Show when frederick the great was broke how in Finance cei it drought progress Pro grens in invent ineat origin of lerat mortgage by S W STRAUS bw york ud ad mingo duller bad er copyright 1917 western newspaper union in all the years that intervened since tho the mortgage was waa first used in ancient babylon lla bylon practically but ono one change has been made lit in mortgage financing that change was made by it a prussian I 1 frederick the grent great who founded prussian militarism aavo the first mortgage bond its start while the world holds much this rhan man tor for sowing the seeds or 0 the present wor world id conflict co wo we must give him credit for his astuteness lit in recognizing the lid vantages of first mortgage bonds here Is how it happened in frederick after ills his seven year war with hungary france russia sia and saxony found himself and ana ills his country in financial embarrassment indeed previous to tho the war the cluan caal system had find proven inadequate for even yen ordinary needs and tho the strain caused by the seven years of fighting mado made tile situation extremely serious german agricultural conditions in par yoular wera vera deplorable insufficient funds and outrageous interest rates on tho ilia part of money lenders greatly final bum the proper tilling of the soil frederick realized that the future of germany was tit nt stake and that further progress with existing conditions ws wits impossible in the necessity a berlin merchant by the latue of Buhr illg conceived the idea of mortgaging the agricultural domain mortgages of course were nothing new having been originated by the babylonians moro more than two thousand years previous but mortgage financing to this extent hall had never bettne been practicable because of the impossibility of oe finding investors able or willing to absorb mortgages of such buch gigantic size buhring said why not divid 9 the mortgages into arne lional parts and call these parts bonds then if tho the bonds tire are issued in comparatively small denominations largo large numbers of investors will participate and lit in addition tho ilia bonds themselves can be used in ili payment of data during the emergency in lieu of ca jl it frederick was va fa rubly i with ath the suggestion ilo ile ordered stint the nobility morti mortgage age their property ao the financial stringency might be ba relieved whether of H n borrowing turn or not tile the owners of great landed estates were compelled to organize an all association which they called the Land schaft land society in silesia in 1770 it was a co operative zatle tho the individual members guaranteeing an the obligations of the ho body and mortgages made the security for or debenture bonds the experiment was a gr great c at suc success other states of what Is now the german empire followed the lend lead of prussia sla thus ans as started the famous of germany applied at first to only the property of 0 the nobility the alio idea was ns made available later to tho the peasants today tile alio in fit improved and modified form are the basis of slin flar societies in almost every civi ilzel country on the globe in france the credit and its subsidiaries enjoy practically it a monopoly in land russia Ilus sla italy Roun iania austria hungary ireland japan carl adit egypt till ind other countries have illar societies these societies not only finnice the alie agriculturist but also city buildings and even een irrigation projects an ali important feature which aich wits was to the plan shortly after its inauguration augurn augu ration tion was vas amortization of the principal this means to kill olt off and provides for the payment each year icar 0 of an amount which alch Is used to reduce the loan tile tho size of tills this payment lie de ponds upon tho the length of the mortgage for it Is intended eventually to extinguish aguish tho the debt tho the interest rate la 19 quite low find and the horror and interest payments usually will not agg aggregate more than the usual interest rate alone lit in this country I 1 notwithstanding their moderate return to rn the bonds are very ery popular with investors lit in europe L drope and billions billion s of dollars in them are outstanding tit at tile tho present fmc time foreclosures Fore closures ures tire almost negligible so safe Is tills this form of investment that in critical times the land credit lias has been more inore stable than that of the state in ili 1808 1809 prussia called upon tile east prussian land sc haften tell to raise part of its ita military y funds by tin nn issue of mortgages on its forests mid and doin domain aln and here Is a peculiar fact while tile tho rest of the world orld has long ngo ago discarded the straight mortgage as being obsolete all and cumbersome cumbe isomo the united states began to realize tile the advantage of mortgage bond ls idues sus only about 20 years ago rn in a subsequent article I 1 shall de scribe the ilia introduction or of mortgage bonds tit in america |