Have we thought this through?...  

AgWeb readers really, really seem to dislike President Obama. And I think they are fairly reflective of farmers I know.

There is much to hate, of course.

• His strong support for ethanol
• Record high grain farm incomes during his administration
• A persistently low dollar
• His support of current farm policy
• Soaring farmland prices 
• Record low interest rates that don't budge

Of course, all these are easy to set aside because he's...well, socialist. And if there is one thing we don't like it's socialism for others. (See also: Medicare and seniors)

If only we could get some solid conservatives like Victor Davis Hanson in power. (What up with this guy and three names? Is he a poet or potential assassin?)

The Department of Agriculture no longer serves as a lifeline to millions of struggling homestead farmers. Instead, it is a vast, self-perpetuating postmodern bureaucracy with an amorphous budget of some $130 billion -- a sum far greater than the nation's net farm income this year. In fact, the more the Agriculture Department has pontificated about family farmers, the more they have vanished -- comprising now only about 1 percent of the American population.

Net farm income is expected in 2011 to reach its highest levels in more than three decades, as a rapidly growing and food-short world increasingly looks to the United States to provide it everything from soybeans and wheat to beef and fruit. Somebody should explain that good news to the Department of Agriculture: This year it will give a record $20 billion in various crop "supports" to the nation's wealthiest farmers -- with the richest 10 percent receiving more than 70 percent of all the redistributive payouts. If farmers on their own are making handsome profits, why, with a $1.6 trillion annual federal deficit, is the Department of Agriculture borrowing unprecedented amounts to subsidize them?
At least $5 billion will be in direct cash payouts. Yet no one in the USDA can explain why cotton and soybeans are subsidized, but not lettuce or carrots. In fact, 70 percent of all subsidies go to corn, wheat, cotton, rice and soybean farmers. Most other farmers receive no federal cash.
Yet somehow peach, melon and almond growers seem to be doing fine without government checks in the mail. Then there is the more than $5 billion in ethanol subsidies that goes to the nation's corn farmers to divert their acreage to produce transportation fuel. That program has somehow managed to cost the nation billions, send worldwide corn prices sky-high, and distort global trade in ethanol at the expense of far cheaper sugarcane. And while the Obama administration discourages new production of far cheaper transportation fuels derived from natural gas, oil, shale oil and tar sands, it is borrowing billions to pay farmers to grow uncompetitive fuel.
About every 10 years or so, public outrage forces Congress to promise to curtail the subsidy programs. But when the deadline arrives, our elected officials always find a trendy excuse like "green energy" or "national security" to continue welfare to agribusiness.
Free-market conservatives don't dare touch the Department of Agriculture, given the senatorial clout of Midwest farm states and the mythology of the independent American yeoman farmer. Don't expect left-wing Democrats to object, either. In a brilliantly conceived devil's bargain, the Department of Agriculture gives welfare to the wealthy on the one hand, while on the other sending more than $70 billion to the lower-income brackets in food stamps. [More]

The last thing farmers should hope for is conservative groundswell forcing an ill-timed plunge into austerity and recession. Meanwhile, right-wing think tanks from Cato to Heritage hate our farm policy, and are prodding politicians on the right fiercely. And making progress: the Coburn ethanol coup, for example.

To be sure, Obama wants to target toward smaller farmers, and maybe no program is better than sharing with vegetable growers and beginners. And the regulation uproar (which I consider to be a deliberate distraction from our sector's incongruous good times in this economy) is going to make it harder to do business as usual in areas like animal handling, runoff/erosion, and pollution.

But seriously, are these irritants sufficient  to outweigh the fact Obama is the subsidy-farmer's best friend in Washington? I can appreciate the protein sector going to war against the administration, but corn farmers?

Were it not for the alarming fiscal/social policies being touted by Republicans right now, I wonder how I can even countenance the President.

I hated 'em then...  

I hate 'em now. Not really, but some guys can't seem to stop catching a break.

The two had already sold slightly more than 300 acres outside Chicago, at an average of $25,000 per acre.

They took those proceeds and bought 4,000 acres, in 17 downstate counties, that they rented to other farmers. That left them 1,800 acres to farm corn and soybeans in Chicago's exurbs, including fewer than 1,000 acres they owned.

That's when fate smiled on them.

During the past year, corn prices have doubled on increased demand for use as livestock feed and biofuels, and soybean prices have risen by more than 50 percent.

As those prices rose, the Baltz brothers began selling their fertile land downstate that they paid $2,500 to $4,000 an acre for and which is valued at as much as $8,000 an acre. During the past 12 months alone they've sold more 2,000 acres. Now they are more active farmers in their own backyards.

During the past three months, they've purchased from lenders almost 1,000 acres of farmland in Will and Kendall counties that were once scheduled for homes, paying a fraction of what developers paid years ago.

"A lot of (banks) just want it off their books," Ed Baltz said. "We got a little more power because we got the cash to spend."

On a recent warm afternoon, the brothers stood behind a weathered, vacant white-frame home and barn north of Black Road in Shorewood, on 246 acres that, at their peak, sold for $65,000 an acre and in 2005 were annexed by the village and zoned for more than 400 single-family detached homes.

The Baltz brothers paid $3.6 million, or about $14,500 an acre, for land that already has subdivision utilities brought to the property line. This year, though, the only thing rising out of the dirt will be the corn that Bob Baltz planted last month. [ More]

 [Click to enlarge]

This is the world we live in. And it is germane to recall that Chicago was a mere military outpost when southern IL was booming.

