361] The Condition of the Western Farmer. 83 



The influence of the use, and more especially of the abuse, 

 of credit will require a more extended treatment, for it is by 

 no means a simple matter and needs to be looked at from 

 several points of view. In the first place, the mere borrowing 

 of money cannot be said to be in itself a harmful thing. 

 Credit has a tendency to multiply as well the opportunities 

 for gain of the man who makes use of it, as to make greater 

 his dangers of loss; but it is only rarely that it can be called 

 the direct cause of either gain or loss. Merely to say that 

 the farmer pays too high interest for his money is in no way 

 an explanation of his financial difficulties; for the rate of 

 interest is adjusted by a competition acting with comparative 

 freedom, and we must go back of it to consider the earning 

 power of the material things in which the borrowed money is 

 invested. 



The economic significance of a mortgage debt depends 

 partly on the previous financial condition of the debtor, but 

 perhaps to a still greater extent on what is the corresponding^ 

 item on the opposite side of his balance-sheet As to this| 

 latter, we must consider whether there stands back of the 

 debt an asset, the liquidation of a loss in the past, or a present 

 personal expenditure. If the money is borrowed for either 

 of the last two purposes, then the debt will be a dead weight-, 

 to be provided for from other sources. If the item offsetting 

 it in the accounts is an asset, then one must consider further 

 whether it has the actual present value of the debt; for in so 

 far as it has not, the debt will be a drag, just as in the cases 

 above. If the asset does actually have a value equal to the 

 debt, then we must examine first whether it is likely to appre- 

 ciate or depreciate, and second whether it is income-produc- 

 ing or not. If income-producing, then such income must be 

 investigated as to its amount, as to the regularity with which 

 it accrues, and the probability of its permanence. 



Applying these principles, w r e shall be able to see why a 

 mortgage bearing seven per cent interest, that represents in 

 part a payment for high-priced land, in part a new house, and 

 in part losses or expenses in excess of income, may perhaps 

 be more burdensome to the farmer of to-day than a small Y 



