Liberty Bonds

Liberty Bonds were a war bond sold during World War I to finance the war.  Like all government bonds, Liberty Bonds allowed the government to borrow money from citizens at a low interest rate in order to finance military operations abroad. This sort of borrowing also controls inflation and, perhaps most importantly, gives citizens a way to participate in war operations even if they cannot enlist in the military. 

The campaign posters for Liberty Bonds capitalized on patriotism and the sense of patriotic duty for Americans to participate in this way.

Citizens who cashed their war bonds after 1934, however, had to deal with the problem of inflation and the now-illegal original term of the bond:  Originally, bond holders were supposed to redeem their bond for payment in gold, but that had become illegal a year before. 

Gold Hoarding

In April of 1933, FDR signed Executive Order 6102, otherwise known as "The Roosevelt Gold Confiscation Order," and the entirety of it can be found here.

In times of economic downturn, like our current one, the price of gold rises as a result of increase investment in it because it doesn't lose its value the way that dollars (or other currency) do during times of economic depression.

However, the hoarding of gold (whether in bullion, coin, or certificate), as the Roosevelt Administration saw it, banks potential wealth rather than circulating it, thus, causing further economic depression and stalling economic growth.

After FDR signed Exec Order 6102, individual citizens and corporate businesses holding an excess of $100 of gold coins had four months to exchange their gold for dollars at the rate of $20.67/troy ounce (which is about $350 in 2012).

This order eventually led to the Gold Reserve Act of 1934, which directed all Federal holdings of gold to  the Treasury.