I also use these examples to remind me my decisions about land (like yours) can have disproportionate consequences.

Why male models...  

Don't smile: They make them wear this stuff.

[via sullivan]

Hot cuisine...

Just in time for the fair season. 

This isn't the first time ole Chicken Charlie, named after the food trailers he trots around to California fairs, has gotten ink for his culinary experiments. One LA Weekly article calls him "the inventor of the deep-fried oreo" (though this seems like a controversial title, given that other people have laid claim to "beignets' country cousins"). The same story details his previous deep-fried feats:

In 2007, he gave the world deep-fried Coca Cola, frog legs, and Elvis' favorite peanut butter banana and honey sandwiches; in 2008, it was deep-fried White Castle burgers, spam, and pop tarts. This year, he did it again: a hot dog inside a hollowed-out zucchini boat, battered, deep-fried and served on a stick -- a creation he affectionately calls the zucchini-weeni; and a classic s'more, deep-fried in pancake batter.

That, folks, is a man living his version of the American dream. Oh yeah.

[More]

As far as I'm concerned it could only help the taste of Koolaid. 

 

The zucchini thing is just immoral.

Not from Pixar...  

Incredibly cool photos of Phobos passing Jupiter as seen from the Mars Express.



Mars has two moons, Deimos and Phobos. For orientation see this graphic:

 [Click to embiggen]

I remember a science fiction story where Mars explorers discovered an extremely low-orbit moon previously undetected. The leader of the expedition got to name it, and chose "Bottomos"

(snort)

(via bad astronomy)

Timesuck #42...  

Just added to my growing linklist of webcomics: Calamities of Nature

How high's the water?...

I know it is just coincidence at this point, but it is hard for Aaron and I not to find ourselves constantly bracing for large rains when each week seems to feature news like this:

• ND
• Central IL (just missed us!)
• China
• Canada
• IA

This is not a climate change told-you-so. One year doth not a climate make. But after 4 years of considerable replanting and harvesting issues due to wet weather, we're taking a hint as to which way to bet. 

And if we're wrong and drought resistant corn is the next Best Thing, we'll own up. But I'm thinking biotech won't be delivering us the answers we need (like corn that can stand 96 hours underwater), just the answers they have.

My tiling contractor just told me he no longer bids any jobs except complete systems. Maybe we're not the only ones tired of this weather twist.

OK, all this is a pile of anecdotes, but by the time good data is carefully analyzed it won't be much economic use.

More lead...

When I posted about the EPA and lead, some questioned the math/science of the correlation.  This excellent post by my favorite neuroscience blogger may help supply some reasons behind my opinion.

How I got to be liberal...

Like many of my readers, I have looked back at my words and discovered they no longer match up with modern "conservatism". This is of course viewed with alarm by those who do embrace the movement today in agriculture. It has puzzled me for some time.


In 2004, I wrote this about getting "lost".

The latest jolt though, was President Bush’s 2005 budget. My position on the political chart has always been in the conservative Republican camp. This is where I thought the guy I voted for was anchored as well. But if planning more tax cuts in the face of $500B deficits, erecting trade barriers for politically powerful industries, attacking sincere dissent as craven disloyalty are the beliefs of conservative Republicans today, then I must be something else. Maybe I’m a liberal…Republican. I’ve heard there may be as many as 6 or 7 of us. Now all these perceptions could simply be fusty middle-aged crankiness. Perhaps I am just not well-informed or smart enough to understand my principles are outdated. Regardless, my painfully-acquired intellectual tools and moral compass are all that I have to guide my decisions. [More]

Meanwhile, I have taken comfort in similar, though not identical adventures recounted by bloggers and commentators I admire, and who have vastly greater audiences than mine.

As most of you know, I read Andrew Sullivan (and have for years) regularly. Here is his account.

Back in the 1980s, conservatism was a thrilling empirical, reality-based challenge to overweening government power and omniscient liberal utopianism. Today, alas, it has become a victim of its own success, reliving past glories rather than tackling current problems. It is part secular dogma - no taxes, no debt, more war - and part religious dogma - no Muslims need apply; amend the federal constitution to keep gays in their place; no abortions even for rape and incest; more settlements on the West Bank to prepare for the End-Times. Although there were inklings back then - Stockman was right; Iran-Contra should have been a warning - they were still balanced by empiricism. Reagan raised taxes, withdrew from Lebanon, hated war, and tried to abolish all nuclear weapons on earth. The first Bush was an under-rated deficit-cutter and diplomat, a legacy doubly squandered by his son.
Now it's Levin-land: either total freedom or complete slavery and a rhetorical war based entirely on that binary ideological spectrum. In other words, ideological performance art: brain-dead, unaware of history, uninterested in policy detail, bored by empiricism, motivated primarily by sophistry, Manicheanism, and factional hatred. This is not without exceptions. Douthat, Brooks, Zakaria, Bacevich, Bartlett, Frum, Manzi, Salam, Lomborg, Mac Donald, et al. are still thinking. It's just that many of them are now deemed - absurdly - to be liberals. And none will have or does have any real impact on the base of the party.
Why? Because these thinkers are prepared to believe that the conservatism of the 1980s might have run its course, that new times might require new ideas, that we have been wrong in some areas, while right in others, that it is not a crime to reverse course when events encourage it, that we have to live in the world as it is, rather than as we would like it to be, that we can learn from mistakes and base policy on shifting reality.
In contrast, today's unconservative "conservatism" is a movement held together by cultural resentment and xenophobic panic. Until it wrests free of this trap, it deserves its Palinesque fate: an ideology wrapped in anachronism, and laced with venom. [More]

Sullivan captures many of of my thoughts along with the others he lists in this peculiar club of exclusion. While this can be seen as a whiny pushback against the criticisms of more righteous believers, all these writers have earned reputations for cogent commentary and thoughtful analysis. It is to be remembered to that ad hominen attacks are now the first line of intellectual defense for today's conservatism.


