If this bubble is as bubbly as it looks, well then it’ll pop and result in a depression for US farmers. Even if they inflate the US dollar to the seventh circle of hell, eventually they will have to stop. At that point, US farming will likely go through a bust of epic proportions. It is ridiculous how low interest rates makes EVERYONE a speculator, and removes all safe alternatives. Unless you will settle for negative interest rates, of course.
Personally, I am currently in a position where I cannot buy a house because the residential property bubble in Sweden hasn’t deflated yet. If anything, it seems it has decided to re-ignite temporarily. What this means is that if I am to buy a house, I will have to budget for it losing 30-35% of its value the coming few years. And I just can’t see how its worth it. Unfortunately, rental properties are hard if not impossible to come buy.
…..and people are wondering why “the economy doesnt seem to work anymore”. Pah – you aint seen nothing yet. If you think this is bad, just wait until we have the next crisis.
I’m praying that we just have 1970s style stagflation or even a mild deflation. I’m just not quite convinced by the whole idea of a Weimar Republic or Austria styled hyperinflation. I think Ludwig von Mises once made a prediction about how there was going to be hyperinflation in England back in the early 1930s, but after experiencing hyperinflation for himself, but he was proven wrong. Ursula Webb, the future wife of economist John Hicks, reportedly attended this seminar and was a student of Mises. I added that little appositive just to show that I’m not trying to criticize Mises at all. Jonathan M.F. Catalan summarizes it wonderfully here.
http://www.economicthought.net/blog/?p=3754
This is a really very good site. I like your info a lot. Have you been
to this site. He’s a top trader, too http://tinyurl.com/yourmoney983
Is it a bubble if all the farmers are using the money as a capital investment? aka untaxed income.
Follow me here. Farmer Brown doesn’t wants to pay as little in taxes as possible (why give the government money? When did they help me sow/harvest my crop?). So he harvested 200 bushels of corn per acre @ 7 (American fiat dollars) = $1400 an acre gross. Farmer Brown has $400 an acre in costs per acre. So he’s got $1000 profit (theoretically) and he’s going to have to ship 60% off to the US gov because well… he’s running 10,000 acres. So instead of just gifting Uncle Sam $600,000, he’s going invest his harvest in a tax exempt capital investment (IE farmland). The problem is that there is a limited amount of land for sale and a giant cash pile that he has to spend before he pays taxes on it. So the demand to make a capital investment is giant, but the supply of said investment is limited. So the price of land goes up……..
Its only a bubble if corn leaves the $6-$7 bushel mark. Otherwise its common sense for every farmer (I mean businessman)…..
If we had statistics on how much lending has been done to purchase farmland then we could easily check this theory. If farmland is becoming less and less “leveraged” since people are simply re-investing profits into land, then you might have a case. That would also mean that since bankrupcy sales wouldn’t then soar if the economy got worse (corn falling in price, for instance), the market wouldn’t completely crash.
Know where we can find statistics on the amount of lending that has been done to finance farmland purchases?
He could invest in an irrigation system, a new tractor, high-tech monitoring and SCADA equipment, a bigger shed, possibly even research & development.
Eventually he is going to actually want a profit, so he can get paid.
My understanding is that in the USA the government eventually nabs these guys when the old man dies and the children inherit. Then there’s a deemed value on the farm and some sort of inheritance tax.