AGRICULTURAL CREDIT. DAVIDSOX. 461 



latter require, or should require, loans for short periods only ; 

 the former needs advances for long periods which, however, and 

 unfortunately, are too long for lending and too short for invest- 

 ment, if such investment were permitted by our banking laws. 

 Generally speaking, capital is not turned over in agriculture in 

 a period much short of a twelvemonth, and should the season 

 prove unfavourable, and the crop fail, credit may be required 

 for still longer periods than a twelvemonth. It is a maxim of 

 good banking and good business that loans should be repaid, 

 after earning a profit for the borrower, out of the property 

 in which the loan has been invested. 



When a bank lends to a merchant, it lends on the security 

 of a stock of finished and marketable commodities, which both 

 merchant and manufacturer have, using their knowledge of 

 market conditions, considered to be marketable, the manufac- 

 turer because he produced these commodities to sell them, and 

 the merchant because he bought to sell. The bank has, therefore, 

 every reason to be confident that the goods on which it lends 

 will, in this case, find a market, provide a profit for the merchant, 

 and a fund from which the loan can be repaid. The manufac- 

 turer has not, other things being equal, quite such a good 

 standing with the banks. The bank has one judgment only 

 guaranteeing that the goods being pro luced will find a market. 

 So far as the raw material is concerned, the bank may confidently 

 advance, because what has foun I a market once will find it 

 again ; but with regard to the commodities into which this raw 

 material is to be converted" the bank has at the best the security 

 only of the manufacturer's judgment that the goods will sell. 

 It is true that the manufacturer has often a better standing 

 than the merchant ; but this advantage arises from the larger 

 amount of capital invested. The small manufacturer has not, 

 as a rule, as good a standing as the merchant using the same 

 amount of capital. The farmer, again, has not as good a standing 

 as fcue manufacturer, for the simple reason that the normal basis 

 of agricultural credit is raw material yet to be produced ; and 

 the bank has the farmer's judgment only that the goods when 



