The Bottineau courant. (Bottineau, Bottineau County, N.D.) 1895-1929, 1919-06-12
INTEREST PAYS
ALL YOUR DEBT
UNDER BANK OF NORTH DAKO.
ia PLAN, YOU PAY ONLY
INTEREST ON LOAN.

IA PLAN, YOU PAY ONLY
INTEREST ON LOAN.
How would you like to pay your
debts simply by paying a moderate
interest on them for a number Of
years until the principal was wiped
out?
How would you like to be able to
borrow money, realizing you could re-
turn it in this way, and knowing that
after you had paid enough interest to
cover the original debt would be can
celled?
1t may surprise some to know that
there is country where this is actu-
ally done.
That country is Australia.
1t may surprise some even more
to learn that this plan is great sue
cess in Australia and that it is firmly
established.
The question might arise, what be-
comes of the banker, under such an
arrangement. Where does he get his?
Well, in this case, there isn't any
banker in the ordinary accepted sense.
The Australian states have state
banks. The state banks are able to
do this, because they are not there
to make money, but to serve the peo-
pie.
In North Dakota, Too
But we do not have to go as far
away as Australia to learn all about
this system. It is much nearer home.
It was established in North Dakota
by the last legislature and is part
Of our present state bank system that
the voter will either indorse or re-
ject June 26.
At public meeting in Fargo recent
ly, F. w. Cathro, director general of
the state bank, explained this phase
of the new banking.
Cathro Explains Workings
According to Mr.. Cathro, the Bank
of North Dakota will probably have
to charge per cent interest in order
to operate successfully this amoctiza-
tion system. This is actually less than
the present average rate Of interest
throughout the state and is 2.7 per
cent less than the average interest on
mortgages.
In other words. when the state bank
is in operation, you can pay yo"r
debts merely by paying the interest
and a lower rate Of interest than at
the present rate for certain per-
iod of time.
The per cent the state will charge
represents the actual cost Of state
banking plus sinking fund that
gradually wipes out the principal.
Profit Pays the Principal.
Under the private banking system,
this money used as a fund to wipe out
the principal, was used to produce pro-
fits and dividends for banking cor
porations. The state takes these pro-
fits and dividends and wipes out your
debt with them, charging you, in the
meantime, whatever it costs the state
to do this.
This is the way the system works:
The farmer needing money goes to
the state bank and gives mortgage
on his farm, say for $4,000. The state
bank takes the mortgage and gives
the farmer the money, charging him
Z per cent interest. This 7 per cent
pays the cost of state banking and
leaves surplus that private bank
would annex as profits. Instead, the
state bank uses this surplus to re-
duce the principal every year.
Per Cent Will Pay $4,000 in 80 Years
Mr.. Cathro estimates that the far
mer borrowing the $4,000 will be able
to have his debt paid simply by pay
ing the Z per cent interest on a dim
inishing principal for 30 years. Every
wear the principal will be less and the
interest will be less. When half the
time is gone, the principal will be gone
and he will be paying interest on
something like $1,000. During the
last few years, he will be paying in
terest only on very small principal.
The last year the principal and inter-
est would be almost negligible.
Borrower Gets the Profit, Not Bank
i Under the private banking system,
the farmer not only pays the interest
year by year, but at the end he pays
back the principal besides, returning
! altogether, probably twice the amount
he borrowed. Under the amortization
plan, the borrower pays back only
what he originally borrowed and q
sum sufficient to cover the cost OF
banking. The bank is simply used for
him as public service operated at
cost or at low profit. This low pro-
fit in turn represents a gain to the
borrower as part Of the public which
owns the bank and will be used to re-
deem the bonds sold to establish tho
bank.
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