I have no illusions about members of the right being moved by even these voices, let alone mine, but I do think the essential flaws in modern conservatism will reduce both its effectiveness and appeal, and that the high water mark may already have been reached, despite massive funds being made available. It could be even wealth and political power cannot withstand the erosion by higher truth and sounder logic.
 It may also be the case that mainstream conservatism simply has not gotten down to the serious work of creating pragmatic solutions based on their slogans and dislikes. The ex-pats above all have, and found they can only afford so much ideology if problems are to be solved.

Consider health care. While still ranting (and I think that is apt) about ACA, card-carrying conservatives are discovering the range of possible options is actually fairly narrow. Despite their best offerts, some consensus could emerge. Ideology is trumped by reality.


I think, without much justification I'll admit, that conservatism will find a moderate center and once again be able to entertain a wide range of pragmatic positions. It is an inherent aspect of traditional conservatism, after all. It just may not occur in my lifetime. Until then, I am OK with the company I have found.

Two dots...

I would never had connected: the Trib and colonial farmland speculation.

At issue is language regarding the legal rights of creditors vis-à-vis debtors. The United States has long had a body of law regarding this issue. A few years ago, for instance, the real estate speculator Sam Zell bought the Chicago Tribune in a debt-leveraged buyout. The newspaper soon went broke, wiping out the employees’ stock ownership plan (ESOP). They sued under the fraudulent conveyance law, which says that if a creditor makes a loan without knowing how the debtor can pay in the normal course of business, the loan is assumed to have been made with the intent of foreclosing on property, and is deemed fraudulent.This law dates from colonial times, when British speculators eyed rich New York farmland. Their ploy was to extend loans to farmers, and then call in the loans when the farmer’s ability to pay was low, before the crop was harvested. This was indeed a liquidity problem – which financial opportunists turned into an asset grab. Some lenders, to be sure, created a genuine insolvency problem by making loans beyond the ability of the farmers to pay, and then would foreclose on their land. The colonies nullified such loans. Fraudulent conveyance laws have been kept on the books since the United States won its independence from Britain. [More]

The difference between illiquidity and insolvency will continue to be hotly debated as the Greek financial crisis proceeds. Farmers may have a hard time intuitively following this debate as with our asset prices soaring, solvency is not the first concern.

In general, as finance is scrutinized more intensely, I think due diligence of lenders will be stressed more. And as bailouts have proven politically damning (especially on the right), that well of relief may have gone dry.

Maybe ridicule will help...

From Alex Tabarrok at Marginal Revolution, one of the top econoblogs, this post under the title:

Not from The Onion:

The headline says it all:

House keeps farm subsidies, cuts food aid
Here are some of the other provisions which seem designed just to be ridiculed by Jon Stewart:

Directs the Agriculture Department to rewrite rules it issued in January meant to make school meals healthier. Republicans say the new rules, the first major overhaul of school lunches in 15 years, are too costly.
Forces USDA to report to Congress every time officials travel to promote the department’s “Know Your Farmer, Know Your Food” program, which supports locally grown food, and discourages the department from giving research grants to support local food systems. Large agribusiness has been critical of the department’s focus on these smaller food producers.
Prevents USDA from moving forward with new rules that would make it easier for smaller farmers and ranchers to sue large livestock companies on antitrust grounds. The proposed rules are meant to address the growing concentration of corporate power in agriculture.
Delays for more than a year new rules for reporting trades in derivatives, the complex financial instruments blamed for helping precipitate the 2008 financial crisis. A Republican amendment adopted Thursday would require the Commodity Futures Trading Commission, which funded in the bill, to first have other rules in place to facilitate its collection of derivatives market data.
Prevents the FDA from approving genetically modified salmon for human consumption, a decision set for later this year.
Questions the scope of Obama administration initiatives to put calories on menus and limit the marketing of unhealthy foods to children.

Don’t get me wrong, I’d probably do away with a number of these rules as well. But anyone who argues against making school meals healthier because it’s too expensive at the same time as they vote for keeping billions of dollars in farm subsidies is not concerned about expenses. What unites the bill is not ideology but protection of agribusiness.
Perhaps the most outrageous provision was one the good guys won:

Critics of farm subsidies did score one victory: The House voted to block a $147 million annual payment to Brazil’s cotton industry. The United States agreed to make that payment last year after Brazil’s industry complained to the World Trade Organization that Washington unfairly was subsidizing U.S. cotton farmers. The United States lost the WTO case and agreed to make the payments to Brazil as a settlement.

So not only have we been subsidizing cotton farmers but we have been paying Brazil to allow us to keep subsidizing cotton farmers. Incredible. I wonder whether this provision will make it into the final bill.
[With apologies for excerpting the whole post.]

