It requires courage and a rare kind of optimism to locate a silver lining in the foreign exchange cloud which now hangs over the universe. The present state of affairs is the inevitable reflex of abnormal trade conditions created by the world war. Five years of continuous destruction in Europe, without production but for destructive purposes: five years of continuous buying in this country without any selling of any importance to this country to offset it, have caused Europe to present the most unfavorable trade balance the world has ever known, and have made America produce without limit; sell to Europe without limit, take in billions of dollars, and starve her own people for all kinds of necessities of life, the consequences of which we find in the extreme cost of living.

Debts between nations have to be settled in gold, goods or securities. We own today nearly all the gold the world possesses: the situation therefore is one which hinges almost completely on goods and securities, and Europe has very little goods: Therefore, until production in Europe reassumes large proportions, she can practically only pay us in securities. If she cannot sell us securities, she will have to borrow from us dollars: if she cannot do this, she must either buy dollars and drive up the price of dollars or to put it differently, sell her own money for what it will fetch, or, she must stop purchasing.

The above reasons and the impossibility to put some of them into practical effect, have made the banks in our country decide to put a stop to Europe's unlimited purchases, and to America's continuous endeavors to sell to Europe, by refusing to continue discounting paper drawn on European importers.

Foreign bills today are only taken for collection. As a result, the exporter suddenly

finds that in shipping goods abroad he is practically confined to a cash basis, namely, either cash here, or cash abroad upon delivery, which is another way of saying, that the foreign exchange market now bears the entire burden of export financing, apart from having already to meet the maturity of sixty and ninety day bills put out two and three months ago before credit conditions became so acute. The far reaching bearing this will have on the export business, and probably, as a consequence, on a reduction of the cost of living deserve the greatest attention.

Cumulative Factors in Exchange Collapse

As stated before, the exchange market at present has to bear the entire burden of the export-financing both the present and that of two and three months ago. Add to this the fact that manufacturers and exporters who held large credit balances in European centers have for some time frantically endeavored to get dollars for a portion of their credit balances, thus suffering very large losses in exchange; that Europeans, desiring to minimize taxation, have purchased dollars in the European capitals; that the maturity of ninety and sixty day sight bills in European centers has forced the foreign importer to buy dollars, thus further depreciating the value of foreign currency; that speculators have made continuous and severe bear attacks on the market; that great difficulties are being experienced with regard to forward sales now due; and that last, but not least, there has developed, as is usually the case under similar circumstances, a decided stagnation in purchasing power, or rather, in purchasing ambition, and one can begin to form an opinion of what is going on.

In order to come to the practical analysis

of a problem of such an unprecedented importance and magnitude, let us first of all see what the crisis in exchange really means. For $1.00 we can buy today about:

14 French francs, against 5.18 normally; 171⁄2 Lire, against 5.18 normally;

14 Belgian francs, against 5.18 normally; £1 sterling cost $3.40, against $4.86 normally;

1 Swedish kroner costs 19 cents, against 26.87 normally;

1 Norwegian kroner costs 17.50 cents, against 26.87 normally;

A Danish kroner costs 15, against 26.87 normally;

not to speak of German Marks, which can now be bought for about one cent instead of 24 cents, and Austrian crowns which are worth about 1⁄2 cent instead of 20 cents.

What does that all mean? Among other things it means this: If you have debts to settle in Europe or mortgages or loans to pay off, or remittances to make to poor relatives, you can do this on the following basis as compared with prewar conditions:

A debt of 1,000 marks, formerly equal to say $240, can today be settled for $10; a debt of 1,000 Austrian crowns, formerly equal to say $200, can today be paid off for $5; 1,000 francs, formerly equal to $193, can at present be settled for $70, etc., etc.

