The producers news. [volume] (Plentywood, Mont.) 1918-1937, 1922-09-08

I -
oreolt Is always good thing t
nave, and under certain conditions
very good thing to use, but lust nov
seems In most cases to be mucI
more desirable to have it than actual
" to use it. The United States De
partment of Agriculture warns farm
efs that the present is particularly
unfavorable time to borrow for any
purpose that does not promise natur
any 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 ont that
while at the beginning or early in the
| progress of a period Of rising prices
1t IS generally highly profitable to
borrow Tor productive purposes, the
case is quite different in time of fall
Ing prices. When prices go up the
value Of money goes down. and q debt
contracted on a low market can be
settled on 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 1t is advisable to use great eau
ton in borrowing since there is
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 |
ltal 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 decidedly produc-
tive use. With the rate Of interest
high and prices falling, only an i'm
Dortant use of borrowed capital is
likely to make loan prove profitable
u even safe venture for the borrow
IF. The borrowing Of money for the
of power machinery, for ex-
nipple, can be justified under present
onditions only where farming is done
n a considerable scale, and where such
machinery can be used considerable
lumber Of days during the year to
ave time and labor needed elsewhere i
n the farm. {
The second rule to BE considered by 3
re farmer concerns the time when
he loan shall be- repaid. IF he bor- y
,Ws money to purchase fertilizer and +
grees to repay it before a crop is r
arrested and sold, he may have diff q
Guilty in discharging the debt. If he
ranges, however, to pay after the :
proved fertilizer has brought re- ::
rms. he will be relieved of the pos j
BILE embarrassment of asking for a I I
neWaI Of the note and the resultant |:
jury to his credit.
The third consideration is closely !?
lated to the second, and has to do | !;
tn the duration Of the loan. Gen |:
ally speaking, the length of time the |:
bit is allowed to run should be close
related to the productive life of the |
nm implement or Improvement for !:
lfch the money is employed. If the
,ney is to build silo that will last
/ years, the loan should not run
re than ten years, because, If a silo
mot pay for itself in its own life
he 1t is plain that 1t would be folly
borrow to build 1t. On the other j..
nd, such loan should run long
,ug,l to give the farmer good | Ii,
lnce to meet it when due.
PROVISION should be made in long Be
e loan for the gradual. reduction Of
principal This can be done by
riding the note so that part Of the
ncipal can be paid on any interest ]
e, or by providing for definite VIII
lual or semi-annual payment COW Low
lg the interest due and allowing a of
dually increasing amount to be sill
j against the principal. Each of per
se methods prepares for the pay twt
it of the interest as it comes due FUR
automatically dlsposes OF the isfs
lcipal In a stated time. sun
Total Annual Payments. Alt
h 81, 900 loan to run for Is years silo
s per cent interest, the farmer mu,
d arrange a total annual payment cut
500. or his first 800 payment, see
would settle the interest and leave and