By design or by accident, a trap is about to spring shut.

By design or by accident, a trap is about to spring shut. The Farming Bubble The Farming Bubble For some time I have been arguing that real estate prices are rising not because of a recovery in the market but because of inflationary pressures by the Federal Reserve to artificially boost them - a bubble. The Administration cannot afford to have a depressed real estate market because it was the real estate market that tanked the economy in the first place and a failure of that market to recover would illustrate quite plainly the failure of the Obama Administration policies. More than that, the RE crisis has allowed government to make real, fundamental changes in the way America operates, has allowed the federal government to intrude in what has traditionally been a local industry. So, thanks to the injudicious use of the printing press and artificially low interest rates the price of housing is on the rise. That was to be expected; real estate is not portable and there is no more of it being made, so when the value of a dollar declines the price of a property rises. If interest rates were free to rise we would see less price increase but the Fed will not allow that either. So a second bubble is in the works, and one wonders if that bubble will not be popped at a critical moment as the last was purposely popped just before the election of 2008, handing the Democrats an electoral sweep. (See William Been’s Masters of Audacity and Deceit to understand how Democrats and forces on the Left conspired to create then burst that bubble to hand themselves political power and put in place a government dedicated to “the work of remaking America”.) Housing is one of the tools used by tyrants to control their populations. Free societies generally feature private dwellings owned by the individuals while statist societies generally feature communal housing owned by government or quasi-governmental, heavily regulated private corporations. This is psychologically important; the owner of a home feels it is his castle and that he is a stakeholder in society. He will demand a voice. A non-owner feels he is a guest and lucky to have a place to live, and is quite willing to allow others to make his decisions. We see that even in our own society where the poor inhabit property owned by others and care little for the future or for the greater good but merely look for ways to get what they want at the moment; they do not feel vested in society but are mere objects within it. Control of housing is a great power for any society, and the government being involved in housing means government has power over people. HUD may have said it sought home ownership for everybody - and demanded banks make subprime loans as a result - but in the end what they wanted was to establish their right to say who lives where. This is an enormous power. But we are covering old ground here. Here is the new. According to the American Enterprise Institute: “Farmers have cash, and nowhere to invest it but farmland. Farmers largely ignore equities, as they tend to balance the inherent risk in farming by investing in what they perceive as less risky places. We aren’t dumb, however, and have figured out that it’s a losing game to invest in bonds or CDs at rates less than inflation while we’re in tax brackets we never even knew existed. So, farmland prices are booming. Land prices in the heart of the Corn Belt have increased at a double-digit rate in six of the last seven years. According to Federal Reserve studies, farmland prices were up 15 percent last year in the most productive part of the Corn Belt, and 26 percent in the western Corn Belt and high plains. Closer to home, a neighbor planning his estate had an appraisal done in 2010 and again in late 2012. In that two-year period, the value of his farm had doubled. According to Iowa State economist Mike Duffy, Iowa land selling for $2,275 per acre a decade ago is now at $8,700 per acre. A farm recently sold in Iowa for $21,900 per acre. A debt-to-asset ratio of 30 percent can enter dangerous territory with a land price drop of 50 percent, which sounds like a lot, until you remember that is a price level last seen only 24 months ago in much of the Midwest. Although much of the increase in land prices has been driven by well-financed farmers and outside investors (many paying a large portion of the purchase price in cash), there are disturbing trends occurring on farm balance sheets. The Kansas Farm Management Association reports that debt-to-equity ratios are highest in large farms, which have over a million dollars in sales. Although the debt-to-asset ratio is low even in the largest farms in Kansas, it’s higher than it was in 1979, shortly before the farmland crash of the eighties. As former home owners in Las Vegas and Southern California can attest, equity can melt away in a hurry. A debt-to-asset ratio of 30 percent can enter dangerous territory with a land price drop of 50 percent, which sounds like a lot, until you remember that is a price level last seen only 24 months ago in much of the Midwest.” And as farmland prices rise interest rates remain at record lows, encouraging borrowing to purchase more farmland. What is left unsaid here is that there is another driver of farm value and that is the ethanol mandate for fuel; the price of corn is artificially inflated because government demands the addition of ethanol to gasoline, a practice that is increasingly silly given the revolution in hydraulic fracturing which will turn the United States into one of the world’s great oil producers. With oil poised to drop in price dramatically and with global warming theory on the ropes we may eventually see a relaxation of ethanol standards - and that will trigger a collapse in the corn market. Here is a classic bubble. What will happen then? Either government steps in to stabilize the market or land is purchased for pennies on the dollar by people like George Soros, who has used government mismanagement to buy up farmland in the past. Canada Free Press There has been a war waged by this administration on the family farm. See here here and here Oh, and there is a concerted attempt to control water. Control the food supply and you control the People Control the food supply and you control the People. There is nothing more dangerous to the Progressive agenda than the family farm. That is the reason why Stalin fomented the great famine in Ukraine; to wipe out the small farmers, the Kulaks. They presented a danger to his collectivization then, and the modern family farm presents a danger to collectivists like Barack Obama now. If the farmland bubble bursts farms will owe more for land than it is worth, and they will find themselves at the mercy of the banks and Washington. Farmers will move from owners to tenants as big corporations buy their land up, or will end up as serf like tenant farmers getting their marching orders from the government. Either way they will come under the thumb of outside forces. America’s food supply will be in the hands of oligarchs. Then, if push comes to shove, anyone who refuses to toe the line will go hungry. As the old saying goes, any society is just three meals away from revolution. The famine in Somalia during the civil war there was entirely artificial; an attempt to starve out the enemy. If such a tactic can be employed there, where most of the people have some agricultural skills, how much more effective would it be in the United States, a land where farming is a highly specialized industry? By design or by accident, a trap is about to spring shut.