Vol. LXXI. No. 4145. 
NEW YORK, APRIL 6, 1912. 
WEEKLY, $1.00 PER YEAR 
GERMAN AGRICULTURAL CREDIT SYSTEM. 
What We Need in America. 
Part I. 
For over a hundred years Germany has had farm¬ 
ers’ organizations established for the purpose of se¬ 
curing loans at favorable rates of interest. Through 
these organizations the farmers have been able to se¬ 
cure their loans for long periods, and at as favorable 
rates of interest as any other borrower. In fact, they 
have been able to borrow money at as low a rate of 
interest as the government and even lower than the 
railroads. At times the rate of interest has fallen as 
low as three per cent, and at no time has it risen 
materially above four per cent, except from 1860 to 
1880, when there was such a demand for capital for 
ing the farmers of America millions of dollars in in¬ 
terest every year. The loans that the German farmers 
have at the present time which they have secured 
through their organized credit associations amounts 
to $2,500,000,000. I have no data at hand to deter¬ 
mine how much the mortgage indebtedness of the 
farmers of the United States is at the present time, 
but it certainly is no less than the indebtedness of 
the German farmers, and probably a great deal more, 
because Germany is only about one-fifteenth as large 
as the United States. But suppose the indebtedness 
is $2,500,000,000, the same as the organized credit that 
the farmers of Germany now have, and that the in¬ 
terest rate could be reduced one per cent by the farm¬ 
ers organizing, it would mean a saving of $25,000,000 
per year in interest for the farmers, or if it could be 
ADVANTAGES OF THE SYSTEM.—The advan¬ 
tages of the system are that it substitutes a public 
organized credit for a private credit. This is mu¬ 
tually beneficial to the capital that is seeking invest¬ 
ment as well as to the farmer making'the loan. 
Thousands of individuals' having money to invest 
would be only too glad to invest in a safe farm loan 
if they knew where the same could be obtained, and 
such a system as this gives a publicity that makes it 
convenient for the capitalist and the farmer making 
the loan to find each other. In the second place it 
substitutes a negotiable security for one that is not 
readily negotiable. The bonds of the company can be 
disposed of at any time, but not so with a private 
mortgage. In the third place it substitutes the credit 
of the organization for the credit of the individual. 
A COW AT HOME ON THE ISLAND OF GUERNSEY—MOTHER OF CALF ON PAGE 455. Fig. 159. 
the building of railroads that the rate rose to about 
five per cent. At the present time the rate is prac¬ 
tically four per cent, varying slightly from day to 
day, depending upon the condition of the money mar¬ 
ket. These low rates of interest are not secured be¬ 
cause rates of interest in general are lower here than 
in the United States, for as a matter of fact they are 
not, but on the other hand are higher than in Eng¬ 
land, France, or the United States. German govern¬ 
ment bonds that bear four per cent sell for par at 
the present time, or if they bear Zy 2 per cent are dis¬ 
counted so that the rate of interest on the investment 
is four per cent. 
HOW ACCOMPLISHED.—The way in which such 
low rates of interest are secured is simple, and a 
method that could and should be put into operation 
in the United States at once. It would result in sav- 
reduced two per cent a saving of $50,000,000. I con¬ 
fess that these figures are astounding and may seem 
like the wildest dream, but nevertheless they are facts, 
and show what has been accomplished here. The method 
followed to secure loans on such favorable terms has 
simply been for the farmers to organize credit asso¬ 
ciations and sell bonds to secure loans for their in¬ 
dividual members. That is, when a farmer wants a 
loan, instead of going to a bank, a life insurance com¬ 
pany, or a private individual to secure his loan, he 
goes to the credit organization, becomes a member, 
and arranges with them for his loan, giving to them 
his individual mortgage. The company in turn issues 
bonds which are known as “pfandbriefen” of an 
amount equal to the mortgage, and these are sold 
upon the money market just as government or rail¬ 
road bonds are. 
Although the individual borrowers are only liable to 
the company to the extent of their mortgage, yet the 
bonds of the company are secured by all mortgages 
held by the company, instead of by the mortgage of 
any individual land owner. In this way a better 
security is given without increasing the liability of 
the individual member. It is needless to say that 
the credit of such organizations depends upon their 
management. The German organizations for the most 
part are public institutions, under the direct control 
of the government. So carefully have they been 
managed that there is no case on record of one ever 
having defaulted, and at times their bonds have sold 
much higher than State bonds. 
AGRICULTURAL CREDIT BEST.—Interest rates 
for loans secured by mortgages on farms should be 
the lowest secured by any industry, because it is the 
