1 82 AGRICULTURAL ECONOMICS 



raise the money for such loans, the institution is permitted by 

 public authority to issue mortgage bonds to the value of the 

 mortgages it holds. As all the members of the association are 

 jointly and severally liable to the full value of their lands, the 

 bonds are considered excellent investments, and are floated at 

 a low rate of interest. 



When the money has been lent to a farmer by one of these 

 institutions and a mortgage given to secure the loan, it is the 

 regular thing to collect a small amount as a partial payment 

 each year until the whole amount is paid. If, for example, 

 the rate of interest charged by the institution is four per cent, 

 five per cent will be collected each year. Four per cent is 

 interest and the one per cent is a partial payment which ac- 

 cumulates with interest until at the end of a little over forty 

 years sufficient has been paid in to cancel the debt. It is also 

 possible for the more thrifty farmers to make other payments 

 which shorten the period required for canceling the debt. In 

 some cases, these additional partial payments must be paid 

 in mortgage bonds, which can be bought at the market price. 



These mortgage bonds make a safe and ready means of 

 investing the farmers' savings. In them the farmer finds a 

 safe investment which is as permanent as he may desire to have 

 it, and at the same time an investment on which he can realize 

 at any time in case he decides to invest in land. The German 

 form of the institution may not exactly meet our needs, but it 

 is certainly true that the principle of association is especially 

 desirable in any system of land credit. 



Not only do such institutions make it possible for the young 

 farmers to invest their savings until they are ready to buy, and 

 then to borrow money to finish paying for the land, but they 

 make it more desirable for the retiring farmers to sell their land, 

 as they can invest in bonds which are as safe as the investment 

 in land and pay practically the same returns. Thus it is that 

 a good credit system is the best means of keeping the tenant 

 problem from becoming acute. 



The safety of these institutions is insured by the fact that 

 they are district associations. Each institution operates only 



