artificial intelligence is impacting the jobs market and
• 21:23
  Speaker 5: corporate margins. Interest rates are of concern because people are
• 21:26
  Speaker 5: wondering when will the Fed start to raise or lower
• 21:29
  Speaker 5: interest rates again. And finally, the corporate credit cycle. If
• 21:32
  Speaker 5: the economy is to weaken, what does that mean for
• 21:35
  Speaker 5: the ability of corporate credit to hold up? We are
• 21:38
  Speaker 5: thinking about the next generation and constantly adapting our portfolios
• 21:42
  Speaker 5: to meet their needs.
• 21:49
  Speaker 2: So we're back.
• 21:50
  Speaker 3: And we're looking at one of the weirdest phases in
• 21:53
  Speaker 3: bond market history, which is the world mania that swept
• 21:56
  Speaker 3: through America in 1917 around selling treasury bonds to finance
• 22:01
  Speaker 3: America's entry into World War I. And we just described
• 22:05
  Speaker 3: some of the crazy marketing tactics that were rolled out then,
• 22:09
  Speaker 3: not around social media or the Internet like today, but
• 22:12
  Speaker 3: around silent movies and other group events.
• 22:16
  Speaker 2: But the crucial question, though, is, Robin, is did it
• 22:18
  Speaker 2: actually work? Did it raise money?
• 22:21
  Speaker 1: It was astonishingly successful. There were five Liberty Loan programs
• 22:25
  Speaker 1: in total, stretching out into 1920, the reconstructing and demobilization,
• 22:30
  Speaker 1: which was also very expensive. It raised over $ 21 billion
• 22:34
  Speaker 1: at the time, which, you know, again, sounds like chump change.
• 22:37
  Speaker 3: And that's a lot more than they planned to raise,
• 22:38
  Speaker 3: wasn't it? Because they wanted to raise $ 4 billion or
• 22:40
  Speaker 3: $ 5 billion originally.
• 22:41
  Speaker 1: Yes, exactly. Well, they pumped money to the Allies as well,
• 22:44
  Speaker 1: because it took time to build the military from scratch.
• 22:46
  Speaker 1: So until American soldiers could actually land... In France, they
• 22:51
  Speaker 1: essentially sent money and material to the Allies, the French
• 22:54
  Speaker 1: and the Brits. In many ways, they kind of sent
• 22:57
  Speaker 1: dollars to fight the war before they could send American soldiers.
• 22:59
  Speaker 1: $ 8 billion they sent to the Allies directly in loans
• 23:03
  Speaker 1: and grants and material. $ 21 billion in total. That's $ 9
• 23:08
  Speaker 1: trillion today. So the equivalent, if you look at the
• 23:10
  Speaker 1: size of the US economy then and now, it would
• 23:12
  Speaker 1: be the equivalent of Scott Besant. selling $ 9 trillion worth
• 23:16
  Speaker 1: of bonds.
• 23:16
  Speaker 3: And it's worth just remembering that the total U.S. borrowing
• 23:19
  Speaker 3: today is $ 40 trillion. But of course, Scott Besson, the U.S.
• 23:22
  Speaker 3: Treasury Secretary, does indeed have to sell or refinance $ 10
• 23:25
  Speaker 3: trillion over the next year. So that's equivalent to what
• 23:28
  Speaker 3: the whole program did back then. But I guess the
• 23:31
  Speaker 3: question is, having raised all this money, Did it enable
• 23:35
  Speaker 3: America and the Allies to actually win the war?
• 23:37
  Speaker 2: Was it a success in military terms?
• 23:39
  Speaker 1: Yes, clearly so. Like I said, those dollars were substitutes
• 23:43
  Speaker 1: for what American soldiers begin with. But soon enough, American
• 23:46
  Speaker 1: soldiers did arrive on the shores of France. And the
• 23:50
  Speaker 1: tide was very decisively turned. But when America entered the war,
• 23:54
  Speaker 1: it was only a matter of time, really, until Germany
• 23:56
  Speaker 1: would be defeated. Tens, ultimately hundreds of thousands of American
• 23:59
  Speaker 1: soldiers led by General Pershing. And, you know, Germany was
• 24:04
  Speaker 1: doomed to lose at that point.
• 24:05
  Speaker 2: So that's all going well then.
