How many people reading this remember the 1970s and 1980s? I will bet not many. In the 1970s, farming was great. We could not do anything wrong. In the 1980s, it seemed we could not do anything right. In the 1970s, debt was a hedge against inflation because cash was eroding in value. In the 1980s, debt was your ruination and cash was everything.
While conditions have changed from a year ago, it is not as bad as during the 1980s when farmland values were falling and interest rates were increasing. Today’s problems could be short term in nature as we are caught in a squeeze between what it costs to raise a crop and what we will get paid when we deliver it.
We hope next year’s seed and fertilizer prices will reflect the lowered crop revenue. Diesel fuel has finally come down. There is no longer a rush to buy anything because supplies are increasing and prices are decreasing.
The next question to ask is how long will this downturn last?
If the current conditions extend into a second or third year, it could be difficult for those who borrowed heavily in recent years to make their payments. Barring another catastrophe, land values and rental rates are likely to go down, but not as drastically as they did 20 years ago when heavy debt loads and high interest rates combined to take a toll.
What is going to happen when all the government borrowing is put into the system? I would expect a short-lived boom followed by extreme inflation and high interest rates. That is a few years off, but I do not see how it can be avoided.
I am not an economist nor do I have an informed opinion. I just have an opinion. However, I believe in my opinion strongly enough to put it in writing for all to see. In another five or 10 years, we will know whether my opinion became fact or fiction.
The politicians in Washington like to say the markets have failed us. The problem is that the politicians interfered with the markets setting them up for failure. Requiring loaning money to people who do not have the ability to repay has never been good business. The politicians failed us first.
Business leaders who were after short-term gains at the expense of the future compounded the problem. “Things are going great; we can not stop now, so let’s give the dice another roll.”
The politicians blame this on greed when I call it stupidity. There is plenty of stupidity to go around for politicians and businessmen alike.
Today’s problem is that the government has interfered with the markets and is picking winners and losers. The insurance company AIG is set to receive another transfusion of cash bringing the total to over $150 billion dollars of taxpayer money (that is whose money it really is, there is no government money) to prop up this business.
The government is saying the money represents an 80 percent interest in AIG. I hope that it does not represent a 120 percent or 150 percent stake in what would be a failed business any other time.
My concern for the future is that with government intervention in business, housing, health care, and education, the capitalistic system of private ownership that offers both risk and reward will be replaced with bureaucrats. They will tell us how to run our business, how much health care we can have, as the value of an education is diminished, because no one appreciates anything that they got free. Since it is being given away, why work for it. There is no incentive to try harder.
The price for all this government interference will be increased regulations and higher taxes. The EPA has decided that farmers must control their dust. Last week the president stated he wants to eliminate the direct payment authorized by the Farm Bill to farms that have a gross income of over $500,000, which would include most medium-sized farms.
There will be fewer reasons to open a business, create a product people are willing to pay for, be productive, or work hard to get ahead. The government has already decided who will succeed. Those who do achieve will be taxed at an even higher rate and condemned for their “greed.”
I propose that we make a change in our money. The phrase “In God we trust,” can be eliminated and in its place, our money will say, “Why try?”
Rye is a Farm News staff writer and farmer from Hanlontown. Reach him by e-mail at firstname.lastname@example.org
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