Probably no one expects a material reduction in the rates on manufactures while maintaining the rates on agriculture.  A material reduction in either would be disastrous to the farmer.  It would mean a general shrinkage of values, a deflation of prices, a reduction of wages, a general depression carrying our people down to the low standard of living in our competing countries.  It is obvious that this would not improve but destroy our market for imports, which is best served by maintaining our present high purchasing power under which in the past five years imports have increased 63 per cent.

FARM LOAN SYSTEM

It is exceedingly important that the Federal land and joint-stock land banks should furnish the best possible service for agriculture.  Certain joint-stock banks have fallen into improper and unsound practices, resulting in the indictment of the officials of three of them.  More money has been provided for examinations, and at the instance of the Treasury rules and regulations of the Federal Farm Board have been revised.  Early last May three of its members resigned.  Their places were filled with men connected with the War Finance Corporation.  Eugene Meyer being designated as Farm Loan Commissioner.  The new members have demonstrated their ability in the field of agricultural finance in the extensive operations of he War Finance Corporation.  Three joint-stock banks have gone into receivership.  It is necessary to preserve the public confidence in this system in order to find a market for their bonds.  A recent flotation was made at a record low rate of 4 per cent.  Careful supervision is absolutely necessary to protect the investor and enable these banks to exercise their chief function in serving agriculture.

MUSCLE SHOALS

The last year has seen considerable changes in the problem of Muscle Shoals.  Development of other methods show that nitrates can probably be produced at less cost than by the use of hydroelectric power.  Extensive investigation made by the Department of War indicates that the nitrate plants on this project are of little value for national defense and can probably be disposed of within two years.  The oxidation part of the plants, however, should be retained indefinitely.  This leaves this project mostly concerned with power.  It should, nevertheless, continue to be dedicated to agriculture.  It is probable that this desire can be best served by disposing of the plant and applying the revenues received from it to research for methods of more economical production of concentrated fertilizer and to demonstrations and other methods of stimulating its use on the farm.  But in disposing of the property preference should be given to proposals to use all or part of it for nitrate production and fertilizer manufacturing.

FLOOD CONTROL