AGRICULTURAL CREDIT IN THE UNITED STATES 953 



responsibility of payment. This form of credit is due to special 

 economic and social conditions- the constant shifting of the rural 

 population and the fact that a large part of this population are of 

 a race still in its economic infancy rather than to any lack of 

 banking facilities. For the majority of such farmers cash credit 

 is out of the question, since they would not use it for making 

 their crop but would squander it. A bank, however, often lends 

 the merchant the money for buying the supplies to be advanced 

 to the farmer. As an inevitable result of the expense and risk 

 of granting this form of store credit, its cost is high, and the 

 system undoubtedly lends itself to grave abuses. With the de- 

 velopment of economic sense it is declining ; but without such 

 credit independent farming would have been impossible for a 

 large part of the southern farmers. 



The substitution of expensive machinery for labor is a marked 

 characteristic of American agriculture, and a large part of this ma- 

 chinery is supplied on credit by the manufacturer, who takes the 

 dealer's or the farmer's notes and in case of need discounts them, 

 sometimes at the farmer's own bank but more often at some met- 

 ropolitan bank. This form of credit, known as dealer's credit, flour- 

 ishes even in regions where farming is well established and credit 

 highly organized. There has been much discussion as to the cause 

 of this condition, and it is urged that the farmer pays more for this 

 credit than he would for bank credit and that the manufacturer is 

 often embarrassed for lack of funds to carry on the business. But 

 there are certain good reasons for the existence of the system. 



First, such credit is easily obtained. The dealer knows that 

 the farmer's credit is good and that he can add enough to the 

 price to make up for bad debts. Knowing that the farmer 

 will buy more on credit, he does not encourage cash payment. 

 A second reason is that the manufacturer can give credit for 

 a longer period than can the bank and that the security, which 

 consists largely of the machine itself, is more acceptable to him 

 than to the bank. Finally, the farmer often prefers to save his 

 bank credit for other purposes. 



In the past grave abuses have grown out of this form of credit. 

 Farmers have been led into extravagant purchase of machinery 



