Right or wrong? -- Roy Smith
I wrote last week’s column after what I thought was a volatile market in grain futures. There were several things I had on my mind that I thought would provoke reaction from my readers. In fact so far all of the comments following that column have been positive. I thought at the very least someone would take me to task for saying grain farmers should be embarrassed for taking the direct payment from FSA with cash corn over $6.00 per bushel.
As it turned out, this week was even more volatile than last week, especially in the stock market. When I listen to the various commentators I hear some things that make me wonder why I see things differently than they do. Not only does it seem as if the government is out of control on some ways, it seems as if there is a lot of backward logic being spread about.
For instance, one of the factors that was seen as driving the market gyrations this week was the lack of growth in the economy. Why the economy have to grow? If population were maintained at the current level and consumption remained where it is today, wouldn’t we be better off in the long run? We would not need as many new highways, new schools and other infrastructure. There would be more resources for the poor and middle class and less would be needed to keep the population at its current standard of living.
Another factor that seems backward is the price of houses. We hear from the media that housing prices have not risen recently and in some cases have dropped. That is supposedly a bad thing. However, if you want to buy a house, is it not better for housing prices to be stable or drop slightly? People who want to sell a house wish prices were higher. Real estate brokers and land speculators wish prices would continue to inflate. Yet that is what got the economy into the recession in the first place.
My community is between the cities of Omaha and Lincoln. If you have a good house to sell for $100,000 or $150,000, it will sell very quickly. If you want to sell a house for $500,000, be prepared to have it on the market for a long time. That should tell us something about the real value of houses!
Interest rates seem to be just the opposite. The government is intentionally keeping interest rates low. They promote this as good for the economy. However, for individuals on fixed incomes and non profit organizations, extremely low interest rates are a death knell. I am involved with two non profit organizations, a church with a large population of senior citizens and a rural cemetery. Both of these groups have problems managing their budgets when interest rates are so low.
If the interest on CD’s and bonds were suddenly to jump from one percent to four percent think how much money would become available for those individuals for every day spending. For most of my career the interest rate on my farm operating note was between six and ten percent. It is difficult for me to think that having interest rates back in that range would ruin the economy.