It simply leaves me speechless that our industry (grain production) can look anyone in the eye and justify our farm program. Maybe this whole ugly budget mess will see much of it thrown under the bus.

Stoopid EPA...

The farmer's favorite bureaucratic target (except when wangling for ethanol mandates) is the EPA.  Our current ranting about "regulation" is unfocussed. This may be on purpose because closer examination might reveal the regulations being proposed are mostly to stop us from doing stuff we agree is bad: abusing animals, eroding soil, polluting water supplies, etc.

But never mentioned in the examples of EPA ineffectiveness or overshoot - and I freely admit that, like all laws, they never fit the problem exactly - are the stunning successes despised bureaucrats can accomplish.

This one few saw coming. The drop in the US crime rate.

There may also be a medical reason for the decline in crime. For decades, doctors have known that children with lots of lead in their blood are much more likely to be aggressive, violent and delinquent. In 1974, the Environmental Protection Agency required oil companies to stop putting lead in gasoline. At the same time, lead in paint was banned for any new home (though old buildings still have lead paint, which children can absorb).Tests have shown that the amount of lead in Americans' blood fell by four-fifths between 1975 and 1991. A 2007 study by the economist Jessica Wolpaw Reyes contended that the reduction in gasoline lead produced more than half of the decline in violent crime during the 1990s in the U.S. and might bring about greater declines in the future. Another economist, Rick Nevin, has made the same argument for other nations. [More]

It seems like I remember the usual carping about switching to unleaded gas.  It was "going to hurt our engines" and "cost us more". Sounds familiar.

This is one reason I am less alarmed about the claim over regulation strangling our sector's efficiency and innovativeness - that's what we always say.

It could also be grain farmers are rattling on about regulation just to divert attention away from eye-popping profits and to retain our "victim" status. 

Update: Here is an example from China about lead and children. I think the EPA decision back in the day was a good move then and this unexpected benefit is not to be despised.

It went thatta-way...

A tornado track from space.

[Source]

Another angle to consider...

As we hurtle toward default: the role of ratings agencies like Moody, Fitch, et al.

The short run picture is more complicated. Avoiding default is presumably the main concern, but if that could be achieved by a Dem capitulation to demands for large spending cuts, so much the better. On the other hand, maintaining any kind of credibility requires a downgrade well before default actually takes place, and probably a series of downgrades as the deadline approaches. Even a single downgrade would throw financial markets into disarray (among other things, investors who are required to hold AAA assets would have to dump Treasuries and, presumably, buy the bonds of other governments). That in turn would place huge pressure on the Republicans. While the idea of “not raising the debt ceiling” polls pretty well, the reality of “destroying the US credit rating” probably won’t. [More]

This is the wrinkle that makes blither about "technical default" so misleading, methinks. The debt market is poorly understood and badly predicted in relatively placid times. Debauching the benchmark debt instrument could provoke little or horrifically concatenated reactions, as outlined above. It seems foolish to find out which for very little gain.


We forget that too many internal investment rules, or mandatory legal guidelines use US Treasuries as THE standard of prudence. Moreover, the knock-on effect would ripple through all other "safe" investments which are actually backed by US bonds.


Where will nervous money go?

Without comment...

Watch live streaming video from pdf2011 at livestream.com

[via sullivan]

Junkbox Episode XXXNO...

It could be worse, I suppose.

• He could have been named Phipps (but then the jokes wouldn't work)
• If you can't say anything nice...you're a child of nature.
• Breaking news from the inflation front.
• Why don't we look at farming the way we look at manufacturing?
• The agribusiness market image could be better.
• The increasing rarity of a cool summer

Remember experts?...

It has occurred to me that one thing unsettling the many who feel comforted by hierarchical political and social systems is the erosion of the authority of The Expert. The presence of sages, living repositories of wisdom who could end discussion with a definitive statement, was alluring in an age of constantly arising means of dispute.

But the explosion of collective expertise - notably Wikipedia, which has only gotten better - has, if not displaced, certainly offered a competing knowledge system. And with it, our reliance on experts has been revealed as just one possible practice, even if only because we now know how essentially mundane were their methods for arriving at their opinions.

