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sw363535
Honored Advisor

interest rates question? or thought

Much has been commented on the fed's monetary policy and resulting intrest rates since 2008 on this board.  That's right it has been that long.  7 years.....  Reminds me how much I miss Jr's comments and appreciate you guys who keep us alert on monetary policy...

 

Simple question this time............ Can you think of any odd things that happen to the ag. economy and markets because of the easy and cheap access to money, money no one wants in their hands very long........ no one knows where to invest........  etc.

 

I was recently reminded of one I would not have thought of.

 

Rumor was an area guy, not a large established cattleman, bought 1800 heifers, A-I'ed em, followed with a sizeable group of cleanup bulls and resold them within a few months as P2 & P3 heifers.... with assumed profits.  My entry for an unexpected effect of low interest rates..... rebuilding the cattle numbers at warp speed...

 

How many ways are cheap interest rates distorting normal economic activity...??  And therefore distorting markets?

 

 

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3 Replies
Red Steele
Veteran Advisor

Re: interest rates question? or thought

$12000 per acre land sales would not have happened without near zero interest rates. And, after 7 years, people start to think of zero as the new normal.

 

Really gives a whole another dimension to calling our fearless leaders the "zero's".

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BA Deere
Honored Advisor

Re: interest rates question? or thought

That is a good point that you bring up SW. And like Red said about land prices.  Low interest rates have been a big part of the cheap food policy.  All the big hog setups were helped along by cheap interest that artifical economics brought about over-production in pork.  Seed companies could get away with soaking us +$300 for seedcorn because "you don`t have to pay until next year and it`s zero% interest  wink wink nudge nudge

 

That cheap interest also got us in trouble because it encouraged us to over buy on machinery to avoid taxes that we made on the windfall years.  Now some of us are making payments on machinery bought during $7 corn and it has to be paid for with now after-tax dollars and $3.50 corn.  And to add insult to injury is now starting to require some repairs.

sw363535
Honored Advisor

Re: interest rates question? or thought

2   The Best People on Earth,,,,,,,,,,,,,,you know, those folks who came out of the early to mid 1900's with savings accounts built slowly and steadily on compounding interest and a steady job.  The folks who had enough money or grain to cash in and buy bonds when the US "really" needed a loan...... Well they are just a footnote in history now........ monetary policy put those folks through a genocide...

 

 

It is screwing up my marketing plans,,,,, Unconsiously, I am hoarding grain when i see the downturn coming and have lost faith in cash savings.  Marketing guru's say sitting on grain is what farmers do.  But the successful folks I grew up watching farm were  good  money managers.

A horrible change brought on by monitary policy, the two avenues of wealth improvement, savings and education have become a monetary nightmare for the young if they are not very well grounded mentally..

 

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