Show r YS AGRICULTURAL A GRI C UL T URAL EDITS WOULD CUT THE COST OF LIVIN LIVING ador jador Herrick Discusses of Present Bank- Bank r System in Filling Needs ural Life in America AmericaS S SMALL PAYMENT 1 IS LOGICAL S SOLUTION LUTION iI i I How European Nations fe p e Worked Out Problem of lying Hying lying Farmers Credit ed led to Work Property i I MYRON T. T HERRICK I mf ic n Ambassador to FranceE France E IE E Is no more important factor the he social and economic progress ro tho country countr than tho the wise dent dolit dc- dc fent nt lit of its agricultural resources iclal dat Importance of or agriculture lly Iy hr is duo to tho the fact that farm sauces ducos a virile citizenship It Is ve ye to o Independent thinking an anti and l action The stability ot of ural tural life an and the maintenance K position as a great force CormonS' CormonS for Cor imong monS' monS tho the nations of at tho world L tipon our ability constantly to toSi Si tho the quality of our citizenship country is to pla play the part that Id d In the progress of the tho world i for tor us to encourage that lito life and that kind of Industrial mont ment that provides pro the proper mont for a high or order cr of manI manId mand man- man Id I d' womanhood c Importance of or Indicated b by the tho fact that it t of all aU the Industrial workers r United States are aro engaged in Ini ft i which is moro more than three throe kho ho he per cent of or those engaged In pee tho ree-tho tho next most Important Int inI In- In I il t I division division division-as as measured b by tho thoi i or of those who nho make mako It their vo- vo 0 The Increasing prices of oC food food- I ake mke It plain that the number rt now engaged engage In ln agriculture la is laler isi Is i ler er too small amaH unless their ern- ern can be bo materially increased IS S S' NEARLY DOUBLED ie e e last ten years ars tho the averages average price United States of products of or tho the thoas tholas as las Increased 87 Si per cent althe altho al- al the tho increase in the average o price ot of all alt commodities Including Including- agricultural agricultural agricultural agri agri- cultural products product has hns been but 23 per por cent A further material increase o In inthe tho the prices of or foodstuffs would bo be ft 0 serious hardship to a n. vast number of people and would Imperil tho economic I advantage of or tho the country countr The only I sure reme remedy Increasing prices priceR of I foodstuffs is a aver very material augmentation I tion in production To bring about a substantial increase in the tho production of or necessities there must bo be expended etl etla a va vat t amount mount of money mone very money very very much more that tho the farmers can supply from their own resources and an more than the they can obtain from rom existing financial m Ins institutions t 1 tu t I 0 n 5 Farmers need funds for two general purposes First for the purchase of oC property and for tor its permanent Improvement Im un- un provement nt nn and second for operation that Is Is tho the purchase of live lI stock Im Implement Implements Im- Im seeds and fertilizers and the harvesting har of oC These two general general gen gen- cn- cn eral divisions of agricultural capital re requIrements requirements re- re should bo preserved In the nature of tho the loans that are made to secure funds Each Ench of or these two divisions divi slon can and should support its own credit t. t DIS DISADVANTAGE TAGE OF BANK D. SYSTEM sysTEr For tho the purpose of buying lan land and permanently Improving it farmers should be able to make malec mortgage loans that have o a long time to run Money Invested In lan land or permanent improvements improvements improve improve- ments becomes fixed capital and the tho proportion of a farmers farmer's Income that can properly be he attributed to this sort of oC capital is so limited that it I is illogIcal illogical I I cal and unreasonable to expect tho the mono money so In Invested to be r repaid e except after a n considerable period pelio of or years I Our present commercial banking system i In 19 designed lesl ne to serve tho the nce needs 1 of or commerce com corn marco merce and Industry and Is not fitted to tomake tomake tomalee make malee tho the time long-time loans that farmers should be able ablo to secure A commercial bank whose whoso deposits must b be paid out outon outon outon on demand demon must keep its HR assets liquid It Tt Is clear therefore that such an In Institution In In- cannot render any considerable consider able service to farmers by b supplying th thorn m with lon long time funds Tho The principal sources of real reat estate estat loans now