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South Central Iowa | A thousand opinions on our crumbs.
The real subsidies are in the stock market and housing.
The stock market, through the tax code, receives the free cash of the greater portion of the American public. What’s more, that money is captive, long-only. Additionally, Federal Reserve policy encourages asset inflation by decreasing bond yields and (along with the tax code again) encouraging corporations to hold cash, purchase stock, or form mergers instead of paying dividends. These are subsidies to equity investments that massively inflate their value. This also is why our land is so high and you old farmers get to believe you elevated yourself alone; your equity got to inflate (and Conan or any other benefactors as well). The independent investors leave the stocks in portions and buy other assets to diversify, further trickling in the monetary policy into our market and supporting land prices with inflated equity wealth.
The housing benefits from the monetary policy as well, many magnitudes greater than us. People who can’t afford houses buy them on 30 year notes because of low interest. This limits supply driving up prices, which in turn is a subsidy to developers to build more and more as fast and cheaply as possible with the greatest markup achievable. Further, the banks are supported by government insured loans on the secondary market. This removes the banks responsibility to be diligent. Make every loan you can and the Federal Home Loan Mortgage Corporation will assume all risks. This is so many orders larger than us, it’s last like an anthill aside a mountain.
There are many larger subsidies than Crop Insurance or MFP, and most all of you benefited from them without knowing it. Our benefits are minuscule compared to those in Equities, Banking, and Housing though.
Side note: if you bought land in 199X for $500 or something an acre and it’s worth $8,000 now, and you think you pulled yourself up on your own and that was all your own doing: you really need to consider the impact of government policy and how much you benefited from it. Specifically: Monetary Policy (both how it made the 80’s crash and how it inflated your value since 2007), Ethanol Policy, Trade Policy, and Crop Insurance.
Remember there but by the grace of God go I. You old benefited in ways you may or may not have realized, you with good planting weather benefit from prices that other producers may not, you with grain only see windfall where livestock users see decimation, you who are part of a generational farm shouldn’t be looking at your struggling neighbor like a vulture, same for those who are young looking at the old. We’ll all be there some day, or our descendants will wear the shoes we didn’t; least that is our hope.
Edited by Conan the Farmer 5/21/2019 18:42
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The Real Subsidy
