184 AGRICULTURAL ECONOMICS 



loan on an amortization plan by means of a fixed number of 

 annual or semiannual installments sufficient to cover, first, 

 a charge on the loan, at a rate not to exceed the interest rate in 

 the last series of farm loan bonds issued by the land bank 

 making the loan ; second, a charge for administration and profits 

 at a rate not exceeding one per centum per annum on the unpaid 

 principal, said two rates combined constituting the interest 

 rate on the mortgage ; and, third, such amounts to be applied 

 on the principal as will extinguish the debt within an agreed 

 period, not less than five years nor more than forty years: 

 Provided, that after five years from the date upon which a loan 

 is made additional payments in sums of $25 or any multiple 

 thereof for the reduction of the principal, or the payment of the 

 entire principal, may be made on any regular installment date 

 under the rules and regulations of the Federal Farm Loan 

 Board. . . . No loan on mortgage shall be made under this 

 Act at a rate of interest exceeding six per centum per annum, 

 exclusive of amortization payments." 



The effect of a good credit system is to encourage landowner- 

 ship on the part of farmers. Much has been said of the in- 

 spiration which ownership of land gives to the farmer which 

 leads to better farming and better citizenship. Much might 

 be said of the greater joy of life on the owned farm where the 

 home can be beautified with assurance that the worker may 

 reap the reward of his efforts. 



On the other hand, better credit usually means greater in- 

 debtedness. In a period of rising prices when the value of the 

 farm is rising while the debt is being paid with money which 

 is ever more easily secured, indebtedness has few horrors. But 

 in a period of falling prices when the value of the land falls as 

 rapidly as the debt is paid, and when the dollars are ever harder 

 to get, the joy of ownership becomes entirely overshadowed by 

 the fear of foreclosure. To insure that a credit system shall 

 be a blessing it may be desirable to introduce some plan which 

 will stabilize the purchasing power of the dollar. 



Another bad effect which has been claimed against the credit 

 system which lowers the interest rate is that it increases the 