• 24:07
  Speaker 3: But what does that mean in terms of the people
• 24:09
  Speaker 3: who actually bought the bonds back in the U.S.? Because
• 24:12
  Speaker 3: it's one thing to have the primary issuance where you
• 24:14
  Speaker 3: sell bonds to willing subscribers. But was there a secondary
• 24:18
  Speaker 3: market for those as well?
• 24:19
  Speaker 1: Well, yes, there was, because these were bonds that were
• 24:21
  Speaker 1: listed on the New York Stock Exchange. New York Stock Exchange, ironically,
• 24:25
  Speaker 1: started most as a bond trading venue. And, you know,
• 24:28
  Speaker 1: quite often people would sign up for a loan, buy
• 24:31
  Speaker 1: a chunk of a Liberty loan, and then actually you
• 24:33
  Speaker 1: kind of needed cash. Or maybe they'd use this collateral
• 24:36
  Speaker 1: for a loan or something. So it would get sold.
• 24:39
  Speaker 1: It would get traded quite actively on the New York
• 24:42
  Speaker 1: Stock Exchange and elsewhere. And that would... all things being equal,
• 24:46
  Speaker 1: as more and more bonds were being sold, 21.4 billion
• 24:49
  Speaker 1: in total, eventually economic forces, as you and I know,
• 24:54
  Speaker 1: they eventually play in and the prices started sagging. And
• 25:00
  Speaker 1: McAdoo hated this. He tried to brand anybody selling a
• 25:04
  Speaker 1: liberty loan as German selling, basically implying that they were
• 25:07
  Speaker 1: sabotaging the war effort. In practice, I think some people
• 25:11
  Speaker 1: just had overinvested. A lot of people had borrowed to
• 25:14
  Speaker 1: invest in liberty loans, and eventually they'd have to sell.
• 25:17
  Speaker 1: Even a young artillery captain called Harry Truman, when he
• 25:21
  Speaker 1: returned from France, had to sell his liberty loans to
• 25:25
  Speaker 1: basically pay for a suit, his first suit when he
• 25:28
  Speaker 1: came back from the war. And he could only sell it,
• 25:31
  Speaker 1: I think, 80 cents on the dollar. So he got
• 25:33
  Speaker 1: far less than what he paid. And he recounted this
• 25:36
  Speaker 1: story rather grouchly to the Federal Reserve Board many years
• 25:40
  Speaker 1: later when he was the president of the United States.
• 25:42
  Speaker 3: So on one level, that's bad news for the Treasury Secretary,
• 25:46
  Speaker 3: the idea that prices of the bonds are falling. The
• 25:49
  Speaker 3: other hand, though, you could also say that it's a
• 25:51
  Speaker 3: sign that you're creating a market that's liquid and tradable
• 25:54
  Speaker 3: and building infrastructure for the bond market in the future.
• 25:57
  Speaker 3: And what's very clear is that we know that wars
• 26:00
  Speaker 3: so often spark wild innovation.
• 26:03
  Speaker 2: Necessity is the mother of invention.
• 26:05
  Speaker 3: We're seeing that in Ukraine, which is a conflict I
• 26:07
  Speaker 3: know well. But people don't often think about the financial
• 26:10
  Speaker 3: innovation that gets spurred by wars as well. And this
• 26:14
  Speaker 3: is a classic example where you actually have a liquid
• 26:16
  Speaker 3: bond market.
• 26:17
  Speaker 1: Yeah. And this was something that kind of almost realized
• 26:20
  Speaker 1: Alexander Hamilton's vision centuries earlier. So Alexander Hamilton had talked
• 26:24
  Speaker 1: about how he wanted to create, in his poetic phrasing,
• 26:28
  Speaker 1: public credit immortal, like a permanent government bond market. In practice,
• 26:35
  Speaker 1: the US kept like borrowing for it to finance a
• 26:37
  Speaker 1: big war, a big project like the Panama Canal, and
• 26:39
  Speaker 1: then paying it down again. this marked the birth of
• 26:43
  Speaker 1: the permanent treasury market. And ever since then, it has
• 26:47
  Speaker 1: occasionally gone down, but it's mostly grown since then. And
• 26:50
  Speaker 1: as much as, you know, debt is a, a, a
• 26:53
  Speaker 1: dirty word in many cases, it is also an essential
• 26:56
  Speaker 1: cog in the machinery of global finance, as you and
• 26:58
  Speaker 1: I know. And, and, you know, the war, World War
• 27:02
  Speaker 1: I was kind of the genesis for this. The Federal
• 27:04
  Speaker 1: Reserve played a hugely important role, uh, the repurchase market
• 27:09
  Speaker 1: was born in World War I. So the whole repo market,
• 27:12
  Speaker 1: which now is kind of like the oil that keeps
• 27:15
  Speaker 1: the machinery of finance going, that was actually just a
• 27:18
  Speaker 1: bit of a fudge. That was the way that the
• 27:21
  Speaker 1: Fed would lend money to banks so they could lend
• 27:23
  Speaker 1: money to people to buy Liberty Loans. So like you say,
• 27:28
  Speaker 1: war is the mother of all invention. And some of
• 27:31
  Speaker 1: those inventions are purely accidental, but they are still with
• 27:34
  Speaker 1: us today.
