FARM CREDIT AND THE RATE OF INTEREST 181 



rowed. What is needed is an institution which will lend money 

 at reasonable rates and provide for a flexible system of partial 

 payments. 



Neither the local money lender nor the agent of the insurance 

 company provides farmers with a means of investing their sav- 

 ings. The young farmer who saves but a few hundred dollars 

 each year cannot hope to lend this money on a mortgage, 

 because those who wish to borrow money to invest in land 

 generally desire a larger sum at one time. Hence the farmer 

 finds the country bank with its low rate of interest about the 

 only chance for investing his savings during the years he is 

 trying to accumulate enough capital to enable him to invest in 

 land. When the time has come for him to make an invest- 

 ment by paying half of the value of a piece of land from the 

 savings of many years, he is embarrassed by the fact that while 

 he has been able to get no more than four per cent for the use 

 of his money, he must pay six per cent for the money which he 

 wishes to borrow. This should certainly be enough to convince 

 the farmer that something is wrong. The important question 

 is, Can anything be done to remedy this condition of affairs ? 



Something has been done in other countries, and something 

 is being done in this country to give the farmer a better credit 

 system. More than a hundred years ago institutions were 

 established in Germany for the purpose of lending money to 

 the farmers at a low rate of interest ; and the years have proved 

 the wisdom of this course of action. The most important 

 institutions for making loans to farmers, in Germany, are the 

 district cooperative credit associations (Landschaften), which 

 are public or semipublic institutions for the purpose of lending 

 money on mortgages. These are organizations of landowners, 

 who by combining their resources into an unlimited company 

 are able to borrow money at a very low rate, — at a rate com- 

 parable to that for which the government can float its bonds. 

 As the institution is not intended for profit, the loans are made 

 to landowners at a rate just enough higher than that paid by 

 the institution to cover the costs of carrying on the business. 

 Money is lent on mortgages to the farmers and in order to 



