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HE American farmer is ahead of the European in many things, particularly in the use of labor-saving machinery. But in the application of business principles in their financial operations, the European farmers have perfected systems that are in advance of anything yet attempted in America. This has been largely brought about by the force of circumstances necessitating an economic transformation. During the last century the competition of new countries with immense areas of virgin soil flooded the European markets with agricultural products and forced the European farmers to reorganize their business methods.

As a result they have organized to make available abundant credit at low rates of interest and on favorable terms of repayment. By credit, it is not meant that the farmer gets everything he buys on time without paying anything on it, and that he is in debt on every hand, but just the reverse. It means he has money available at all times, so that he may pay cash for everything he buys, thus getting the benefit of the lowest cash prices and discounts. His credit is at the bank and not at the store, and through the bank he gets the loans that he needs at rates of interest just as low and in many cases lower than secured by other industrial enterprises, no difference how large or how much business they do. But to accomplish this the farmers have had to take a hand in the banking business themselves. They have organized on a cooperative basis to secure the credit they need and to supervise its distribution rather than leaving it to private interests to supply the same. By so doing they have reduced rates of interest, lengthened the time for which loans are made, provided for the repayment of loans by annual installments, and they keep the money in the rural districts and prevent its accumulation in the large cities.

The sources from which the capital is drawn that is thus made available to the use of the farmers may be classified under three heads: (1) subvention from the government, (2) savings deposits of the farmers and rural population, (3) from the sale of bonds secured by mortgages on farm land.