DEFLATION: Comin-in strong

[Sheepwheat]

How come dumbass farmers could see this coming a mile away, yet our educated class got blindsided by it.

Some maybe. But in terms of land, I think 90% of farmers, including on here, seemed to think land has no where to go but up.

When commodities take a beating here, the “correction” will begin in farm country. Too many guys have made far too many assumptions about the future.

Reminds me of another time. When I was a wee lad. But this time it’s millions and millions of dollars, not pocket change as it was then.

[helmsdale]

I will put money on ,( not alot because I have very little to wager), some of these new young BTOs get a special deal. And pay quite a bit less than they originally bid for the land.

When the majority of the scheme revolves around ever increasing equity, a devaluation of their primary asset doesnt provide solvency.

The second part of the scheme was that age old idea of "spreading fixed costs over MORE acres". Ok, so you used to net $10/ac...
now you're losing $10/ac... Eventually deere is goings to want their machinery back, leasing companies come for the grain storage, and nobody will extend op loans for fertilizer, chemical, and seed.

You can spread losses over all the acres you want, but they're still losses.

[jazz]

Some maybe. .

At the very least, land has some productive value even if you overpay for. What return does a home provide. Canadas housing market dwarfs our farmland market. Pain will be there first.

Hell local Super BTO bought $10m worth this spring.

Now is not the time for expansion, its time for debt reduction.

[fjlip]

The hundreds of $ million combines, drills and tractors? Deep discounts?
maybe refuse the unit, eat the deposit, if any, I hear Pattison never took deposits....

Wonder if the message gets to auctions?

[furrowtickler]

When the majority of the scheme revolves around ever increasing equity, a devaluation of their primary asset doesnt provide solvency.

The second part of the scheme was that age old idea of "spreading fixed costs over MORE acres". Ok, so you used to net $10/ac...
now you're losing $10/ac... Eventually deere is goings to want their machinery back, leasing companies come for the grain storage, and nobody will extend op loans for fertilizer, chemical, and seed.

You can spread losses over all the acres you want, but they're still losses.

That started happening here last few years with very adverse weather and crop conditions
God forbid this crop don’t come off this year
Will be a wipe out for some

[AlbertaFarmer5]

I don't think this will be as simple as saying all asset classes are facing deflation.

There will be a huge discrepancy between needs and wants going forward.

The shortages and supply chain issues for the necessities of life aren't going to be rectified overnight, especially not in the face of lower prices and higher interest rates. Whereas all of the things that we wanted, and used the cheap credit to buy, and caused the pent-up demand all at once has already run its course.

But first, apparently we will throw the baby out with the bathwater, what an excellent way to demotivate energy suppliers and farmers and miners etc from increasing supply to meet The chronic shortages going forward.
None of the factors which caused these shortages have gone away. Some markets may have got ahead of themselves.

[SmallTimeOperator]

Asset values are about to get a whole lot cheaper. The central bank induced debt crisis is now breaking inflation like a twig. Equities, cryptos, commodities, retail, real estate now under heavy pressure. Central bankers and markets may not know what just hit them.

Human emotion cycle of greed, hope, fear, panic and sell is now in fast motion.

Keynes economics at-its-finest . . . .

I agree a debt crisis that what we have not seen in decades is unfolding before our eyes. The more the Bank of Canada hike it’s rate, the worse it’s gonna get.

The central bankers think that cranking up the interest rates will stop all inflation. But this time, I’m not so sure. Real Estate will deflate. Equities, crypto’s all taking a shellacking. Commodities, if there remains demand for them, could stay the course. But if demand ever goes over the cliff, then they will too.

But I think this time it’s different because the inflation of a lot of our goods is being driven by the price of oil. And that is not going to change no matter what interest rates are. As the cost to transport goods increases, the cost of said goods goes up. People are not going to stop eating, or buying the things they need to stay alive.

I see a triple whammy in the oil situation.

1) Carbon Tax - continues to increase every year. This drives up the cost of all goods because fuel prices increasing means cost of goods transported goes up. This is like mandated yearly inflation by the government.

2) Russia / Ukraine - the sanctions on Russia will increase European demand for oil and LNG from other sources, North America being one of them, for years to come. Many of the sanctions haven’t even kicked in yet so this is only going to get worse. USA will be the exporter to Europe. Canada will be of little help.

3) North American Politics - And I say North American because both Canada and the USA have regimes in place that are anti-oil development. There will be little increase in oil infrastructure while Biden/Trudeau are in charge. Increases in pipeline capacity, new pipelines, new tar sand development, and new oil exploration that are badly needed will not happen. The cancellations of the big projects already happened (Keystone XL, Tech Resources). We have a hard time building pipelines, and possibly no new pipelines will ever be built. Companies will be shy to invest the big dollars needed at this point to expand production. And the investors (ie. pension funds) who once had the oil industry’s back have left the building. The oil industry is moving towards self financing. Investors want to invest in green energy.

The central bankers and the governments of North America have not acknowledged that oil is a big driver of inflation and until they decide to do something about it, I think we are in trouble.

Just my opinion…

[fjlip]

Totally AGREE! Bang on STO, regime is accurate description of the devil bastards running us into disaster.
Energy/oil/gas needs to be abundant and affordable. Or the shit hits proverbial FAN....as we see currently.

[Austrian Economics]

As interest rates fall, asset prices will rise. As they fell close to zero in the last few years, asset prices predictably skyrocketed.

Now the reverse is occurring. I don't think it will last a year, but in the meantime, asset prices will fall.

The problem with falling asset prices is that you can find yourself insolvent in short order.
Assets < liabilities.

It doesn't matter that you may still be able to service the debt. Even if lenders are OK with that, they will be reluctant to loan you any more.

Not everyone is going to be able to simply renegotiate their loans. If the answer was that simple, why didn't millions of homeowners in the U.S. do just that in 2008?

Even if they could, the effect on the economy would be disastrous. When a creditor makes a loan for 10 years, it's because they have plans for that money 10 years down the road. They put into place investments that rely on that timely repayment in order to proceed. If everyone decided that they would not pay up for 20 years, then all those investment plans get postponed or cancelled. That's a guaranteed way to ensure a recession or depression.

[errolanderson]

How fast can prices drop? Retailers now caught with unwanted inventory discounting prices. Many asset classes now hit by a wave of deflationary pressures. Consumers are simply tapped out.

Once oil prices cave, inflation may be a distant memory. More rate hikes? Central bankers may have to give their collective heads-a-shake. Pause rate hikes? Even rate cuts in 2023? Failure of Keynes in full sight . . . .