But there continues to be resistance to the idea that expertise itself has been called into question, and we can expect that resistance to continue. Experts, understandably, are apt to be annoyed by their devaluation, and are liable to make their displeasure felt. And the thing about experts is that a lot of people still feel disinclined to question them.Experts, geniuses, authorities, "authors"—we were taught to believe that these should be questioned, but until now have not often been given a way to do so, to seek out and test for ourselves the exact means by which they reached their conclusions. So long as we believe that there is such a thing as an expert rather than a fellow-investigator, then that person's views just by magic will be worth more than our own, no matter how much or how often actual events have shown this not to be the case. For us to have this magic thinking about "individualism" then is pernicious politically, intellectually, in every way. That is not to say that we don't value those who can lead the conversation. We'll need them more and more, those "who are able to marshal the wisdom of the network," to use Bob Stein's words. But they might be more like DJs, assembling new ways of looking at things from a huge variety of elements, than like than judges whose processes are secret, and whose opinions are sacred.And there's so much more to this. If my point of view needn't immediately eradicate yours—if we are having not a contest but an ongoing comparison, whether in politics, art or literary criticism, if "knowledge" is and will remain provisional (and we could put a huge shout-out to Rorty here, if we had the space and the breath) what would this mean to the quality of our discourse, or to the subsequent character and quality of "understanding"?Maybe disagreement doesn't have to be a battle to be fought to the death; it can be embraced, even savored. Wikipedia as it is now constituted lends enormous force to this argument. The ability to weigh conflicting opinions dispassionately and without requiring a "decision" is invaluable in understanding almost any serious question. That much is clear right now. There are many, many practical political, pedagogical and epistemological benefits yet to be investigated."Learning" no longer means sitting passively in a lecture hall or on in front of a television or in a library and waiting to receive the "authoritative" version of what the experts think is up as if it were a Communion wafer. For nearly 20 years we have had the Internet, now grown into a medium of almost infinite paths, where "learning" means that you can Twitter directly to people in Egypt to ask them what they really think about ElBaradei (and get answers), ask an author or critic to address a point you feel he may have missed (ditto), or share your own insights in countless forums where they will be read and admired (and/or savaged.) Knowledge is growing more broadly and immediately participatory and collaborative by the moment.The results of these collaborations, like Wikipedia, represent not just new methods of packaging knowledge, but a new vision of what might come to be meant by "knowledge": something more like what Marshall McLuhan called "a galaxy for insight.""The sadness of our age is characterized by the shackles of individualism," Bob Stein said. But are we throwing off those shackles, even as we speak? [More of a superb essay]

This new communal knowledge likewise does not match up well with our economic system which has seen a revival of the arch-individualistic ethos of Ayn Rand, despite their faint usefulness in any part of our real world. If intellectual property, for example, turns out to be much more common than just in John Galt's head, who cares if he sulks in Colorado?

It is also fair to say this idea is not broadly embraced or even acknowledged in the public, so why should we even consider it? The answer is, I believe, that that is the only productive time to consider it - any later and the question is essentially resolved.

Electronic collectivism has very quickly gone from being a sci-fi imagining to being a plausible scenario that more and more people, at least those active in the computer-culture, would endorse for us all. It will be objected that the ambitions of the cyber-sector don’t have that much to do with the life of the culture at large. But one could similarly say that the decisions made by a few thousand members of the investment banking community don’t affect us either. In fact, there is a connection between the ideas held by that minority and the lives that the rest of us live. [More]

I am excited to be witnessing these new forms of arbitration of competitive views, and their deployment by individuals all across the social spectrum to build new things for humanity. but more than that, the excitement of the possibilities these new tools create is the most effective counterbalance to my occasional bouts of despair over our current management of human affairs.

China is for real...

We are all tired of hearing about China and their remarkable economic progress. But you ain't seen nuttin' yet.

108 Giant Chinese Projects

This is a 280 mph train project.  ($5B)

Check out the rest at the above link.

The center cannot hold...

Things do fall apart. And it would appear there are worrisome signs for the fabled American middle class.

But the reality may be even more chilling: Perhaps U.S. business is learning to get by just fine, thank you, without middle-class U.S. consumers. And while that may be good news for chief executives and shareholders, it could be the beginning of a new and socially wrenching political logic that leaves the great American middle behind.Wall Street, which is paid for smarts, not sentiment, has this figured out. In a newspaper interview this month, Robert C. Doll, chief equity strategist at BlackRock, the largest money manager in the world, pointed out that the fortunes of U.S. companies and the fortunes of the country as a whole were diverging: “The U.S. stock market and the U.S. economy are increasingly different animals.”Mr. Doll’s explanation for the shift was the increasing importance of international markets rather than the domestic one — of the rising middle class in emerging markets, rather than the stagnating one back home. He said that over the next five years, 70 percent of the incremental earnings of S.&P. 500 companies would come from outside the United States.Among the most high-ranking executives, capitalizing on that shift has become standard operating practice. Speaking this week in Washington at an Ernst & Young conference on emerging markets (disclosure note: I moderated some sessions), Steve Taylor, a senior executive at the energy and water company Nalco, explained, “In most cases, it is dismantling something you have in mature markets to build in emerging markets. So you have to take that step. It is very painful, but you have to take that step.”The move to consumers from emerging markets is just part of the story. Within the United States, the advertising agencies on Madison Avenue are discovering that the age of the American mass consumer may be drawing to an end. Instead, a new white paper by Ad Age, the industry’s trade journal, argues that growing income inequality means the only buyers who count are those at the top.“Simply put, as the discrepancy between the rich and poor has become more and more stark, a small plutocracy of wealthy elites drives a larger and larger share of total consumer spending,” the paper concludes, citing research that shows the top 10 percent of U.S. households account for nearly 50 percent of all consumer spending. “It appears that mass affluence may be a thing of the past — and that luxury marketers should reconsider how their products appeal to elite consumers.” [More]

Unlike some observers, I think it is possible for the US to continue to divert economic returns to a few for some time.  Of course, I think this is a really, really bad idea, but the forces I see assembled in Congress and boardrooms are formidable.

The tipping point might come when and if we move beyond a consumer economy and technology wrings the last few suckers' games out of the financial sector (when all the player are equally fast and savvy and governments have little to throw into the pot).

Currently the finance sector contributes about 8% of our GDP. I have a hard time seeing how they provide that much value, and believe the essential smoke-and-mirrors aspect of the industry will not endure forever. With fewer newbies to fleece (since the folks with growing incomes won't be in the US and will be "protected" by restrictive governments), and tapped out public sectors, profits will have to be made from commerce with entities like themselves: large financial firms. I think those will tend to be low margin stalemated outcomes.

