Yellow Pea Chart

[Landdownunder]

Perhaps an increase in money supply has kept the price of food relatively inexpensive.

Need more info behind this statement interesting

[AlbertaFarmer5]

It is complex.

A few years ago, my brother spec'd out a new Ford with the same specs and technology as his 2002.

I believe a new truck was $2000 more.

He is on here, so maybe he can add to this.

Us farmers like to complain about the deflation of our products relative to everything else.

But I'd say that automotive manufacturers have us beat. With the exception of this very recent price increase, they have been selling increasingly better, more reliable, safer and more efficient, product with more features and creature comforts and better warranties, and meeting ever increasing government regulations since the beginning of the industry, and still doing it with prices that routinely underperform inflation.

There is no apples to apples comparison. And if you could still get a vehicle as basic as it was in 19xx, it probably wouldn't much more than it did then.

[sumdumguy]

Reliability Trade-Off

[sumdumguy]

True AF5. Quality and reliability of vehicles, ATV’s, ski-doos is evident. But the trade-off is that it is so easy for manufacturers to add some “tech advancements” that take away our ability to repair our own vehicles, tractors, machinery. Guess we can’t have it both ways. RV’s for example, they will have us by the short ones. Computers will run everything. The other day I read somewhere that the self-driving computer in a Tesla locked at 140, fix that,eh?

[wheatking16]

Perhaps an increase in money supply has kept the price of food relatively inexpensive.

Need more info behind this statement interesting

I am not a monetary policy expert; however, this is my high-level understanding of how this applies to agriculture.

This is a very simplistic explanation of my thesis.

Perhaps someone can add or correct me on some of these points.

An increase in money supply was required to finance WWI resulting in most countries abandoning the gold standard.

The printing of money with the increased availability allowed for increased capital expenditure, credit, etc.

The war accelerated an incredible technological revolution that increased efficiencies in flight, motorized travel, medicine, communications, etc.

For example, at the beginning of the war, the French with the "greatest military of the world" dressed in similar uniforms and employing the same tactics as Napoleon's armies 100 years prior were literally massacred by the Germans dressing in grey blending into the landscape with superior weaponry.

It can be argued that the technological advancements would not have been possible or happened as quickly with the gold standard system of the day.

Each government required more currency than was available with the increased supply driving investment.

I apply this concept that the increase in money supply is/was necessary to drive investment in ag technology and the associated efficiencies in production exceeding relative food demand growth.

Access to more money leads to more investment leading to more technology leading to more production.

In essence, the money supply has grown at a faster rate than population growth.

As an aside.

My buddy tells me the most profitable year on their farm was 1918.

They had a $40,000 profit and could buy a house for $800.

That is how I see it.

[AlbertaFarmer5]

Very well said, wheatKing.

I would add; that what you described, expanding the money supply faster than population expands, worked fairly sustainably as long as that money was being used to increase productivity in general. But in recent times we are using the same theory except using it to discourage productivity, by paying people not to work, by using it to fuel real estate bubbles and other bubbles in non-productive assets.

Which is starving the productive industries of capital and labor, and driving up their costs.
You almost couldn't come up with a worse plan to destroy productivity. Well actually you could, you could tax energy and overregulate everything else, oh wait, we already do that too.

[wheatking16]

Very well said, wheatKing.

I would add; that what you described, expanding the money supply faster than population expands, worked fairly sustainably as long as that money was being used to increase productivity in general. But in recent times we are using the same theory except using it to discourage productivity, by paying people not to work, by using it to fuel real estate bubbles and other bubbles in non-productive assets.

Which is starving the productive industries of capital and labor, and driving up their costs.
You almost couldn't come up with a worse plan to destroy productivity. Well actually you could, you could tax energy and overregulate everything else, oh wait, we already do that too.

I like to consider how the low-interest rate environment has encouraged investment and debt at the expense of savings.

Why save?

Chasing returns via speculation has been an effective investment strategy for the past 30 years.

Buy a house or land.

Refinance and use that equity for additional asset accumulation.

Rinse and repeat.

My first loan was on a 1994 Dodge pickup with an interest rate below 10%.

I remember thinking how smart I was to get that low of an interest rate.

The interest rate has been on a downtrend ever since and that was a 28-year high.

This chart is a 10-year Canadian Government Bond Yield chart to get a perspective.



Canadian Deposit Interest Rate



Why save? Speculate!