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Birth of a MarketThe U.S. Treasury Securities Market from the Great War to the Great Depression$
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Kenneth D. Garbade

Print publication date: 2012

Print ISBN-13: 9780262016377

Published to MIT Press Scholarship Online: August 2013

DOI: 10.7551/mitpress/9780262016377.001.0001

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Paying down the War Debt

Paying down the War Debt

(p.160) (p.161) 12 Paying down the War Debt
Birth of a Market

Kenneth D. Garbade

The MIT Press

This chapter examines how the Treasury reduced wartime debt. Andrew Mellon, Secretary of the Treasury, and his colleagues first addressed the problem of refinancing the postwar overhang of short-term debt and then put in place the program of regular tax date financings that became the backbone of Treasury debt operations in the 1920s. Between mid-1923 and early 1927, they whittled down the Third Liberty bonds as sinking fund appropriations became available, but when tax receipts exploded in early 1927, they had the mental agility to make a midcourse correction, switching their attention to the Second Liberty bonds and calling those bonds for early redemption. They also made use of intermediate-term securities in the second half of the decade, three times offering 5-year notes callable in three years.

Keywords:   Treasury debts, sinking fund, foreign debt payments, budget surplus, Victory notes, Liberty bonds, short-term debt, debt reduction

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