• 27:35
  Speaker 3: And I'm curious, so World War I created the channel
• 27:38
  Speaker 3: for primary issuance of loans or bonds on a massive scale.
• 27:41
  Speaker 3: It then created the framework for secondary market trading and
• 27:46
  Speaker 3: associated products like repos. But what happened to those Liberty
• 27:50
  Speaker 3: Bonds in the end? I mean, were they mostly short-term loans,
• 27:54
  Speaker 3: long-term loans? And how did the population react to the
• 27:58
  Speaker 3: sight of the prices of those falling?
• 28:00
  Speaker 1: Yes, they did not react well. I think people would
• 28:03
  Speaker 1: be quite happy to accept below-market interest rates. These were
• 28:07
  Speaker 1: very cheap loans. The interest rates on them were very low.
• 28:10
  Speaker 1: And that's why you had to kind of mobilize patriotic
• 28:14
  Speaker 1: feather and get people excited about it. But they didn't
• 28:17
  Speaker 1: like the prices falling. Like Harry Truman, that felt somehow wrong,
• 28:23
  Speaker 1: that they were lending money to the government and they
• 28:24
  Speaker 1: did get less back. There were quite long-term loans. There
• 28:28
  Speaker 1: was inflation after the war. And this actually became quite
• 28:31
  Speaker 1: a politically... touchy subject it really hurt the democrats in
• 28:36
  Speaker 1: the election after world war one but what was genuinely
• 28:39
  Speaker 1: unifying movement spurred by the liberty loan program kind of
• 28:44
  Speaker 1: dissolved you know it was the red scare as well
• 28:47
  Speaker 1: um the russian revolution has caused stood fear of bolshevik
• 28:52
  Speaker 1: infiltration in the united states uh women did get the
• 28:55
  Speaker 1: vote in america after the war but black Americans were
• 29:00
  Speaker 1: still largely disenfranchised. There was no sort of improvement. Many
• 29:04
  Speaker 1: other minority groups did not quite see maybe the implicit
• 29:08
  Speaker 1: promises of greater integration and participation. They would not really realize.
• 29:13
  Speaker 2: So, But just to be clear, the U.S. government didn't
• 29:16
  Speaker 2: default on those bonds.
• 29:17
  Speaker 1: No, no, no, no. It never defaulted. It paid back
• 29:18
  Speaker 1: all those loans. It took many years, but no, no,
• 29:21
  Speaker 1: they never defaulted.
• 29:21
  Speaker 3: So if you hung on to them, you'd get your
• 29:23
  Speaker 3: money back with a below-market interest rate.
• 29:25
  Speaker 2: It was more than if you tried to sell it
• 29:27
  Speaker 2: in the secondary market.
• 29:28
  Speaker 1: Yeah, he crystallized it. When he came back from France,
• 29:31
  Speaker 1: a lot of people were selling their liberty loan because
• 29:33
  Speaker 1: there was a new big one, the big fifth one,
• 29:35
  Speaker 1: I think was the largest one. So it was just
• 29:37
  Speaker 1: bad timing. He crystallized the market. mark-to-market loss, essentially.
• 29:41
  Speaker 3: Well, one that we all know from the bond market
• 29:43
  Speaker 3: is when everyone wants to sell, that's a very worst
• 29:45
  Speaker 3: moment to try and sell.
• 29:47
  Speaker 2: But I'm curious.
• 29:47
  Speaker 3: So what actually happened to the architect of this whole
• 29:50
  Speaker 3: innovative program, William McAdoo?
