Amortization is simply a method of paying off a loan by returning a little of the capital each year. These payments are called annuities and are composed of the interest and contributions to the sinking fund and the cost of conducting business. They are calculated for periods of ten to seventy-five years, and at the end of the period the mortgaged debt becomes extinguished and the property returns to the owner free and clear of all encumbrances. The prevailing interest rate on amortizable mortgages in France at present is 4.3 per cent. But by adding a little over 3.2 per cent to this, and paying 7.5 per cent a year, a French farmer can extinguish his debt within twenty years and obtain a satisfaction piece in full from his creditor. Thus, suppose he borrowed $10,000. He pays $750 annually twenty times for the interest, sinking fund and expenses. This makes a total of $15,000, interest included, and his debt is paid off. A farmer in the Southwestern States would pay this much for interest alone, and his debt would still be unsatisfied. Amortization has a two-fold value. It lessens the debtor's burden year by year and increases in an equal ratio the security of the lender, provided, of course, the sinking fund created by the accumulated annuities be properly and honestly kept for the redemption of the debentures. The Landschaften were very particular in this respect. Hence, their debentures obtained the confidence of the public, and through their means they were able to draw capital from all parts of the country for distribution among their members at the lowest rates on record. If a holder of a bond wished his money back he had merely to sell his bond in the open market. In this way fluidity was given to real estate securities for the first time in history and the dream of "mobilizing the soil" accomplished at last. For these reasons the Landschaften hold the most prominent place in the literature on land credit, and everybody who studies that subject must begin with them.
The old Landschaften, however, have many characteristics peculiar to their own localities and dates of their foundation. They are in fact governmental institutions, and their head officers are public functionaries clothed with summary executive and judiciary powers over the property, and, to some extent, over the actions of their associate members. These powers were simply an enlargement of the feudal and manorial rights possessed by princes in early times, and so, in many respects, are contrary to modern ideas. But the new Landschaften, which have adopted the best principles, present points worthy of careful study. A description of these latter institutions is taken from the excellent report of Sir F.A. Nicholson to the Madras Presidency in India.