Meanwhile, the vastly depleted ranks of the middle class will not be able to provide the steady tide to support the economic froth of the ephemeral finance industry. It may take some time, but making money by sleight of hand will not prove, I think, a permanent part of our economy.

Testing email posting

This a try to see if I can post by email, and what it looks like.

Hand me the stake...

And I'll pound it through the vile heart of this planting debacle. We're almost done replanting beans.

We think.

Many neighbors are struggling to finish the first planting as well. (Both corn and beans)

Meanwhile, I've been fixing tile holes and breaks (mostly from the tile plow on old lines). Funny how the more tile you install the more maintenance they require.

And the 96℉ weather takes a bigger toll that I think at the time. So posting is really slow.

Forecasting with bonds...

At the risk of seeming defensive, Brian's comment about using the bond market to forecast default consequences/probabilities started me thinking where I came up with my position.  This article sums it up better that I have.

History suggests that such faith may prove to be misplaced in the long run. A study of 116 financial crises in 25 countries found that rates had a poor track record in foreshadowing financial difficulties, said Carmen Reinhart, a co-author of the analysis and the female economist whose work is most frequently cited by other researchers. European debt markets were “complacent” about the growing repayment risks there “even three years ago,” James Bullard, president of the Federal Reserve Bank of St. Louis, said in a May 18 interview.“People don’t worry about credit risk very much until suddenly they worry about it a lot,” said Jay Mueller, senior portfolio manager in Menomonee Falls, Wisconsin, for Wells Capital Management. “Then you can get a panic.” [More]

I guess I'm just assuming this is another instance where I will say, "Whoa - didn't see that coming!" and I'm acting on that assumption.

As always, your results may vary...

Hat's off, gentlemen...

A genius.  I have been reading Tyler Cowen's magnificent blog, Marginal Revolution, for several years thanks to a former reader. While I do not agree with all his conclusions, and I struggle to follow his mercurial intellect, I find his outpouring of opinion enlightning and strangely down to earth (as in dirt, in our profession).

I have posted before about his wildly popular e-book, The Great Stagnation, and found this succinct summary very helpful in fixing his hypothesis in my mind.



Minds like his are gifts to all of us. And the Internet and his prolific blogging helps to maximize the value of that gift.

Problem solved...

Just bill Uncle Sam. In a rather typical fashion Big Seed (I think I just made that up, BTW) has found a way 'round those pesky Brazilians who won't pay tech fees.

On February 18, Republicans in the House of Representatives defeated an obscure amendment to the House Appropriations bill by a 2-to-1 margin. The Kind Amendment would have eliminated $147 million dollars that the federal government pays every year directly to Brazilian cotton farmers. In an era of nationwide belt tightening, with funding for things like education and the U.S. Farm Bill on the chopping block, defending payments to Brazilian farmers may seem curious.
In order to understand this peculiar political move, one has to look all the way back to 2002, when Brazil filed a case in the WTO challenging U.S. cotton subsidies. In 2004, the Dispute Settlement Body of the WTO found in favor of Brazil, ruling that government subsidies afforded U.S. cotton producers an unfair advantage and suppressed the world market price, which damaged Brazil's interests. After multiple appeals the WTO upheld the original ruling, and by 2009 the U.S. still had not reformed its cotton programs. Brazil then asked the WTO for permission to retaliate against the U.S. by imposing trade sanctions. The WTO decided that Brazil was entitled to impose 100-percent tariffs on over 100 different goods of U.S. origin. Even more importantly, however, Brazil was entitled to suspend intellectual property rights for U.S. companies, including patent protections on genetically engineered seeds.
In WTO language, Brazil was allowed to suspend its obligations to U.S. companies under the Trade-related Aspects of Intellectual Property Rights (TRIPS) agreement. This constituted a major threat to the profits of U.S. agribusiness giants Monsanto and Pioneer, since Brazil is the second largest grower of biotech crops in the world. Fifty percent of Brazil’s corn harvest is engineered to produce the pesticide Bt, and Monsanto’s YieldGard VT Pro is a popular product among Brazilian corn farmers. By targeting the profits of major U.S. corporations, the Brazilian government put the U.S. in a tough spot: either let the subsidies stand and allow Brazilian farmers to plant Monsanto and Pioneer seeds without paying royalties, or substantially reform the cotton program. In essence, Brazil was pitting the interests of Big Agribusiness against those of Big Cotton, and the U.S. government was caught in the middle.
The two governments, however, managed to come up with a creative solution. In a 2009 WTO “framework agreement,” the U.S. created the Commodity Conservation Corporation (CCC), and Brazil created the Brazilian Cotton Institute (BCI). Rather than eliminating or substantially reforming cotton subsidies, the CCC pays the BCI $147 million dollars a year in “technical assistance,” which happens to be the same amount the WTO authorized for trade retaliation specifically for cotton payments. In essence, then, the U.S. government pays a subsidy to Brazilian cotton farmers every year to protect the U.S. cotton program—and the profits of companies like Monsanto and Pioneer.  [More]

This is why I get peeved with the NCGA occasionally. Why can't they get the CCC to pay my tech fees?

Now let's talk about how farmers hate on the deficit some more...

The river will win...

