Capital is brought into existence in only one way—­that is, by consuming less than is produced.  If one has a dollar one can spend it either for an article of consumption, say confectionery, or for an article of production, say a spade.  He who buys a spade becomes a capitalist to the amount of a dollar—­that is, he becomes the owner of tools.  The process is precisely the same whether the amount in question is a dollar or a million dollars. [Footnote:  T.N.  Carver, “How to Use Farm Credit,” Farmers’ bulletin 593, U.S.  Department of Agriculture, p. 2.]

BORROWING

Every business requires capital, some more than others.  Farming requires more capital to-day than formerly because of the increased use of machinery.  The necessary capital must either be saved by the person who wants to use it, or borrowed from others who have saved it.

The advantage of borrowing is that one does not have to wait so long to get possession of the tools and equipment.  One can get them at once and make them produce the means of paying for themselves.  Without them the farmer’s production might be so low as to make it difficult ever to accumulate enough with which to buy them.  With their help he may be able to pay for them—­that is, to pay off the debt—­in a shorter time than it would take to accumulate the purchase price without them.  That is the only advantage of credit in any business, but it is a great advantage to those who know how to use it. [Footnote 2:  T.N.  Carver, “How to Use Farm Credit,” Farmers’ bulletin, 593, U.S.  Department of Agriculture, p. 2.]

CREDIT

Credit is simply a person’s ability to borrow and depends upon the confidence that others place in him.  This confidence depends on his reputation for honesty and his known ability to repay.  A man, as a rule, has to have something—­land or property of other kind—­ that he can offer as security before he can borrow much.  It is for this reason that thrift is essential to a man’s credit—­thrift and honesty.

There is no magic about credit.  It is a powerful agency for good in the hands of those who know how to use it.  So is a buzz saw.  They are about equally dangerous in the hands of those who do not understand them. ...  Many a farmer would be better off to-day if he had never had a chance to borrow money at all, or go into debt for the things which he bought.  However, there is no reason why those farmers who do know how to use credit should not have it.

Shortsighted people, however, who do not realize how inexorably the time of payment arrives, who do not know how rapidly tools wear out and have to be replaced, or do not keep accounts in order that they may tell exactly where they stand financially, will do well to avoid borrowing.  Debts have to be paid with deadly certainty, and they who do not have the wherewithal when the day of reckoning arrives become bankrupt with equal certainty.