There is a reason for World-Wide

Confidence in SMITH BONDS

Every safeguard and provision, our long

experience in the First Mortgage field recommends, is utilized for the benefit of the in

vestor.

Every Smith Bond is secured by a First

Mortgage on improved Real Estate-a First lien on land and building; a first lien in effect on net property earnings, the owner being required to make monthly payments in advance for interests and a portion of the principal.

Every Mortgage that secures a Smith Bond

issue is a first mortgage on property advantageously located, whose valuation, as established by competent and reputable appraisers, is substantially in excess of the first mortgage.

These and many other important factors make SMITH BONDS

Safe

Interest Sure

Income Satisfactory

They yield

61%

export surplus of the past four years has exceeded only slightly that of the four years before the war, and the annual excess in both 1925 and 1926 was less than in 1913. Europe is not now cut off from its export markets. It has recovered the neutral trade which was lost in war-time, and we have lost what we captured of it during war. Despite the post-war recovery in the trade of neutral countries, official figures show that exports from the United States into that competitive field have increased less rapidly in the last four years than in the four years before the war. Except for the higher values, Europe's direct purchases in the United States itself are not much greater than they were before the war. In so far as our present prosperity has been built up at the expense of Europe, it was done between 1914 and 1920, and manifestly on Europe's own urgent initiative.

Economic Changes in Europe

THAT would not necessarily affect the question, whether Europe will be able in the long run to meet the requisitions on its debt to the United States, created by our war-time export surplus of $18,000,000,000, and whether, therefore, the immense advances of capital by America to Europe are secure or not. The answer to that question must evidently depend on the course of events economic and financial in Europe itself. It is in that respect that recent occurrences in Europe's own finance have been most impressive. When the German economic structure crumbled to pieces in 1923, along with the loss of all value by its paper currency, when debts were thereby automatically repudiated and the whole body of thrifty investors in the country ruined, the spectacle appeared to be that of an economic giant in the death-struggle. But what has happened in the subsequent brief period has been Germany's emergence into full economic prestige with a new currency firmly linked to gold; with a gold reserve in the national bank which rose from $110,000,000 in April, 1924, to $460,000,000 in March, 1927; with a public revenue that abundantly covered home expenditure, foreign indebtedness, and reparations payment; with an export trade which, in such a basic commodity as steel, exceeded the exports of any other producing nation.

Whereas, only a year ago, the economic condition of France was commonly described as desperate, and even Paris bankers talked of the franc repeating the disastrous story of the mark, firm and judicious reform of the country's fiscal structure has in less than twelve months brought the Paris market into a position from which it largely dominates the international gold movements of the world. Last midsummer's prophets of hopelessness had forgotten the immense reserve of capital, in that nation of thrifty industrialists, which had sought refuge in foreign markets when the franc was depreciating, but which came rushing home with impetuous haste when the government had got the currency in control. How large an aggregate sum that expatriated capital had reached was unknown even to the committee of experts which outlined the programme of currency reform. But when the Bank of France, fixing and maintaining a settled value for the franc, paid out after last December its own franc notes in exchange for the offers of sterling or guilder or dollar credits by owners of French capital returning from abroad, the resultant claims on foreign markets acquired by

(Financial Situation, continued on page 54)

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(Financial Situation, continued from page 52)

the Bank of France rose to no less than $800,000,000. It was plain that this huge sum, owned by French citizens, had fled France in the period of financial misgiving. What was now happening was that the bank was purchasing and holding for its own use the whole amount of foreign credits from which this home-coming French capital was being withdrawn.

IT was soon discovered that the French bank, acting for the French Treasury, was in position to pay off its obligations to England without buying exchange on London. In default of a ratified settlement of its war-debt to our government, France had been banned by our State Department

from raising loans in the New York The market, whereby a gold credit could be Recovery established to protect the franc in the of France case of French resumption of gold payments. But the bank now proceeded, through use of its own resources and its own power over international finance, to establish at New York, without any borrowing whatever, a gold reserve of $150,000,000. It effected this a month ago, by such largescale financial operations as purchase at London from our Federal Reserve in a single week of $59,000,000 drafts on the New York market, followed in another week by purchase of $40,000,000 actual gold from the American reserve of the federal banks. Not a dollar of this great sum was borrowed from foreign markets; on the contrary, the French Government in May laid down at London $165,000,000 cash to pay off an old war obligation. In advance of a formal settlement of its debt to the United States, it has voluntarily paid $10,000,000 to our Treasury.

This extraordinary transformation, following the complete reversal of Germany's economic condition, suggests what changes may still be ahead of us in the financial rehabilitation of the outside world. It shows the misjudgment which may arise from assuming that the troubles which have beset financial Europe during the past eight years reflected a permanent situation. It is at least a reminder of the unexpected way in which, on other occasions of economic readjustment-as in the period, for instance, of our own financial helplessness of thirty years ago, under what our markets considered a paralyzing debt to Europe-slow-moving economic forces have solved problems which seemed as insoluble as the present relations of the United States and the rest of the financial world.

Baby Bonds

Why not invest that $100 your child has in the savings-bank in a baby bond?

The Investor's Service Bureau will supply you with a list of bonds suitable for such investments.

INVESTOR'S SERVICE BUREAU

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