INTEREST ON FARM LOANS 73 



PROBLEMS 



i. "The most common complaint is to the effect that farmers have 

 been discriminated against in the rates of interest they have been 

 obliged to pay. While the railroads have been borrowing at from 

 4 to 6 per cent and the industrials at from 5 to 7 per cent, the farmer 

 has been paying on the average around 8 per cent." Can you explain 

 these differences in rates ? Why should the capitalist single out the 

 farmer for discriminatory treatment ? 



2. " Distance from financial centers is a factor affecting interest 

 rates. Data show that the average cost of loans rises as one proceeds 

 outward from the leading financial centers. It is believed that such 

 variations can be considerably lessened, but the remedy appears to lie 

 in institutional rather than individual effort.' ' What does this mean ? 



3. "The interest rate is approximately 50 per cent higher in the 

 newly settled part of the state than in the older part. In other words, 

 the fluidity of capital is so poor as to require an inducement repre- 

 sented by a 50 per cent increase in advantage of movement in order 

 that it may flow to the pioneer sections of the state." Does this 

 appear to be a typical situation ? Suppose the whole country were 

 thus divided into two great sections with rates of 6 and 9 per cent, 

 respectively, and our credit institutions were so improved as to secure 

 a complete fluidity of capital. Would the interest rate fall to a uni- 

 form 6 per cent ? Explain carefully. 



4. It appears that in the foregoing case the farmers of the older 

 section "are using local money, and this money is almost all obtained 

 from private, mostly small, lenders," whereas the money in the newer 

 sections is much of it procured through a trust company in a distant 

 city. Are the rates mentioned, therefore, strictly comparable as inter- 

 est upon capital ? Should such facts be taken into account in making 

 comparative statements of rates upon loans ? 



5. "In many parts of the country the farmer is charged extortion- 

 ate and inexcusable rates of interest, regardless of usury laws and a 

 decent regard for human necessities." When is an interest rate 

 "inexcusable" ? Is this question akin to the problem of just or fair 

 prices ? Can it be answered absolutely or only relatively ? Is there 

 such a thing as a "normal" rate of interest? 



6. It is asserted that now for the first time in our history the West 

 is able to finance its own crop movement. How does this come 

 about ? What does it mean in terms of the interest problem ? 



7. "Farmers want their personal loans to run longer than other 

 bank patrons, as a rule. While this means a smaller amount of 

 negotiation by the bankers to place their money, it often means 

 that they must pass by other patrons whose more rapidly moving 



