MUST REFORM OUR FARMING

The average yield of wheat in the United States for the five years ending in 1910 was eight-tenths of a bushel per acre more than in the five years ending in 1905, but it was less than four-tenths of a bushel more than for the ten ending in 1900. The average corn product for the ten years ending in 1910 was a little less than for the ten years ending in 1875.

Thirty-five years had not advanced us a step. European countries--Great Britain, France, Germany--with inferior soils and less favorable climate produce crops practically double our own. In our studies of conservation we find no waste comparable, either in magnitude or importance, to this. The farm will fail, and the foundations of our prosperity be undermined, unless agriculture is reformed. The percentage of our people actively engaged in farming had fallen from 47.36 in 1870 to an estimated 32 in 1910. Every man on the farm to-day must produce food for two mouths against one forty years ago.

--_J. J. Hill._

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THE FARMING SPECIALS

One of the latest and most successful activities of the railroads is the practice of carrying knowledge of the best farming methods to the farmers by means of special trains equipped like agricultural colleges.

These trains, bearing experts and all the equipment for exhibiting the new methods of agriculture, bring the knowledge to the farmers free, and the railroads are glad to give it, for every bit of knowledge comes back to them in a hundred fold profit in freight. In the summer eager audiences all over the country listen to the preaching of better methods and larger crops.

Dozens of special trains travel through the agricultural regions disseminating information. The "Breakfast Bacon Special" has been run to encourage Iowa farmers to raise more hogs to take advantage of the high price of bacon. The Cotton Belt Route southwest of St. Louis runs the "Squealer Special" to prove to the Arkansas and Panhandle farmers the money-making advantages of blooded hogs over the razor-back variety. Down the Mississippi Valley the Illinois Central sends the "Boll Weevil Special" to conduct a campaign against that pest. The Harriman lines have six trains operating in California every year. In one year they visited more than seventy-five thousand people. Better farming specials run in practically every state south of the Ohio and Potomac and west of the Mississippi. The New York Central also has two trains in operation in New York.--_The Business Almanac._

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A large proportion of farmers give little or no attention to the selection of seed; yet it has been demonstrated that a careful selection would add hundreds of millions of dollars to the total value of the crops. If, for example, a variety of wheat were developed capable of producing one more kernel to the head, it would mean an addition, so Burbank says, of 15,000,000 bushels to our average wheat crop. It is possible, however, to do even more than this. At the Minnesota station a variety, selected for ten years according to a definite principle, yielded twenty-five per cent more than the parent variety. Applied to our average crop, that increase would amount to 185,000,000 bushels, worth about $140,000,000. As for corn, it has been officially stated that our average yield could easily be doubled. After exhaustive experiments the Department of Agriculture says that by merely testing individual ears of seed corn and rejecting those of low vitality an average yield of nearly fourteen per cent could be secured, adding about $200,000,000 to the value of the crop. Does scientific seed selection seem worth while?--_The Wall Street Journal._

CHAPTER XX

BANKING

IMAGINE that you are a druggist in a small town. Suppose that a woman comes in to buy two ounces of camphor and in exchange gives you three eggs. In a few moments, perhaps, a man enters to buy a safety razor and brings with him wheat enough to pay the bill. Another, again, wishes to trade a turkey for a fountain pen. You can readily see the inconvenience to which you would be put in such exchange of actual commodities; yet this was the method used in primitive times, a method called _barter_.

To overcome the inconvenience of barter, as civilization advanced, it became necessary to establish a common medium of exchange, which could be accepted for anything one had to sell and with which one could buy anything he wished. This is what we call _money_. To meet the requirements, money must not be bulky, must be durable, and must not readily change in value. In civilized countries gold and silver are the bases of exchange.

But gold and silver are heavy and inconvenient to carry about in large, or for that matter in small, quant.i.ties, and for convenience the following kinds of paper money have been established:

1. _Gold Certificates_ are issued with the government's guarantee that there is gold deposited in the Treasury equal to the amount of the face of the bill. At any time the one holding such a bill may demand of the Treasury that he receive gold for it.

2. _Silver Certificates_ are similar to gold certificates, except that silver is deposited in the Treasury instead of gold.

3. _United States Treasury Notes_ are promissory notes of the government to pay the sum indicated. They are not payable on demand.

