Tuesday, August 9, 2011
Bond of the Month, August 2011 - USA Postal Savings
From 1911 to 1967, the Post Office of the United States (not to be confused with the current USPS, which is a quasi-private entity, complete with a "dot-com" address), sold certificates of deposit that payed 2% annual interest and were backed by the faith and credit of the United States government. As you can see, they are similar to US Savings Bonds, in that they have an individual's name on them, a denomination, the issuing location, and the date they were issued (non-negotiable, non-transferable). The USA is not the only country to do this; the idea began in Britain and is also very popular to this day in Japan.
The purpose they served was to give people with small amounts of money - or people who lived in rural areas - an opportunity to safely save money without needing access to a private bank account (keep in mind, 1911 was many years before the FDIC, so private banks were not widely trusted, especially small-town and rural banks). It was both safer and more profitable than putting green-backs under the mattress, without requiring the capital needed to buy a $10,000 Treasury bond.
There was a main depository in each state, though they could be bought or cashed at any branch, so far as I know. It was also a cheap way to finance the government debt. In my opinion, it was an excellent system, but it fell out of favor due to the FDIC, which gave private banks the same government guarantee of safety that Postal Savings enjoyed.
I plan to write more about these later, and how they might tie in with a reinstatement of Glas-Steagel, the re-nationalization of the Postal Service, the US Treasury market, and other issues. For now, just look at the nice pictures! :)