FARM CREDIT AND THE RATE OF INTEREST 185 



value of the land and in this way makes it necessary for the 

 prospective buyer to pay the same amount of interest and a 

 larger principal. The effect of better credit, in this regard, 

 depends upon the source of the funds. If, for example, the 

 federal farm loan bonds are sold in New York City and the 

 money borrowed by Iowa farmers, the effect might be to force 

 the price of land up. On the other hand, if the bonds were 

 marketed in the same region where the money is borrowed, 

 the effect might be very different. Many farmers in Iowa buy 

 more land than they care to farm because they have no other 

 safe investment available. When federal farm loan bonds can 

 be bought at the country banks in Iowa many farmers who are 

 now paying high prices for land just as a safe investment and 

 many retired farmers who hesitate to sell their farms for lack 

 of a safe investment will prefer bonds to land. The result will 

 be that many of the strongest bidders for land will cease to buy 

 and many holders of land will decide to sell. This will tend to 

 increase the number of farms for sale and decrease the demand 

 from one class of buyers at the time when an increasing number 

 of young farmers are buying because of the better credit system. 

 What the result of these varied forces will be is hard to predict, 

 but where the whole system is handled in a satisfactory manner 

 both landlord and tenant may be benefited by encouraging 

 ownership in place of tenancy. 



Interest is paid for the use of borrowed money. This money 

 may be borrowed to invest in land or equipments, to pay labor, 

 or to buy the necessities of life. In ancient times money was 

 borrowed primarily to buy subsistence. At that time the 

 charging of interest was looked upon as wrong, just as we would 

 look upon it as wrong for a farmer to refuse to lend his ax for 

 half a day free of charge to the son of a poor widow, in order 

 that he may cut some stovewood for his mother. The charging 

 of any interest was once called usury. Now only the charging 

 of an excessive rate is called usury. This change of attitude 

 is due to the fact that in modern life loans are usually made 

 for productive purposes. 



While interest is nominally paid for the use of money, it is 