4. _National Bank Notes_ are promissory notes issued by the national banks and are payable on demand of the bearer. Before a national bank may issue such notes, it must own United States government bonds of at least the amount for which it issues notes. These bonds are held by the Treasurer of the United States as security that the bank will pay its notes. According to the Owen Gla.s.s Bill, pa.s.sed in December of 1913, national bank notes may at the option of the banks be gradually withdrawn from circulation.

Credit

_Credit_ is a promise to pay at some future time for a thing which you receive now. Its use is probably as old as the practice of exchange and quite as important. The simplest and most extensive form of credit is "book" credit, such as you get at the grocer's or butcher's or at the department store. To explain a little more complex kind of credit: Suppose you owe Smith one hundred dollars. At the same time Smith owes Jones one hundred dollars. Because you owe Smith, he may give Jones an order to collect the money from you. With this order Jones may pay his lawyer, let us say. Perhaps the lawyer has bought a bill of goods from you. He pays you with the same order. You destroy the "note," and thus four actual transactions have been taken care of without the use of any money. The business inst.i.tution which deals especially with credits is the bank.

Banks

A bank which fulfills every banking function must have these three departments: (1) the commercial department, (2) the savings department, (3) the trust department. Some inst.i.tutions specialize in one department more than in either of the others, and thus, taking the name from their princ.i.p.al function, banks are known as follows: (i) commercial banks or banks of deposit, (2) savings banks, (3) trust companies.

Banks of Deposit

[Ill.u.s.tration]

Banks of deposit or commercial banks are business men's banks. Their two princ.i.p.al functions are (1) receiving money for safe-keeping on deposit, and (2) loaning money to business men at interest. The deposit function is based on confidence and credit. The business man takes his money to the bank not only because it is convenient for him to do so, but also because he has confidence that the money will be more carefully protected than if he kept it in his own possession. In depositing his money in the bank, the business man uses a _deposit slip_ such as the one ill.u.s.trated here. The teller puts down the amount in the _bank book_ of the depositor, who is credited with that amount on the bank's books.

He is ent.i.tled to draw just that much actual cash or that much credit in the form of _checks_. (See page 339.) Most firms do not deposit a sum of money and then promptly draw it out again in the form of checks to pay current liabilities, but maintain a fairly steady balance in the bank.

On large average monthly balances most banks allow interest, varying from one per cent on balances of one thousand dollars to three per cent on balances of ten thousand dollars or more.

Discount

Because a large bank has many depositors, the aggregate of all the balances makes a considerable sum of money. Bankers have learned by experience just what proportion of their deposits they can depend on to remain steadily on deposit as a balance, and thus they know what proportion of their deposits it is safe to use for the purpose of _discount_. The simplest case of the discount function is the discount of a promissory note. In the note shown in the ill.u.s.tration after ninety days John H. Blodgett will receive from Lucius Thomas five hundred dollars with interest. But perhaps Blodgett cannot wait ninety days for his money. In this case, he takes the note to his banker, who will pay him the five hundred dollars less a certain percentage or discount, which is the bank's profit on the transaction. The bank then collects the note when it becomes due.

[Ill.u.s.tration: PROMISSORY NOTE]

Collateral

Instead of cashing a note held by one of its customers, the bank may itself loan money at interest for a short period of thirty, sixty, or ninety days, taking the note of the business man to whom the money is loaned. In most cases, however, unless the bank knows the business man well, a certain amount of _collateral_ is demanded as an a.s.surance that the borrower will pay the loan when it becomes due. The amount of collateral deposited with the bank is usually 10% to 25% in excess of the amount loaned, and it may take the form of stocks or bonds; mortgages on real estate; liens on stock, fixtures, or personal property; or warehouse receipts. When the amount borrowed is paid, the collateral is returned; if it is not paid within a reasonable time, the collateral is sold, and the amount loaned, with interest to date, is taken from the proceeds.

There are, of course, other functions of banks of deposit practised quite generally by all banks, and these will be explained later. The functions just described, however, distinguish banks of deposit in a general way from the other two cla.s.ses.