That's my bet, anyhoo. Missouri ag is incensed at the idea of leaving the blown Bird's-Point levees open.

Three Southern Illinois University professors have written a letter to President Obama asking him to leave the Birds Point Levee breach open, turning 130,000 acres of productive farmland into a permanent wasteland, er, wetland.In my view, the U.S. Army Corps of Engineers should rebuild the Birds Point levee if only to spite these three self-important individuals, who either don’t know, or don’t care, that they are rubbing salt in a very fresh wound and offending every hard-working farmer in America.Blake Hurst, president of the Missouri Farm Bureau Federation had this to say about the trio of egotists. “Those of us who remember the great flood of 1993 can write the script from here; environmental groups will use Mississippi County’s misfortune to attempt a land grab of massive proportions. “The professors, without bothering to provide any evidence, claim that 200 square miles of fertile farmland would better serve mankind as a swamp, instead of producing food the world so desperately needs. I’m not sure how big the ‘I Miss Malaria Caucus’ is, but it’s imperative we drown this foolish idea in its infancy. The levees must be repaired as soon as it dries enough for dirt to be moved.”Hurst noted that professors “are not only deluded, but self serving as well. The lack of concern they show for the families affected by the flood is breathtaking, the arrogance shown by their cavalier disregard for the efforts of generations of farmers is shocking. People are suffering, and the best that the academics can do is to propose a plan that will make the suffering permanent.”Hurst says the U.S. government “has a moral obligation to help those in the path of this man-made flood. The levees must be repaired, the ground must be restored, the roads, bridges, and homes replaced. [More]

The problem here is arrogance all right, but it's spread pretty evenly around. "Moral obligation"? This is the heady language of entrenched entitlement. It certainly captures the expectations from government

of many farmers, but whence does this "right" arise?

Let me see.  Public money pays for the levees, subsidizes the crops, and then covers the insurance claims. Is there no amount of dollars that would be undeserved? I doubt Blake would see it that way.

But the real problem is simply being ignored: the water's gotta go somewhere.

But the problem is one no one should be surprised about, experts said, and there is no easy solution.The leveesThe very things that protected Vidalia and thousands of other river residents up and down the Mississippi last month — levees — are part of the problem, according to Karen O’Neill, associate professor in the human ecology department at Rutgers University and author of a book focused on flood control, “Rivers by Design.”“The question is always ‘Where can the water go?’” O’Neill said.If levees force rising waters into a smaller area, she said, the water rises only within that area.“At some point, it’s just a question of volume,” O’Neill said. “Levees closer to the river give the river less room to spread at flood time.”Historically, she said, people built their houses on relatively higher land and planted crops in the low areas, taking the risk that those areas would be flooded at times whether they were protected by the levee or not.Now, though, as the design of levees becomes more advanced, O’Neill said, there’s a temptation to build them closer to the river to protect farmlands.“Private individuals and county and state government cut off some of the historic natural outlets, (as well),” she said. “The floodways that have been built since then do not replace the functions of these outlets.”Franklin Heitmuller, an assistant professor in the Department of Geography and Geology at the University of Southern Mississippi said, too, that levees are part of the problem.“The bad comes with the good,” he said.“Flood-control levees are absolutely critical in this day and time to protect lives, communities and properties,” he said. “If (the levees) were absent — or poorly built — we would have a big mess on our hands.”However, Heitmuller said, unintended problems arise.“At locations where flood-control levees reduce the area (for floodwater), the floodplain can build up more rapidly than would otherwise be expected if floodwaters and sediment were distributed across a larger area,” he said. [More]

Finally, let's submit that demand for farm output to  a little economic cost-benefit analysis. What if the public is paying more to serve farmers than they get back in commodities? And let me guess - these farmers are also outraged at the size of the federal debt and deficit.

I suspect it will take a few more outsized floods from now familiar heavy rain events for this new axiom to be accepted by bottom-land farmers. With the riverbed now above the surrounding cropland in many areas, artificial efforts to contain it simply raise the potential for ever more catastrophic failures.

Given a close race in some MO Congressional seat, the levees will likely get rebuilt. But my money is on the frequency of these events increasing dramatically. And the flooding to be worse as a result of a narrow view of what is "moral".

Junkbox, Episode DVDV...

I need a full time job.

• Bury me not on the lone prairie (Link broken and memory fails me) (Thanks, Derek)
• When Vikings run banks
• Inflation that really hurts (or so I've been told)
• Storms are not getting more deadly. Statistically.
• Computers and your children's reading ability
• US: Land of Low Taxes (really!)

The continuing housing bust...

I'm demo-ing a mini-excavator.  Besides being cuter than a speckled pup, I've semi-convinced myself it will be in many ways more useful that a backhoe. Anyhoo, there are some great deals now on equipment like this because the housing market, and hence construction - and housing prices -  can't seem to get restarted.

But comparing housing to stocks only adds to the confusing picture.

