receipt of the regular interest on their bonds, will be encouraged to continue in thrift. Once thrifty habits are formed, they grow by use. A surprising amount of money thus may be accumulated, even by people who heretofore have let their cash slip through their fingers.

2. By investing this money in federal farm loan bonds, it will be absolutely safe. It will yield a fair return regularly by the cashing of the interest coupons. When money is needed, the holder may be able to sell the bonds readily, perhaps for more than he paid for them. Indeed, the longer they are held, the more valuable they are likely to be in the market.

3. The money thus saved and invested in the bonds will remain right in the community, because it and perhaps more will be loaned by the land bank to the farmers within the territory from which such savings emanate. Thus is constituted what I have already called an endless chain of prosperity, ever at work to fructify each community.

4. Instead of sending cash away from one's home region for losing speculations, unwise investments or foolish expenditures,

this plan constantly adds to the cash and credit resources of each rural district that adopts it.

5. People will come to take pride in their landed ownership as represented by their holdings of farm loan bonds. It gives them a stake in the land, with all the social and civic influences that flow therefrom. The poorest may own a $25 land bond, and even the children can save up a few pennies at a time for deposit in their national farm loan association toward the purchase of a bond. Special provision is made by the law to encourage petty deposits by offering four per cent interest thereon. The receipts for such deposits are convertible into land bank bonds. In this way, a bond may be bought even by those who can pay down only a few cents or a few dollars at a time.

To promote thrift in each home and in each locality, so as to create a home market for farm loan bonds, is essential to the largest development of the system and its finest usefulness to the nation.

This is recognized fully by most farmers who wish to patronize it as borrowers. They realize that the requirement of small install

ments upon principal every six months or year is also a stimulant to thrift. They know that they must "make good"-that this is not a scheme for advancing funds as a gift to those who won't or can't pay interest or principal.

The bond market will control the net cost to the borrower of his accommodation. Hence his interest in creating, through his own successful management and encouragement to local thrift, conditions that will be most favorable for the marketing of farm loan bonds.

My own judgment is that federal farm loan bonds will become a favorite investment for both small and large sums. I look forward to the time when here, as abroad, farm bonds may vie with government bonds in the market.

When that time arrives, farm bonds bearing three per cent may sell at par, farmers whose mortgages secure such bonds may pay not to exceed four per cent interest, and may enjoy generous profit-sharing dividends out of the one-point margin.

CHAPTER TEN

PAYING PRINCIPAL BY INSTALLMENTS

TH

HE easiest way to pay a debt is a little at a time—the hardest way is to have

to pay it all at once. If these small payments come due at regular intervals, say every six months, they can be met with the more certainty and convenience, because the farmer knows just when they are due and can plan accordingly to meet his dues.

Basis of the System. That is why the federal farm loan system is based upon the principle that the borrower must pay at least a small installment toward the reduction of his debt every six months or annually until the debt is discharged. Of course the borrower may pay up more rapidly, or in full, at his option, after not less than five years, but from the very start he must reduce his debt by periodic installments upon the principal, besides meeting his interest promptly and regularly.

To this familiar method has come to be applied the term amortization. That word,

because comparatively new to some people, has led to needless mental complexity.

Instead of saying, amortize the loan, let us say, make slightly increasing payments upon principal at regular intervals, and it all becomes as clear as daylight.

The borrower pays in a fixed sum as dues, sufficient to cover (1) his interest, (2) his share of the expenses and profits of administering the system, and (3) leave a balance which, applied upon the principal, so reduces the debt as to wipe it out in full by the date that his note comes due or matures.

In this easy, simple and regular way, the borrower constantly whittles down the principal of his indebtedness. This correspondingly increases the borrower's equity, and by the same ratio increases the lender's security. The law carefully provides for the application of such installments to the reduction of the principal.

These regular installments upon the principal are so small as seldom if ever to inconvenience the borrower in meeting them. Thus he pays his debt almost without feeling it, at the same time that the lender's security constantly improves. All savings in interest