It has been nice of all the economists and ag pundits to spread the word that the ag economy is about to go belly up similar to what it did in the 1980s.

They have become prolific in their warnings of the pending contraction of the ag economy this cycle. I think that one reason why they want to make sure that farmers are made aware of a looming economic pitfall is that they did such a pathetically poor job of forecasting the downturn that became the ag depression of the 1980s.

Like generals fighting the last war, they want to make sure that everyone sees this one coming.

I haven’t kept up with what cycle analyst Jake Bernstein is doing these days, but in 1980 he gave a seminar that I attended in Chicago that laid out the economic calamity that was about to occur with remarkable foresight.

He said that the ag economy was a bubble although I don’t think they used that term back then. He said that commodity values would lose as much as 80 percent of their value in bear markets.

He said that debt would be crushing and bankruptcies would proliferate. When asked by a father about bringing a son into the operation, Bernstein warned against it if it required any expansion or leverage.

When I went home and told the family what I had learned they wouldn’t believe it because it was so counter to what the traditional ag press and advisors were saying.]

I was told, “But the Kiplinger letter says land will be $10,000 acre within the next decade.” The traditional ag pundits did not warn of a change in the trends and certainly did not forecast what the ag depression became.

The ag banking sector was blindsided resulting in record bank closings as foreclosures soared. The ag programs that were developed in Washington that brought some stability back from the chaos in the ag economy were primarily motivated by a desire to stabilize the ag banking sector.

Farm subsidies were meant to save the banks. The peak price for a farm sold on contract in Clay County Iowa was $4,000 per acre. Prime farmland plunged to $800 per acre in the depth of the contraction as the farm economy de-leveraged.

That was about exactly the 80 percent decline that Bernstein forecast in 1980.

Kiplinger was right about farmland values, but its timing was far off. In the 1980s Paul Volker declared war on inflation and took interest rates to 18 percent in order to drive a stake through its heart.

That produced a broad general economic recession that the ag depression was a part of. It also took the U.S. dollar soaring to record heights as the other countries converted all of their cash to dollars that where paying 18 percent returns invested in treasury bonds.

Nobody overseas could afford grain or goods priced in expensive dollars and exports dried up. I don’t think that the ag economists forecast much of any of it, as least not so that it was useful information to farmers then.

My father-in-law told me that the farm sector expected a crash after WWII because that is what happened following WWI. It didn’t happen following WWII, in part, because farmers were ready for it.

They were liquid and instead of a crash one of the strongest economic expansions occurred in the nation’s history.

Farmland prices have gone up, but that is about the only thing that resembles the 1980 economic peak. There is some leverage in the ag economy, but it is not the same. There is caution, too.

They are calling this a golden era because assets values have gone up, but they were not driven up by leverage. The leverage was subsidiary to the fact that assets values went up and wealth was created. Seventy-five percent of Iowa farmland has no mortgage on it.

When a farmer who owned 160 acres became worth $2 million, he bought a new tractor and a new machine shed for which he paid cash from profits from $7 corn.

He then took a mortgage to build a new house at near record low interest rates.

Yes, they took a vacation and they did borrow some money on a new combine. Yes, net farm income will decline, but $4 corn is just not quite the economic disaster that some would make it out to be.

It is nothing on a scale of comparison to the cornucopia of negative fundamentals experienced that deepened and prolonged the ag depression of the 1980s.

They are going to have to throw a lot more at the ag economy than that to crash it.

If interest rates go up today it will be because of a strengthening general economy which is not exactly a bearish event.

If they go up so much as to become a calamity as in the early 1980s none of us will have anything to worry about as there will be a global economic depression resulting as the federal government follows Detroit into bankruptcy.

Bad stuff can happen, Black Swans can crap on us, but the ag analysts and economists have got this economic downturn well forecasted until some new existentially bearish fundamental falls on us.

In 1980, the farm sector was as unprepared for what happened next as it could possibly have been which is why the result was so horrible. Economists missed that one so they are trying to make up for it this time. We hope it works.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.