Savings Banks

A savings bank accepts from its depositors small amounts of money which are not subject to withdrawal by check, but on which it pays a low rate of interest. As a general rule, an account may be opened with one dollar; and when the initial deposit is made, the depositor is furnished with a pa.s.s book, similar to the bank book, in which further deposits, interest credits, and withdrawals are recorded. Interest is compounded every four or six months, and money must, as a general rule, remain on deposit until an interest payment date before the depositor receives any interest on it. The usual rate of interest is three per cent, although four is often paid. Frequently, before banks allow deposits to be withdrawn, they demand a certain number of days' notice, usually thirty.

It is well to investigate the conditions under which the depositor places his money in the safe-keeping of the bank, because the withdrawal requirements are often stringent. Because of the stability of this cla.s.s of deposit, banks are always anxious to increase their savings accounts, as a large proportion of the funds may be used for loans.

A form of the savings bank established in the United States in 1911 is the postal savings bank, in which the post-office is made the depository for savings. The post-office in the town deposits its funds in the local national or state bank, which, as security for safe-keeping, must deposit with the Treasurer of the United States bonds at least equal in value to the amount of savings deposited in the bank. Postal savings banks are practically absolutely safe, because, if the bank which takes care of the funds should fail, the bonds may be sold, so that the savers will receive their money. From deposits made in the postal savings bank, the return to the depositor is only two per cent, whereas the return from deposits made in the bank's own savings department is three, three and a half, and sometimes four per cent.

Trust Companies

_The Richards' Baby Stocking Fund_

A miner named Richards was killed in an accident in an Alaska mine. Among his possessions were found a number of letters and a baby stocking containing a little gold dust. The letters told that Richards had a little six-year-old daughter, who was now left dest.i.tute. The rough miners made up a fund of $2,500 in gold dust, depositing it with the United States Commissioner of the Territory of Alaska, to be held by him until the proper disposition of it could be made. A committee was appointed, who agreed that one hundred dollars a year for ten years should be used to give the child a common school education, and then five hundred dollars each year to give her a college education. A legal guardian was appointed, and the Kansas City Trust Company asked to act as co-guardian to invest the money and make the required remittances. The funds were first deposited by the commissioner in a bank in Portland, which sent them to the Kansas City Trust Company. Correspondence was of course carried on at the same time, the Kansas City Trust Company agreeing to accept the trust without remuneration. They have invested the money in five per cent bonds, thus increasing the fund yearly.

This is called a _trust_ because the money is entrusted for safe-keeping and investment to the bank, which is called the _trustee_. A bank may also become the trustee for property left at the death of a person, both when there is a will and when there is none. When there is no will and the bank takes charge of the affairs of the deceased, the bank is called the _administrator_; when there is a will, the _executor_. Another important function of the trust company is acting as _receiver_ for a company which has failed; that is, adjusting the company's affairs in the way fairest both to the stockholders and to the company's creditors.

The trust company often acts, also, as _agent_ for its clients'

property, performing the same duties as a real estate agent.

Form of Remittance

Banks as a cla.s.s are distinguished one from the other according as they specialize in one or more of the functions described above. However, there are certain services that all banks perform and certain facilities that they all offer in connection with the payment of money from one person to another. These concern the forms of remittance.

If you have studied business arithmetic or bookkeeping, you very likely know the definite forms that are used. At all events, you know that currency should never go through the mails. The following is a brief review of the more important forms that may be used. Study the ill.u.s.trations carefully, noticing particularly the similarity of form in all. Uniformity in such matters is desirable because it saves time as well as misunderstandings. The forms we shall consider are:

1. The check _a._ Personal _b._ Certified 2. The money order _a._ Express _b._ Postal 3. The bank draft 4. The time draft 5. The sight draft

_Check._--A check is a written order on a bank, signed by a depositor, directing the bank to pay a certain person a certain sum of money. When the bank pays the order, it deducts the amount from the depositor's account. The one who signs the check is called the _drawer_ or maker; the person to whom or to whose order a check is made payable is called the _payee_; the bank on which a check is drawn is called the _drawee_.

[Ill.u.s.tration: CHECK AND STUB]

Of course, before you could write a check for one hundred dollars, you must have deposited at least one hundred dollars in the bank on which the check is drawn. The bank supplies you with a check book, consisting of blank checks, each attached to a stub. When you write a check, you put the same information on the stub to be kept for reference. Then you tear off the check through the perforated line, using it to pay for whatever you may have purchased.