722 AGRICULTURAL ECONOMICS 



expenditures would have to be met out of the farmer's capital, which 

 must ultimately increase his mortgage indebtedness. 



The writer is not of the opinion that the average mortgage 

 indebtedness of the American farmer is excessive. In a country so 

 rich agriculturally, a mortgage debt of $2,793,000,000 is no cause for 

 alarm; and in general, an increase of the agricultural indebtedness 

 of a country is usually a sign of prosperity. But it is a sign of pros- 

 perity only if the increase of land values on which the additional 

 mortgage debt is based has been caused, not by speculation or by an 

 abnormal rise in the prices of products, but by an actual increase in 

 the volume of production. It is essential not only to the welfare of 

 society in general but also to the security of the farmer himself that 

 any increase in the returns from agriculture shall have resulted mainly 

 from an increase of production rather than from high prices. 



As to personal indebtedness, there has been no general investiga- 

 tion into the situation of the Ajnerican farmer. Holmes estimates 

 it as follows: chattel mortgages, $700,000,000; liens on crops other 

 than cotton, $450,000,000; cotton crop liens, $390,000,000; unsecured 

 debts, to local merchants, $250,000,000, and other unsecured debts, 

 $410,000,000. With regard to its source personal credit may be 

 classified as: (a) merchant's credit, including store credit, dealer's 

 credit and factor's credit; (b) bank credit. 



The practice among storekeepers of selling to farmers goods to 

 be paid for after the harvest is almost as universal as agriculture 

 itself. It is less prevalent in regions of diversified farming, where the 

 farmer, from the sale of eggs, poultry, milk, etc., has a weekly income 

 available for ordinary household expenses. There exists, however, in 

 the South, a far more important form of store credit. The local 

 merchant not only gives credit for the ordinary family supplies, but 

 in reality finances the growing crop contracting to make a definite 

 loan to be taken in commodities. A bank, however, often lends the 

 merchant the money for buying the supplies to be advanced to the 

 farmer. As an inevitable result of the expense and risk of granting 

 this form of store credit, its cost is high, and the system undoubtedly 

 lends itself to grave abuses. With the development of economic 

 sense, it is declining; but without such credit independent farming 

 would have been impossible for a large part of the southern farmers. 



The substitution of expensive machinery for labor is a marked 

 characteristic of American agriculture, and a large part of this machin- 

 ery is supplied on credit by the manufacturer, who takes the dealer's 



