Year: 1875

In the South prior TO war Tie cFeult
system in farming had taken such a
deep hold that the mercantile classes
were involved in wide spread ruin at
the close of the contest. With the re-
storation of peace the system of ad-
vancing the means with which to
grow crop was again inaugurated,
though the depreciation In the value
of lands, and the emancipation of the
slaves rendered the business more haz-
ardous to the merchant. AS years
passed by one after another abandon
ed the credit system as Improbable,
or were bankrupted by it, and now the
Southern planter like the Western
farmer is expected to rely upon his
own resources, and furnish the neces-
sary collaterals just as other borrow
ers. In California the system of farm
ing and commission agencies is very
similar to that formerly in existance
in the South. The merchant supplies
the farmer with seed, farming impli-
ments, cash to pay for Harvesting, food
for the farmer and his workmen and
packages for the produce. The mer-
chants reimbursed by the crop at the
end of the season. The banks of San
Francisco have encouraged this branch
of business, and loaned literally
to the merchants engaged in it. We
do not deny that there may not have
been a necessity for the existence of
such system of business, or that it
has not greatly aided in developing
the resources of the country, but it is
nevertheless fraught with great dan
ger and liable to produce financial de-
preston. All forms of credit are more
or less objection able, and history
shows that the possession of good
credit by the farmer is very apt to be
the cause of his ruin, and may be the
source of general disaster. 1t is one Of
the first principles of politica econo-
my that the too rapid fixing of capital
its expenditures for permanent i'm
provements (which cannot afterwards
be converted into CASH is dangerous.
A country that has fixed its capital
too rapidly is in the condition of a
farmer who has used all his cash to
purchase land; it is compelled to bor-
row from abroad, and if its securities
are not in demand in distant markets
production must for time be check
ed. The power to exceed his individ-
ual resources generally leads the farm
er to expend an undue amount in per-
manent improvements, and where the
credit system is general the strength
of the common wealth is gradually
sapped. The producing classes go on
from year to year spending more mon
ey than is warranted by their crops;
the imports of the country finally ex-
ceed the exports, and the specie begins
to flow to other lands. Farming on
the credit system leads to overtrading
and overtrading leads to panic and
disaster. Viewing the system from
an individual standpoint it is equally
impolitic. Credit leads the farmer to
overcrop, and bad year leaves him so
burdened with debt that he is never
able to extricate himself. The rate of
interest is so high on this Coast, par
ticularlywhere there is much risk, as
in this case, that no legitimate busi-
ness can long flourish under its weight
The farmer who has to pay twenty
five or thirty per cent. interest on
most of his working capital cannot ex-
pect to prosper. Both the merchant
and the planter will soon find that 1t
is good policy to greatly curtail or en-
tirely abandon the present system of
advances. 1t seems that the failure
of CHARLES CLAYTON & Co. was due
to the advancing system, the farmers
owing to short crops. being unable to
repay the loans made them as stipe-
lated. Let this be warning.