Consequences of Exchange Break

The advantages to us are obvious; the disadvantages to European creditors which are being paid off in currency which has lost the greater part of its purchasing power, not less obvious. But it also means that European nations owning any American securities or any goods ready for sale to the U. S. A, can sell these over here at as high a premium as the exchange is against them. For instance: A German owning a $1,000 bond worth par in America, previous to the war used to realize about 4,100 marks: today he receives 100,000 marks. The Austrian would get 200,000 crowns against formerly 5,000 crowns. The Frenchman about 15,000 francs instead of 5,180 francs. The Britisher 275 pounds aga..st 205 pounds. The advantages to the Europeans are obvious: the incentive for them to produce and to work-I underlineunprecedented.

But it also means this: If a Belgian merchant has to buy $100,000 worth of material in this country, he has to pay now 1,400,000 francs, whereas normally he would only have to pay 518,000 francs. The Frenchman must pay 1,450,000 francs, and for the Italian the situation is even worse: $100,000 costs him

today more than 1,850,000 lire instead of 518,000 lire normally. Germany must pay 10,000,000 marks where normally 400,000 marks was sufficient; and Austria has to find more than 20,000,000 crowns instead of 500,000 crowns before the war.

Consequently, the foreigners to get our goods, are paying enormous premiums which they naturally cannot afford to pay, and which do not do us any good. If maintained the inevitable consequences will be that. (a) they will buy from us only such goods as they cannot buy anywhere else, and only as much as they absolutely require; (b) they will not buy from us any more American securities, but will sell us whatever American securities they have left.

Effect on American Exports and Industry

All this becomes a matter of very serious consideration for our industries, importers and exporters, bankers and investment houses, all of which have been preparing for a tremendous after-war expansion of foreign trade, and many of whom in connection with the above have been issuing securities for the enlargement of plants, or have been receiving large credits from banks for similar purposes. The question now arises: "What are going to do about it?" Are we going to allow a situation like the above to continue, a situation which might seriously interfere with our industrial and commercial development, a situation which might lead to complications and disturbances such as the world has never known?

we

It may be asked: "What can we do to help?" My reply is, and has always been ever since America began to wake up to the fact that there was "something rotten in the State," and in this I have been borne out by the leading authorities on finance in this country":

Bringing Exchange Back to Normal There are five specific means to stop this continuous drop of foreign exchange and to bring it back to normal:

A-Shipment of gold from abroad.
B-Shipment of goods from abroad.
C-Extension of dollar credits.
D-Limitation of exports to a minimum of
absolute necessities.

E-Purchase of foreign securities.

The first shipment of gold-is impossible; Europe has not enough gold! The secondshipment of goods-is as yet a slow process, although it will readjust itself gradually, and no doubt much more quickly than we all expect. The third-extension of dollar credits

is practicable but should not be done on any large scale as it is and will remain a banking proposition pure and simple, and will only clog up our banking facilities, and can never reach the heart of those whom it should reach the American investors. The fourthlimitation of strongly enough.

exports-cannot be urged

But the fifth-the purchase of foreign securities-is the most logical and best means of all. Why? Because we are facing a situation which affects our country, our commerce and industry, and our domestic investments, and which consequently is a matter of immediate national importance, and one that requires everybody's attention at this very minute, for patriotic and business reasons.

Purchase of Foreign Securities

The investor will naturally ask: "What securities shall I buy?" And to him I would reply: To start with tax free Government and Municipal securities, of France, Belgium, England and Italy!

And he will ask again: "Why?"

And the reply would be: A-because you can buy a safe security, issued in francs, pounds, and lire, at prices upon which by reason of the exchange situation, you can eventually make a profit of from 35 per cent. to over 300 per cent. on your investment. Bbecause former panics and former wars have invariably been followed by higher prices and prosperity, coupled with higher industrial, economic and intellectual development. C— because for business, social and patriotic reasons you should help to relieve the present situation. D-because by purchasing foreign securities you are helping your allies and best customers, not by charity, but in a businesslike and concrete manner. E-because by buying foreign securities you are helping toward the improvement of foreign exchanges, which will mean a profit to you on your foreign investments and a profit on your domestic investments; because through helping the foreign exchange situation to readjust itself, you will eventually help the development of your own domestic industry and com

merce.