• 29:53
  Speaker 1: Well, he went back into business.
• 29:56
  Speaker 2: What, running tram lines again?
• 29:57
  Speaker 1: No, he founded United Artists with Charlie Chaplin. Wow.
• 30:01
  Speaker 3: So all that experience of making that movie, The Bond,
• 30:04
  Speaker 3: that silent movie with Charlie Chaplin, piqued his interest and
• 30:07
  Speaker 3: he reinvented himself.
• 30:08
  Speaker 2: What, as a Hollywood mogul?
• 30:10
  Speaker 1: Basically, yes. I mean, it was the first big talent
• 30:12
  Speaker 1: agency that's still around today. Charlie Chaplin, Douglas Fairbanks, Mary Pickford,
• 30:17
  Speaker 1: other celebrities were involved. But he then, because he was
• 30:20
  Speaker 1: the rising star in the Democratic Party at the time,
• 30:23
  Speaker 1: he tried to make a tilt for president. He was
• 30:26
  Speaker 1: very big in the Southern Democrat Party bit of it, which,
• 30:31
  Speaker 1: you know, had, even for the time, fairly retrograde racial views.
• 30:36
  Speaker 1: He ran for president twice. He got defeated in very
• 30:40
  Speaker 1: late ballots at the convention. He got endorsed by the
• 30:44
  Speaker 1: Ku Klux Klan. He was not a Klansman, but he
• 30:48
  Speaker 1: did not disavow them either because he wanted that Southern
• 30:50
  Speaker 1: Democrat support. And in the last one, I think it
• 30:53
  Speaker 1: was at the 34th ballot. He was finally defeated at
• 30:57
  Speaker 1: the Democratic Convention. And this was when a comedian made
• 31:00
  Speaker 1: that famous gag that I belong to no organized political party.
• 31:04
  Speaker 1: I'm a Democrat because he was such a shambles, essentially.
• 31:07
  Speaker 1: So he he was a politician of great promise. But yes,
• 31:12
  Speaker 1: his political career ended like so many others in tears
• 31:15
  Speaker 1: and failure.
• 31:16
  Speaker 3: And so you go from being a stiff shirted person
• 31:19
  Speaker 3: in Washington to being a cool politician. media mogul in
• 31:23
  Speaker 3: Los Angeles with dark glass and all that by the pool?
• 31:25
  Speaker 1: He wrote his memoirs, triumphing about all his successes and
• 31:30
  Speaker 1: downplaying his failures. But he basically died, if not unknown,
• 31:36
  Speaker 1: then relatively unremarked. American politics had moved on quite from him.
• 31:42
  Speaker 2: Politics is a very cruel game, the media movie business.
• 31:45
  Speaker 2: But I'm curious. So he raises all this money through
• 31:48
  Speaker 2: this extraordinary.
• 31:50
  Speaker 3: liberty bonds campaign liberty loads campaign it sounds like it
• 31:55
  Speaker 3: certainly succeeded its aim of trying to raise money for
• 31:58
  Speaker 3: the war effort because they did go forth and win
• 32:00
  Speaker 3: the war but when you look back at it now
• 32:04
  Speaker 3: almost a century later would you have deemed it a rip-roaring.
• 32:08
  Speaker 1: Success Well, yes, on its main objectives. It was launched
• 32:12
  Speaker 1: to transform the fabric of American finance and the American
• 32:16
  Speaker 1: investing classes were to raise money to fight the biggest
• 32:20
  Speaker 1: war the world has ever seen, the Great War. And
• 32:24
  Speaker 1: by any measure, it was an incredible success. The sums
• 32:28
  Speaker 1: are just astonishing. I think it was a very important
• 32:31
  Speaker 1: moment in the history of America and probably underappreciated.
• 32:34
  Speaker 3: This is what I find fascinating as someone who trained
• 32:36
  Speaker 3: as an anthropologist, which is that You know, one of
• 32:39
  Speaker 3: the things that really defines America today is this obsession
• 32:43
  Speaker 3: with financial.
• 32:43
  Speaker 2: Markets and investing. And it's really quite subtly different from
• 32:47
  Speaker 2: other countries I've lived in, like Japan or the UK.