open to American n farmers are arc the life Insurance companies local savings savins banks banJo and trust companies and ma I Brokers It is reHab reliably 1 that thirteen of or the larger Insurance com com- antEs T on January 1 t. 1912 had outstanding out out- standing farm loans amounting to toJ J Form loans ore are also made I by individual lenders but tho the total from ill 1111 of ot these sources is rho Tho failure to the deroads of or great reat I numbers of or honest and crumble farmers armel's for mort mortgage a e loans is evidence that I something is wrong on and thit t ii n w fi financial It- It machinery will hn hivo havn to be cre- cre I ted ted for the tho financial retirements of ot farmers formers are Increasing ln more rapid rapidly th r iho fline of 01 any oMu r clas oln Tho only 10 logical anti and pra method meth od for a n farmer to pay a loan Inan secure secured b by his land Is bv hv amortization ln In other words bv hv narth l re regu regu- u- u I made mardo AmOr Amortization I IB II the dominant domi domi- feature e SY SYI systems systems I nant of land theland terns of ot all Europe European n nationS nation TIle The av average aV- aV I length of th loan there Is IR about thirty years oars and anI may run for tor seventy seventy- five years Tho The sum paid bYthe by bytho bytho annual tho the borrower is composed of ot the In- In composed th the pro rate of ot the cost of bustness bust bUBl- ness nells and nn an Installment on the tilo principal pal pall and nna la is called an annuity It remains re rema re- re ma mains ns level with tho same rate to of ot in interest interest interest in- in terest through tho th entire term of the loan but each year ear the actU actual amount of ot Interest decreases so that by tho the end and of the term the debt debt la IR wiped piped out completely I The Tho percentage of capital to bo ho repaid each year under the thC amortization amortization amortization amor amor- depends Upon the term of ot the loan of or course J JA J- J b. b A PRACTICAL I ILLUSTRATION Thus suppose o tt n. loan toan to be tie granted at 6 per percent cent for tor ten years The annuIty annuity annu annu- ity Is la 13 a little littI over 1 13 per pcr cent if tho the term tern be twenty years cars t the e annuIt annuIty annuity annu annu- It ity Is about 87 57 per cent If St tho the term torm b bo bf fifty years tho annuity Is 6 I a HUlo over G. G 33 per cent The longer the term tho the smaller the annuity an an- nult nutty a BO so that in this last case caso the tho ab absolutely absolutely ab- ab payment on the principal becomes Insignificant and hardly distinguishable dis dis- from the interest rate It starts at 34 cents per io tho the first t year and at at atthe the final year ear is 59 99 but tho the annuity of per cent re remains remains remains re- re mains the same me for tor every year of or thet the tho t term figures point tho the wa way to tho the mortgage e correct method for Cor tho the farm business of the United States tes Adopt the amortization system and there thero w will willbe Ii be he few for foreclosures foreclosure's and dispossessions But amortization calls for special Institutions in institutions In- In for Its full ruB pla plaY The They may maybo mayho bo ho either associations of borrowers like the famous or joint stock companies like the land mortgage mort inert gage age banks of or Germany German and amI the Cr Credit Fonder of or France On tho basis of tho the mortgages mortgagee that they hold holtI these associations and companies CS issue and sell soli debenture bonds which have a a. very I wide and steady market By Jy tho the sale of these debentures funds are drawn to agriculture from the tho outside Investment investment invest Invest- ment mont market European land credit in institutions In- In which have havo attracted mone money In abundance to real meal estate owners for over O a century have ha lowered the Interest in interest interest in- in terest rate rato to tIm the present minimum of 3 per cent from froni a maximum of 12 per creating safe late cent This was done b by convenient negotiable securities for forthe forthe the tho savings of all nU sorts sort of people ALSO AISO VOlt Iron OPERATING G. G In Ill addition to funds for tho the purchase of land and an and Its permanent Improvement improvement improve Improve- ment meat f farmers need funds for tor operating their property and for this purpose their personal credit should bo be made available i AS AI In the tho case of ot mortgage e loans loan 1 the facilities in this country for making negotiable the personal credit credito o of farmers CarmelS are aro very cry mat Inadequate equate The personal