944 READINGS IN RURAL ECONOMICS 



prosperity. For in normal times a change of agricultural prices is 

 always imminent, and with prices at their present high level any 

 change would probably be a decline. This might easily cause a 

 diminution of the farmer's income which would result in a fall 

 of land values sufficient to wipe out much of the increase in his 

 equity and to add still further to the burden of his mortgage debt. 

 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 prosperity 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 essen- 

 tial 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. 



Sources of Mortgage Credit 



The principal sources of mortgage credit are: (1) the indi- 

 vidual lender ; (2) the life-insurance company ; (3) the bank ; 

 (4) the state; (5) the mortgage company; (6) the building and 

 loan association. These will be considered in the order stated. 



(1) In most communities there are individuals willing to loan 

 to their neighbors, because through personal supervision they can 

 minimize risks which exclude outside lenders, and because by 

 loaning directly they avoid paying the middleman's commission. 

 This form of credit offers certain advantages to the borrower, 

 but it lends itself to abuse. It plays an important role in this 

 country, but no statistics concerning it are available. 



(2) Perhaps the most important source of farm mortgage loans 

 is the insurance company. It has been recently estimated that 

 172 of the leading life insurance companies have outstanding 

 rural loans to the amount of $572,000,000, or about one-fifth of 



