compared to the prevailing 2% to 4% peacetime rates. Ten-year notes yielded just 2%. Of course, in 2020, those rates sound downright lofty! And the thought of swapping American dollars for higher-yielding foreign assets seemed ludicrous and likely to lure J. Edgar Hoover's team to stomp down your door. Who bought U.S. bonds, the majority of which were designated in small denominations of $25 or less? American citizens, many from a sense of patriotism as they planted Victory Gardens and saluted posters depicting young soldiers hurling grenades and charging across enemy lines. Employees of the Federal Reserve Board got into the act, too, and competed to see which offices could buy more bonds. In April 1943, New York Fed employees snapped up more than $87,000 worth of bonds and were told that their purchases enabled the Army to buy a 105mm howitzer and a P-51 Mustang fighter plane. The Army sent the New York Fed a letter and photograph, displaying the aircraft with the name “N.Y. Federalist” painted on the side. The plane flew across the English Channel to battle the Luftwaffe over France and Germany. Patriotism aside, many Americans snapped up the bonds from the sheer lack of other good choices. It is easy to forget that until banking deregulation in the 1980s, the federal law called Reg Q prevented banks from
suite for months, and perhaps thinking he was on the front lines at Guadalcanal, actually began washing his socks in a bucket while Walt tried to conduct production meetings. The Department of War harnessed Disney’s talent to produce films with such eye-catching titles as Hookworm , How Disease Travels , and Cleanliness Brings Health . Needless to say, Disney’s typical fans did not race to buy tickets. With 1,500 people on the payroll, the studio soon found itself more than $4 million in debt. While Walt understood the need to sacrifice, occasionally the U.S. government seemed less than grateful. In one notorious example that I document in my book Lasting Lessons from the Corner Office , the U.S. Treasury commandeered Donald Duck to appear in a film warning Americans to pay taxes on time, called The Spirit of ‘43 . (A Scrooge McDuck-like character says, “Aye laddie, it’s your dough, but it’s your war, too.”) Treasury Secretary Henry Morgenthau actually complained to Walt about Donald Duck’s performance. Walt Disney blew up: “I’ve given you Donald Duck... That’s like MGM giving you Clark Gable!” Despite Donald’s apparently flawed acting, tens of millions of Americans saw the film, with a Gallup poll showing that 37% were more willing to pay taxes. The war was financed with a blend of roughly 40% taxes and 60% debt and seigniorage (that is, the profit from minting coins and printing pieces of paper). Buyers of debt received a measly return. The Federal Reserve joined the war effort by intervening in markets to keep one-year paper at 0.375%,
American Consequences
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