cre credit lt system stem for Cor short short- time tinie loans such as has has has' become the al almost almost almost al- al most exclusive means of discount and deposit in a agricultural Germany of Germany of which tho the isen en banks arc aro the best known type would type would require but Cr very few tow changes In order to adapt It Ite for r uses e of or farmers armors r in n ninny many n 1 parts t of t tRio united states As tuese agricultural turn tural banks are aro simply operative co-operative so societies so- so tle ci the credit of each cach Is established established upon tho the solidarity of or its mem meni- bers bera This solidarity ma may render rendel the members In l Idu Iv ly liable with or without limit for fOl all the debts of their association according according- to the laws or ortho ortho ortho tho articles of 01 agreement l und under r which It i is formed The tendency IK ii toward unlimited liability for it inspires confidence confidence con con- I and expands tho borrowing power on the combined responsibility r of the adhering members member The Tho loans loam of ot I these co societies arc secured not b by mOlt mortgages ages but by tho the personal obligation of 01 tho the borrowers usually J I g guaranteed cd lJ by two associate members I I Th Tho affairs of a few cv operative co credit I j i I societies have havo been heen wound up but no I failure has ever eyer occasioned loss to depositors de do- I or creditors or n n. burdensome assessment on members Their solidity Is so o widely recognized in Germany German that In panics deposits withdrawn from front other banks have o been offered to these societies AN LX N INHERENT l 1 STRENGTH The Inherent strength of tho op co-op- credit society ocl t Is ls easily understood understood under under- stood upon studying the principles which govern It ft The Tho liability is the only thing about It which Is unlimited All lo loss s is 18 carefully and rigorously limited The Tue territory of its operations is limited No 0 speculative or risk risky in investments investments In- In vestments are arc tolerated The total amount of or loans allowed Is limited Tho rho maximum for or individual loans 1 a is fixed The Flie term of tho the loan Is fixed and usually can run no longer long with renewals rc than from harvest to barvest harI hal bar I i vest st If It not then thon paid Ial by h tho the borrower his guarantors guarantees become liable Tho ThoI money advanced atI can bo ho used onI only for tor fora I a a. productive c purpose and in the way I especially a agreed rec 1 upon and should the tho thoI claim be fought or tho the contract wilfully wilfully wil wil- vil- vil fully violated the tho borrower or Is expelled I from the society and practically practical be becomes becomes becomes be- be comes an outcast Ht in his community No loophole has been left In theory and practice These opera co-opera operative co-operative Uve societies uro are admitted to bo he splendidly adapted to accomplish the object for Cor which the they are arc devised In some provinces of or Germany there is a society within walking distance of every ever farm composed composed com corn posed It ma may be of only a dozen or moro more nel neighbors and having but hut a few tow hundred dollars of assets and throughout through through- hout h- h out tho German empire there Is an nn av av- cra o of one ono ban bank Ie for over every 1600 per per- Hons eons The rho vcr very smallness redounds to its strength I It t permits the farmers to watch atch and encourage each other and prevents Improvident borrowing or the misuse of or a loan Joan These ol CO-ol co operative credit societies have c lowered the rate of interest to 3 or 4 per pr cent coot but cheap monc money is not the only good they do tb Organized arid and managed ed us as Intelligently Intelligent ly as In Germany German operative co-operative o co-o credit societies would place tho the mone money American Amer lean ican farmers make In Sn their own control control control con con- and keep leep It in circulation for tor a ag agricultural agricultural ag- ag purposes Tho The foreign n mortgage loan Jonn societies societies' and com companies pan Ie fin and the tho agricultural credit societies Involve no financial principles that are not familiar In the United States There Is la no reason renson why hY we 0 should not profit by bj the eXP experience of France and Germany German and build up in Sri inthis this country organizations that willI will satisfy tho the financial needs of ot farmers hero as well as tho the organizations In I those countries take care of tho the financial financial finan finan- cial necessities of farmers there |