• 32:51
  Speaker 3: You know, being an investor is part of being, for
• 32:53
  Speaker 3: many people, an American, up there with apple pie, motherhood,
• 32:57
  Speaker 3: hot dogs and baseball. And I'm curious, do you think
• 33:01
  Speaker 3: that was a moment culturally, this time during the Liberty Bonds,
• 33:06
  Speaker 3: when that concept of investing being an all-American activity really
• 33:10
  Speaker 3: got laid down?
• 33:11
  Speaker 1: I think so, because even before the Liberty Loan Program,
• 33:15
  Speaker 1: you could see that kind of almost unique American animal spirits.
• 33:21
  Speaker 1: The booms are bigger, the busts are bigger, everything's bigger,
• 33:23
  Speaker 1: the food portions are bigger in the US. But this
• 33:27
  Speaker 1: is really when you can see the fabric of American
• 33:30
  Speaker 1: investing culture getting woven, essentially. At the beginning of the war,
• 33:36
  Speaker 1: there were only around 300,000 people that held bonds and
• 33:39
  Speaker 1: almost nobody held stocks. By the end of the war,
• 33:41
  Speaker 1: a third of the country, 34 million Americans, had invested
• 33:46
  Speaker 1: in the Liberty Loan. And obviously far more had ingested
• 33:50
  Speaker 1: just financial knowledge about what a bond was, what a
• 33:53
  Speaker 1: stock was as well for comparison. So you can even
• 33:56
  Speaker 1: see people have studied for generations afterwards counties that have
• 34:01
  Speaker 1: greater Liberty Loan participation rates. invested in far greater alacrity
• 34:08
  Speaker 1: later on in stocks and bonds. So it kind of
• 34:10
  Speaker 1: really seeded that investing culture. So economic historians have studied this,
• 34:16
  Speaker 1: and it was shown that Americans would have probably invested,
• 34:18
  Speaker 1: even as late as the 1960s, probably have held 20%,
• 34:22
  Speaker 1: 30% less stocks and bonds than they would have given
• 34:27
  Speaker 1: what we can see in the patterns after the Liberty
• 34:29
  Speaker 1: Loan Program.
• 34:29
  Speaker 2: That's truly fascinating. So the idea of investing really got.
• 34:34
  Speaker 3: entrenched in the mainstream out there with milkshakes and hot
• 34:37
  Speaker 3: dogs and everything else. But I'm curious because today, most
• 34:41
  Speaker 3: Americans regard bonds as being pretty darn boring. It's kind
• 34:45
  Speaker 3: of what you do if you can't think of anything
• 34:46
  Speaker 3: else to do with your money. And of course, equities
• 34:49
  Speaker 3: is where people like to put their funds, particularly if
• 34:52
  Speaker 3: they're being a bit risque, never mind about Bitcoin. But
• 34:55
  Speaker 3: I'm curious, you know, in those days, did people just
• 34:59
  Speaker 3: focus on bonds?
• 35:00
  Speaker 2: Was it a natural progression?
• 35:01
  Speaker 3: Was that the gateway drug to get them into equities
• 35:04
  Speaker 3: later on? Or how did those two things dovetail?
• 35:07
  Speaker 1: Yes, it was. I mean, you could almost say, you know,
• 35:10
  Speaker 1: because there was obviously a huge stock market boom in
• 35:12
  Speaker 1: the 1920s. You could almost say that the Liberty Loan
• 35:15
  Speaker 1: Program primed the American public to invest in general. And
• 35:20
  Speaker 1: that really saw, manifested itself in that the roaring 20s
• 35:25
  Speaker 1: and the stock market boom then. And again, it ebbed
• 35:29
  Speaker 1: off in the Great Depression as well afterwards. And after that,
• 35:31
  Speaker 1: Americans had to kind of re-fall in love with equities.
• 35:35
  Speaker 1: But basically, that is the moment from whence everything else flows,
• 35:39
  Speaker 1: I think, the Liberty Loan Program. That's when you can
• 35:42
  Speaker 1: see both stock and bond investing rates, you know, they
• 35:45
  Speaker 1: ebb and flow. But broadly speaking, they've been pointing upwards
• 35:49
  Speaker 1: ever since in America.