The point here is that houses are largely insulated from the kind of capital flows which drive everything from the stock market to the price of gold. There was a brief speculative bubble in housing from about 2000 to 2006, but even then the capital being deployed was largely borrowed rather than invested. Real estate is and always will be a game of debt: it’s almost unheard-of for people to buy up investment properties for cash.The other weird thing about the housing-stocks disconnect is that it seems to be peculiarly American. There have been gruesome property-market crashes in other countries too, of course — look at commercial property in Ireland, or speculative beach resorts in Spain. But in general, countries with much larger property bubbles than we saw in the U.S. have seen property prices fall much less during the bust. And indeed there are brand-new property bubbles popping up all over the Pacific Rim: what is it that’s causing huge demand in Sydney and Hong Kong and Shanghai and Vancouver which doesn’t seem to have any effect on San Francisco?I don’t have any good answers here, except to say that if housing is getting cheaper, in many ways that’s a good thing. Sure, it’s bad for banks, and it’s unpleasant for anybody who bought a house as an investment. But in general, the less money we Americans spend on housing every month, the more money we have to spend on more productive sectors of the economy, and the higher our disposable incomes. Falling house prices don’t make people richer. But they can make you feel richer than if you were spending hundreds of dollars more per month on a mortgage. [More]

The continuing loss of home equity may seem like good news for potential buyers, but it exacerbates an already tense investment/retirement picture for tens of millions of Americans. Small wonder that floating cutback schemes of any kind for SS and Medicare are not well received.

We're betting on default...

After pondering some deep ponders, we are girding our loins for a default by the US Treasury, to be followed by a deeper recession as the financial markets melt down.

The reason is simple: we can no longer negotiate - we engage in tests of will.

Perhaps more importantly, we have a large number of powerful people convinced we can default without major consequences.

I am reminded of that as I listen to those Republicans who claim that a small default on payment of principle and interest to creditors would not roil credit and equity markets.  Indeed, 17 Republican Senators have sent a letter to Treasury Secretary Tim Geithner saying that if a default on sovereign debt payments occurs, it is all Geithner’s fault.  The “reasoning” for this statement is the fact that the Treasury takes in much more money than is needed to pay outstanding debt on time and in full, so it’s Geithner’s responsibility to make sure that happens.What they don’t say is that a government services disruption of an unprecedented nature would then occur—after all, if Treasury pays the debt cost, it has to cut spending somewhere else.  And in a cash-in/cash-out system, only hundreds of thousands of layoffs and the issuance of IOUs to contractors, among other chaotic choices, would satisfy that “stubborn fact of life.”Apparently, the belief that no one in the United States would notice such layoffs, and the resulting economic disruption, is held as an article of faith by folks who ought to know better.In a separate letter, 23 GOP Senators wrote to President Obama calling upon him to create a budget plan that would assume no increase in the government’s ability to borrow.And, Stanley Druckenmiller reprises his 1995-96 role in a budget/debt debate by once again contending that a short term default wouldn’t disturb markets if a major deficit reduction plan emerged.(If I were 24 years old, seven feet tall, with a superior hook shot and athletic ability, I would be the center for the Los Angeles Lakers.  That is about as relevant as Druckenmiller’s hypothetical discussion of markets’ reactions to something that isn’t going to happen.)When politicians talk about politics, it is wise to listen.  They do it for a livelihood and if they are wrong, they lose their jobs.  Just like butchers and back surgery, however, don’t listen to politicians with little or no experience in modern financial engineering when they predict market behavior.Listen to market participants, who will lose their jobs if they are wrong.Or watch the rising costs of Credit Default Swaps (CDS) in the marketplace.  Without getting too technical, when those costs rise, it means that markets are losing faith in a form of financial product—in many cases, national sovereign debt.  The CDS market forecast the late and unlamented financial meltdown of three years ago before almost any other market mechanism.According to the Depository Trust and Clearing Corporation, which gathers information about global CDS, global traders and investors have increased their purchase of this form of insurance, doubling the level of such insurance on American sovereign debt in 12 months.So, who you gonna believe—the markets or the politicians?Here are a couple of ways to make that decision:*ask the next Senator you see about the Credit Default Swap situation;*ask the next Congressman you run across at a fund-raiser about the size of the global derivatives market;*ask the next Washington, D.C. politician you meet how many swaps and derivatives contracts he or she has personally arranged.Then, ask a Wall Street fixed-income trader the relationship between United States sovereign debt issuance and the global markets in these arcane financial instruments.  Finally, ask this trader for the legal and market implications of failures of counterparties to be able to perform as contractually obligated because the United States defaulted “just for a little while” on its debt payments.And, the coup de grace, just ask anyone if they think it is wise to test a theory about marketplace behavior when failure of that test could severely undermine the confidence of markets all over the world about the reliability and judgment of United States policymakers.A theory gaining ground on Capitol Hill posits that with all the turmoil in North Africa, the Middle East, in Japan, and with wars in Iraq, Afghanistan, and Libya, American Treasury securities will continue to be the first choice with global investors who want to protect their capital.  That’s like saying that we should foul our own nest because others’ nests are even worse. [More]

I think many assume there is a script somewhere and the actors are just peaking the dramatic tension. I do not. I think we are being led by badly misinformed, power-motivated politicians who would just as soon push the economy back into recession on the gamble it would be blamed on their opponent.

Because we really don't know how this failure would play out, there seems to be a curious sense of "Let's find out!" floating around DC-wannabees. After all, if it goes very badly there will be plenty of mud to be splashed on everyone, and perhaps more of it will stick to the other guy. If you are currently out of power, there could be a "What do we have to lose?" mentality.

At any rate, between now and August, barring any surprising breakthrough,  we will fumble for a position that could at least let us get this crop sold for a profit. After all, current prices aren't bad.

If I think of any other measures I'll share them. And hope I am wrong.