Evening star., 1920-02-08
WORLD REBUILDING WILL AID
FOREIGN EXCHANGE SITUATION
Bache Review Points Out Conditions In
u. S. Which May Be Remedied More
Easily With Help of Legislation.

Lastly WITH i lie
In commenting on the general busi-
ness conditions Of the country, the
Bache Review says the most serious
situation is that with regard to the
foreign exchanges, but this is re-
suit Of economic law and cannot
slow workings of forces to rebuild
the world. assisted by the conserva-
tive cooperation Of the banking unit
But there are conditions in our
country. the Review points out. which
may be remedied by less heroic
tion which could be put through
promptly.
Liberty Bonds Depreciate.
Perhaps the most acute of these
situations. and one whose influences
are widespread and deleterious, is
that relating to liberty bonds.
Through a mistaken idea, in the
beginning of crowding our liberty
bonds into a war market at too low
were. nevertheless. placed success
fully. due to the patriotism of the
American public. But these bonds
now. In low-rate competition with
worldwide demand for capital, it is
claimed, have sunk steadily. until
on-the-hundred loss to the devoted
people who subscribed for them, with
pospects Of sinking still lower.
Twenty millions of people are esti-
mated to have participated in these
subscriptions. the vast majority of
them having never before invested in
securities. and the effect of the loss
on the rank and file of this great
body of individuals is most discour-
aging.
Large numbers of these people
have sold or are selling their bonds
and are spending the proceeds. for
getting that it represents not in
come. but principal A great extrav-
agance has thus resulted.
another bad effect. says the Re-
view. which has followed the unusual
CHANCES in the investment market of
. low government bond rate is the
loading up of banking institutions
obligations, thus reducing reserves
and cramping banking facilities.
Means Of Relief Suggested.
In offering a relief for the credit
situation the Review says:
The national banks own govern
ment obligations to the extent Of over
1880. 100000. The state banks prob
ably hold as many more. and, accord
ing to their last statement. the fed
eral reserve bank was carrying gov
ernment bonds to the amount of
3s29.000.000. This makes a total of
these government obligations carried
in the federal reserve bank and in
the national and state banks of more
than $500. 100000.
This same statement shows that
the member banks have discounted
with the federal reserve bank. Sc
cured by government obligations,
around $1,000. .000. 900.
The whole situation would be re-
lieved II government bond with an
attractive rate Of interest were sub
stituted for the low-rate liberty
bonds. Investors here and all over
the world would be attracted by
them as the most profitable. highest
class form OF security.
This could be accomplished by leg
islation authorizing the refunding of
all the liberty and victory bonds
Except perhaps the 3h per cent tax
exempC into one issue maturing.
say. in 100 years. and at q higher
rate Of interest say per cent for
gradual reduction Of the rate at
stated periods.
Bonds would then be taken out Of
the banks by private investors. re-
ducing bank loans and federal loans.
who are now getting rid
duced to hold them tenaciously in
view of the attractive rates, advanc-
ing prices and the favorable future
prospects Of these bonds.
"The credit situation would be i'm
and effectively relieved
WoBla Eaeourage Tariff
The whole country would be turn
ed by this one operation toward thrift,
and the 10000. 900 patriotic subscrib-
ers to the bonds would be converted
from extravagant spenders or irri-
tated investors into satisfied and con-
tented holders.
There is no doubt that this fall in
government bonds against the sub
scribers of war times has produced
a restless and condemnatory spirit
against the government. This Is nat
ural. and should be cured as soon as
possible.
Congress and the Treasury have
given no attention to this matter. Not
a bill has been proposed looking
toward such . contamination. IL is
q matter which should receive the
immediate attention OF Congress and
the Treasury Department"
Dun Reviews Conditions.
In it's weekly digest OF business
conditions Dun's Review says: u,.,
severe storms and cold aggravating
an already congested transportation
situation, have not been the only
forces operating against business
progress. More potent and far-reach-
Ing in its influence than any tempo
rary handicap OF weather conditions
has been the unparalleled deprecia-
tion Of European exchange, continu-
ing for months almost without inter-
ruption and assuming state where
international commerce Is seriously
impeded. While certain reports OF
the effects OF the collapse of ex-
change seem to have been overdrawn.
ket on the cufrencies Of leading for
eien nations present formidable OBJ
stacles to the maintenance OF large
merchandise shipments and have a
highly important bearing on the fu-
ture Of business and prices. A not
Illogical result Of the financial move
ments OF the week. which have in
rates, has been more sharply de-
fined policy Of conservatism and eau
ton in various mercantile and in
dustrial channels and a disposition
to proceed more slowly in making
forward commitments. Such tenden-
cies as these. appearing at q time
when the economic and political out
look Is obscure and commodity prices
remain on an unnatural and unwhole-
some basis, are Of a reassuring char
acter. and a lessening of extrava-
gance among consumers whose earn
ing capacity has risen greatly would
operate to bring about more healthy
must ultimately follow 10 scarcely to
be doubted: and a comprehensive list
of wholesale quotations this week,
for the second consecutive week, dis