• 35:50
  Speaker 3: It brings me to another key question I'm really interested in,
• 35:52
  Speaker 3: which is that today we have another Treasury Secretary, Scott Besant,
• 35:57
  Speaker 3: who desperately needs to flog a lot more bonds. There's
• 36:00
  Speaker 3: $ 40 trillion outstanding. He has to roll over and raise
• 36:05
  Speaker 3: about $ 10 trillion of that. He's trying to shorten the
• 36:07
  Speaker 3: maturities by selling a lot more short-term bonds instead of
• 36:10
  Speaker 3: long-term bonds. But his challenge is not only are countries
• 36:14
  Speaker 3: like China beginning to shy away, but a lot of
• 36:17
  Speaker 3: the owners of bonds today are hedge funds overseas that
• 36:21
  Speaker 3: tend to be very fickle and flighty. So we've got
• 36:24
  Speaker 3: voices once again saying, maybe it's time to tap into
• 36:28
  Speaker 3: that patriotic, all-American zeal, either on the part of pension
• 36:33
  Speaker 3: funds or banks or even major individual retail investors. Do
• 36:37
  Speaker 3: you think Besant needs to take a leaf out of
• 36:40
  Speaker 3: McAdoo's book and try some kind of propaganda advertising campaign again?
• 36:46
  Speaker 3: Because there was discussion of that a few years ago,
• 36:48
  Speaker 3: but it's not really been launched to any significant degree,
• 36:52
  Speaker 3: has it?
• 36:53
  Speaker 1: No, it's true. And I bet he would find the
• 36:56
  Speaker 1: story inspirational, except, you know, you need a big war,
• 37:00
  Speaker 1: not like a war against Iran. You need something that
• 37:03
  Speaker 1: really basically gets the country unified and pointing in one direction.
• 37:07
  Speaker 1: And wars are terrible, but they do get different countries.
• 37:10
  Speaker 2: The Iran war is so controversial, you couldn't do a
• 37:12
  Speaker 2: round the Iran war for sure. Exactly.
• 37:13
  Speaker 1: So you can't say, oh, buy treasuries to support our
• 37:16
  Speaker 1: war in Iran. That just wouldn't work.
• 37:18
  Speaker 3: And you couldn't even say buy treasuries to support our
• 37:20
  Speaker 3: battle against climate change because.
• 37:22
  Speaker 2: No.
• 37:22
  Speaker 3: Half the country doesn't agree. I mean, the question is,
• 37:24
  Speaker 3: is there anything right now America could rally around other
• 37:26
  Speaker 3: than staving off bankruptcy, which is not a great marketing pitch?
• 37:29
  Speaker 1: No, no, it isn't. And I suspect what he'd do
• 37:31
  Speaker 1: is kind of a regulatory equivalent of the Liberty Loan Programme,
• 37:35
  Speaker 1: where essentially you say that it is important for the
• 37:38
  Speaker 1: nation's banks and pension plans and insurance companies to rally
• 37:42
  Speaker 1: around America and make America great again. And you kind
• 37:45
  Speaker 1: of do a lighter, kind of a Liberty Loan light version.
• 37:50
  Speaker 1: And essentially... use the levers of regulatory power and say that, well,
• 37:53
  Speaker 1: you just have to hold more treasuries. Financial repression, as
• 37:57
  Speaker 1: economists call it.
• 37:58
  Speaker 2: Absolutely.
• 37:58
  Speaker 3: Well, financial repression is a term that economists use when
• 38:00
  Speaker 3: essentially you're forcing people to buy or encouraging people to
• 38:03
  Speaker 3: buy bonds at essentially negative real interest rates, even slightly negative,
• 38:09
  Speaker 3: which if they hold it for many years, the power
• 38:11
  Speaker 3: of compounding means the government can essentially pay down its debt.
• 38:14
  Speaker 3: That's how the government's got out of it in.
• 38:16
  Speaker 1: The US and UK. That's how they did it in
• 38:17
  Speaker 1: World War II, for example, where the Fed... just basically
• 38:20
  Speaker 1: pinned yield. They did yield control, as we call it,
• 38:23
  Speaker 1: when the Bank of Japan did it. But they basically
• 38:25
  Speaker 1: just made sure that interest rates across the entire US
• 38:28
  Speaker 1: government bond market were below the rates of inflation.
• 38:31
  Speaker 3: Right. Which is essentially what did happen with the Liberty
• 38:35
  Speaker 3: Loans in this time round. But it's not something which
• 38:37
  Speaker 3: is well known. And trying to have a sort of
• 38:40
  Speaker 3: call to arms around financial repression is not something that's
• 38:44
  Speaker 3: going to go well on TikTok or Truth Social or
• 38:47
  Speaker 3: anything else, is it?