And last but not least: Because trade follows the flag of investment, and because we want foreign trade, the greatest blessing ever given to any country, as a means to international development, broadening of mind and education in foreign affairs, with its inevitable profitable consequence.

How Problem Will be Solved Having outlined the specific means to stop

this continuous drop of foreign exchange, I would like to visualize what the future will bring us, and how this exchange problem will eventually be solved: for it will be solved!

Let us for a moment look at what has happened. We have had the greatest war the world has ever known; we have spent more money for destructive purposes than the world has ever had: we have just "printed it." America has been selling to Europe at the rate of several billions per annum, thereby depriving her own markets for home consumption and driving up her prices sky high. Labor has become dissatisfied-wants more money, less work. Europe has been purchasing here for cash and for credit, all we could possibly produce and at any price, thereby upsetting her home markets and her cost of living.

The inevitable result has been: inflation and dissatisfaction. What is the quintessence of it all?. The sum and substance is: we have all sinned for five long years against the elementary principles of economics; we have all been--let me state it boldly-drunk, and it is high time to sober up; we require prohibition in economics. And we'll get it. We are all coming to our some sooner, some later. We'll get back to normal. Not because we talk about it, or because we'll have economic debates but because the inevitable laws of demand and supply, and the inevitable and proven principles of political economy, will bring back to normal what was abnormal.

senses:

A Look into the Future

The foreign exchange crisis is forcing us to reduce our exports to what is of absolute vital necessity for the immediate European requirements, just as well as it is forcing Europe to stop importing but what she cannot possibly do without. Six months from now the figures of the all-around export reduction will startle the world, and will make the greatest pessimist rub his eyes and throw up his arms in the air, with amazement.

With it will come the inevitable gradual collapse of the cost of living, caused through economic aberration, and laid low through economic sanity. Furthermore the foreign exchange crisis for us will be the greatest incentive to buy European goods as well as securities, just as well as for Europe it will be the greatest incentive to sell us goods and securities, and to go to work and produce at any cost.

Three months from now this entire continent will be buying European securities. One year from now and the exports of goods from Europe will surprise the world: One year from now we will all marvel at Europe's

Executor

Trustee

Establishment of the Cincinnati
Foundation

By virtue of formal resolutions recently accepted by the board of directors of the Union Savings Bank and Trust Company of Cincinnati, Ohio, the Cincinnati Foundation has been established in that city. Announcement of the purposes and plans of the Foundation were made by President Charles A. Hinsch just prior to his leaving for California. The plan of organization is practically the same as that of the Cleveland Foundation as originally devised by President F. H. Goff of the Cleveland Trust Company and since that time incorporated in similar community trusts or foundations created in upward of over thirty leading cities of the country. Under the agreement and trust form of the Cincinnati foundation the Union Savings Bank and Trust Company of that city will function as trustee in receiving gifts, bequests and funds as well as their conservation for charitable, welfare and educational purposes. The management I will be in the hands of a board of five trustees, two of them appointed by the trust company, namely, Edward Senior and B. W. Campbell. The other trustees are to be appointed by the mayor of Cincinnati, the

judge of the Probate court and the judge of the United States district court of Cincinnati. Power of inspection is given to the attorney general and the city solicitor in addition to rendering careful audits and reports.

The Cincinnati foundation will start actual work under most promising auspices. In the will of the late Jacob Godfrey Schmidlapp, chairman of the Union Savings Bank and Trust Company, who died recently and devised the residue of his estate estimated at $1,000,000 to the trust

company, provision was made for the transfer of all the property, real and personal, of the trust to a charitable corporation. Mr. Schmidlapp doubtless had in mind the probof able early formation the Cincinnati Foundation in giving his trustee, the Union Savings Bank and Trust Co. power to exercise discretion in using the residue of his estate as a nucleus for a fund such as contemplated by the foundation. Prior to his death Mr. Schmidlapp had expressed an earnest interest in the development of community foundations or trusts as a plan which was in line with the broad and generous spirit with which he had advanced welfare and charitable work in Cincinnati.