The midland journal. (Rising Sun, Md.) 1885-1947, 1921-03-18
prepared by the United States Depart
nent of Agriculture.)

prepared by the United states Depart
ment OF Agriculture.)
Credit is always good thing to
have, and under certain conditions a
very good thing to use, but just now
It seems In most cases to be much
more desirable to- have 1t than actual
~ to use it. The United States De-
partment of Agriculture warns. farm
ers that the present is particularly
unfavorable time to borrow for any
purpose that does not promise natur-
ally to increase the productiveness
Of the farm enterprise. This applies
particularly to longtime loans. In
terest rates are at present consider
ably above normal, and the payment
Of these rates Is in itself a heavy
burden to assume.
When to Borrow.
1t is furthermore pointed out that
while at the beginning or early in the
progress of period Of rising prices
1t Is generally highly profitable to
borrow for productive purposes, the
case is quite different in time of fall
ing prices. When prices 60 up the
value Of money goes down. and debt
contracted on a low market can be
settled on q high market with money
representing correspondingly less la
Dor and smaller quantities Of products
per dollar. Thus, with rising prices
all loans that would be safe on a
steady market stand to yield hand
some profits. In a period of peak
prices, however, or Of falling prices,
such as farmers are facing now, the
shoe is on the other foot. At such a
time it is advisable to use great eau
ton in borrowing since there is a
probability OF having to pay back the
loan in dearer dollars than those OBJ
tanned from the loan.
For those who find that they must
borrow at this time In order to avert
disaster, or are so situated that by a
reasonable amount of additional cap
ital they can naturally increase their
earnings, the office Of farm manage
ment and farm economics offers GER
tain simple rules to be kept in mind.
The first and most important rule Is
that only as much money be borrowed
as can be put to q decidedly produc-
tive use. With the rate Of interest
high and prices falling. only an i'm
portant use Of borrowed capital is
likely to make a loan prove profitable
or even safe venture for the borrow
err. The borrowing Of money for the
purchase Of power machinery, for ex-
ample, can be justified under present
conditions only where farming Is done
on considerable scale, and where such
machinery can be used a considerable
number Of days during the year to
save time and labor needed elsewhere
on the farm.
The second rule to be considered by
the farmer concerns the time when
the loan shall be repaid. If he bor-
rows money to purchase fertilizer and
agrees to repay it before crop is
harvested and sold, he may have diff
iiculty in discharging the debt. If ne
arranges, however, to pay after the
borrowed fertilizer has brought re-
turns, he win be relieved of the pos
sible embarrassment Of asking for
renewal Of the note and the resultant
injury to his credit.
The third consideration is closely
related to the second, and has to do
with the duration Of the loan. Gen.
orally speaking, the length Of time the
debt is allowed to run should be close
" related to the productive life Of the
farm implement or Improvement for
which the money is employed. II the
money is to build a silo that will last
ten years, the loan should not run
more than ten years, because. IL silo
cannot pay for itself In its own life
time 1t is plain that 1t would be folly
10 borrow to build 1t. On the other
hand, such loan should run long
enough to give the farmer good
chance to meet 1t when due.
Provision should be made In a long
time loan for the gradual reduction Of
the principal. This can be done by
wording the note so that a part OF the
principal can be paid on any interest
date, or by providing for definite
annual or semi-annual payment COW
ering the interest due and allowing a
gradually increasing amount to be
paid against the principal. Each Of
these methods prepares for the pay
ment of the interest as 1t comes due
and automatically disposes of the
principal in alstated time.
Total Annual Payments
On $1,000 loan to run for is years
at s per cent interest. the farmer
could arrange total annual payment