Charlevoix county herald. (East Jordan, Mich.) 189?-1953, 1914-09-05

The reason was that so long as the
usurers were permitted TO offer loans,
many shortsighted people would yield
to the temptation to borrow. Since
the purpose for which they borrowed
added nothing to their earning capac
ity, they were in no better position
to accumulate money after they Dor
rowed than they had been before. If
they had been able to accumulate any
thing before, they would not have
needed money. The fact that they
had not been able to accumulate any
thing before would be pretty cOnclu-
sive proof that they would not be able
to accumulate enough to pay the debt.
Therefore, they put themselves into
the clutches of the usurer.
Rightly or wrongly this was the
attitude Of the early religious and
moral leaders on the subject of usury,
or interest. Instead of forbidding
shOrtsighted borrowing, as all Dor
rowing for purposes of consumption
is, they went to the root of the mat
ter, and attacked lending for interest.
Since the use of productive machinery,
that is, capital, has come to play such
an important role, these considera-
tions do not apply to borrowing for
productive purposes. Therefore, dis
eliminating modern leaders and
teachers do not oppose the taking of
reasonable interest. In fact, the state
regulates this matter by fixing the
maximum legal interest charge. There
is need, however, of revival of senti-
ment against lending for nonproduc-
tive purposes, which was all that the
Wv laoI 70
Principal More Important Than
Interest.
In the payment of a debt it is not
the interest but the principal which
gives the greatest trouble, except
where interest rates are exorbitant.
If a man borrows 500 for year at
z per cent, he has to pay, at the end
of the year, $107. If he borrows at
5 per cent, he has to pay $105. The
difference is 50. How, So is not to be
despised. Good business consists in
large part in looking after just such
items as this. Nevertheless, it is only
a little harder to pay S107 than to
pay sos. The point is that the prin-
cipal is the same in either case, and
greatest trouble.
The reason it has seemed necessary
to emphasize this elementary fact is
that many people seem to imagine
that if interest on farm loans can be
reduced from Z per cent to 5 per cent,
or from per cent to per cent, con-
ditions will be made easy for the
farmers. 1t is important that interest
rates be lowered wherever it is econo-
mically possible, but it is vastly more
important that farmers should learn
how to pay back the principal easily.
The only way to do this is to use the
money borrowed in such way as to
put one in possession of the means
of repayment. If the 800 which a
man borrows is spent for fertilizer,
which adds 1925 to the value of his
crop, he should not find any great
difficulty in repaying the loan, both
principal and interest. If he uses it
in such a way as to add only $75 to
his crop, he will have some difficulty
in repaying the principal, saying
nothing Of the interest. 1t is more
important that he should be able to
use the 500 so as to add 1925 rather
than $75 to his crop, than it is that
he should be able to borrow at per
cent or even without interest.
An unproductive enterprise is not
a safe basis for borrowing under any
conditions. In other words, it is of
more Importance that the enterprise
i'm which one is engaged shall be a
productive enterprise than that the
rate of interest at which one can bor-
row money is high or low.
The first and more important rule
to be observed, therefore, in the use
of farm credit is to make sure that it
say, make sure that the purpose for
which the borrowed money is to be
used will produce a return greater
than needed to pay the debt. Except
in extreme cases, it is bad policy to
borrow for the purpose of purchasing
anything which will not help to pay
for itself. AS a rule, the purchase
of these things should be postponed
until the farmer has accumulated the
wherewithal out of his own earnings.
But if he borrows money to buy
fertilizer and agrees to repay the loan
| before his crop has been harvested
and sold, he may have difficulty in
repaying it. One in such a predica-
ment has three possibilities open to
him. He may receive money from
some other source at the time the loan
falls due, he may get the loan ex-
! tended or the note renewed, or he may
be sold out by his creditor. The first
is not altogether desirable because it
violates an important principle of
business management; namely, that
each part of the business shall pro-
vide the means of paying its own ex-
p6nses. The second is undesirable be-
cause it puts him in the position of
requesting a favor Of his creditor
whereas all business arrangements
between man and man ought to be SO
clear and so definite that neither shall
need to ask special favors of the
other. The third needs no comment
ITO be continued)
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WAR.