ECONOMIC PHASES 165 



to reduce production; and, one year with another, would tend to in- 

 crease rather than to reduce the size of the surplus. If any proof of 

 this thesis is required, we need only cite the experience in sugar, rubber, 

 tobacco, copper, and several other essential products, the surplus of 

 which has been increased in most cases to unprecedented amounts, by 

 means of a stimulating price and a tendency to hoard the products for 

 a still higher price. The same thing happened in the case of a variety 

 of manufactured products as well as in the raw materials mentioned. 



Until recently, it was somewhat generally supposed by those in- 

 terested in the collective marketing of farm products, that the prin- 

 cipal steps in the successful conduct of such activities were integration, 

 standardization, warehousing, transportation, and similar processes 

 having to do with the physical handling of the commodities. We see 

 now that these essential steps in the processes dealing with the physical 

 goods are in themselves relatively simple, and that the real marketing 

 problem deals with such questions as the influence of supply and de- 

 mand on price ; and, no less important, the influence of price on supply 

 and demand. We have also come to appreciate that the problem of 

 handling the physical goods is relatively simple as compared with the 

 problem of financing the marketing of such goods. My point is not 

 that the farmer cannot through collective effort improve the present 

 marketing systems, but merely that we have not made any adequate 

 study of the economic principles underlying the process of marketing 

 farm products. We have dealt too much in general terms such as or- 

 derly marketing, cooperative marketing, costs of distribution, reason- 

 able price, and a variety of other terms, which we use fluently, without 

 bringing them under careful economic analysis in order to see what 

 they really mean when subjected to the test of practical application. 



In the problem of meeting the farmers* credit needs the question 

 is being raised whether either the Federal Reserve System, a system 

 based on deposit banking; or the Federal Farm Loan System, a 

 system based on long time bond investments, can offer the farmer the 

 kind of credit facilities which his production and marketing operations 

 require. We know that the Federal Reserve System was designed 

 primarily to meet short-time credit needs; that is, for ninety days 

 or less. The Federal Farm Loan System was designed to meet the 

 needs for mortgage credit extending over periods of five to thirty-five 

 years. As compared with these facilities, certain of the farmer's credit 

 needs require that his loans be carried from six to twelve months, or 

 even longer. Many believe that we need still a third or intermediate 

 type of credit, designed to meet certain peculiar needs of the farmer 