• 38:48
  Speaker 1: No, financial repression just doesn't sound cool on a poster,
• 38:51
  Speaker 1: does it? I can't see Boy Scouts and Girl Scouts
• 38:54
  Speaker 1: going around selling cookies and financial repression to the households
• 38:57
  Speaker 1: of America.
• 38:57
  Speaker 2: Well, it sounds a bit kinky, doesn't it? Not one
• 39:01
  Speaker 2: for the Boy Scouts. But I'm kind of curious. I mean,
• 39:03
  Speaker 2: is there anything that.
• 39:04
  Speaker 3: A treasury secretary in America or elsewhere can learn from
• 39:08
  Speaker 3: this remarkable Liberty Loans campaign for today?
• 39:12
  Speaker 1: Well, one of the things that has stuck with me
• 39:15
  Speaker 1: ever since researching this for my book, A Fabulous Debt,
• 39:18
  Speaker 1: is how this also wasn't just a start of American
• 39:22
  Speaker 1: culture of investing, but the uniquely almost American culture of
• 39:25
  Speaker 1: investing as an expression of identity. That you invest in
• 39:28
  Speaker 1: liberty bonds to show the you were true blue american
• 39:31
  Speaker 1: whether you were polish american italian american black american woman
• 39:35
  Speaker 1: whatever this was a sign of of allegiance and identity
• 39:39
  Speaker 1: and we can see this even today that american congressmen
• 39:42
  Speaker 1: people have studied the investment portfolios of congressmen and congresspeople
• 39:46
  Speaker 1: and have shown that what they invest in actually broadly
• 39:50
  Speaker 1: fits their political views as well. I think we all
• 39:54
  Speaker 1: are in danger of this, that obviously our cultural reviews
• 39:59
  Speaker 1: will affect whether we buy big oil or an ESG-friendly
• 40:03
  Speaker 1: stock and things like that, but Americans do it more,
• 40:05
  Speaker 1: that investing is an expression of identity. That, I think,
• 40:09
  Speaker 1: maybe is something that the current US government could and
• 40:13
  Speaker 1: maybe will eventually try to tap into a little bit.
• 40:16
  Speaker 3: Right.
• 40:17
  Speaker 2: That's fascinating.
• 40:18
  Speaker 3: I mean, if nothing else, it shows that the story
• 40:20
  Speaker 3: of money is not just about numbers and balance sheets
• 40:23
  Speaker 3: and equations and algorithms. It's also about culture and identity and, frankly,
• 40:28
  Speaker 3: who we think we are as human beings and societies.
• 40:31
  Speaker 3: It's also about the story of unintended consequences and how
• 40:35
  Speaker 3: war can be an astonishing spur for innovation and invention.
• 40:40
  Speaker 1: Yes.
• 40:40
  Speaker 2: So thank you, Robin.
• 40:42
  Speaker 3: I'm not sure you quite convinced me to be as
• 40:44
  Speaker 3: obsessed with Liberty Loans as you are. I hope we
• 40:47
  Speaker 3: do find a certificate eventually to put up somewhere in
• 40:49
  Speaker 3: your house, maybe the loo or the toilet for our
• 40:52
  Speaker 3: non-British friends.
• 40:53
  Speaker 2: But in the meantime, thank you for educating us. It's
• 40:56
  Speaker 2: truly fascinating.
• 40:57
  Speaker 3: And that's it for us for this week's episode of
• 41:00
  Speaker 3: The Story of Money. If you liked the episode, please
• 41:03
  Speaker 3: do make sure to subscribe and review the show and
• 41:06
  Speaker 3: comment underneath, however rude, We would love to hear your
• 41:10
  Speaker 3: views on Liberty Bonds and much else.
• 41:11
  Speaker 2: And we do read your comments. So thank you. I'm
• 41:15
  Speaker 2: Gillian Tedd.
• 41:16
  Speaker 1: Just don't be rude about Liberty Loans because that will
• 41:19
  Speaker 1: hurt me a lot. We can't be friends then. And
• 41:21
  Speaker 1: I'm Robin Wigglesworth, of course. And this is the story
• 41:23
  Speaker 1: of money.
• 41:24
  Speaker 2: We'll see you again next week.