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Why a Farm is a Good Investment in an Entitlement Society

‘Asia has a big advantage,’ said our old friend Marc Faber, at the Halkin conference in London. ‘It doesn’t have the same entitlement culture of the developed countries.’

‘Entitlement culture…’

He was talking about zombies. People who take, but don’t give. Parasites on the productive economy.

Of course, zombies come in all shapes and sizes. Many are decent people…who work hard… do their best. They’ve been forced… or seduced…into zombiedom, often without realising it.

Here’s a note we found in our inbox yesterday. The writer explains why there are so many troubled zombies in the Midwest. They are zombies because they depend on government subsidies and giveaways for their money. They are troubled because they know the country is going broke:

‘I’m from Nebraska. Middle America understands the subsidies that benefit them (and they will be tireless in defense of ag [agricultural] subsidies especially; the fastest growing luxury car market in the US is Omaha). But they also understand that spending and deficits are on a crazy track that is undeniably unsustainable. And that, plus the fear of a government that it seems can only grow, overwhelms the desire for subsidies (and they know Republicans will never really stop ag subsidies since there are three times as many senators from Nebraska and the two Dakotas as there are from California).

‘The ag economy is thriving to a great extent because of the ethanol mandate which has been very effective in more than doubling the price of corn (now, often above the price of wheat per bushel, which until recently was unheard of) as we burn food for fuel.’

Zombies to the left. Zombies to the right. And zombies on every street corner when you’re trying to get home.

It’s the “entitlement society“, as Marc puts it. Half the households in the US tap into money that doesn’t belong to them – they’re beneficiaries of money from the government. And they are not likely to give it up.

‘Once you get into a situation like that, where people have a legal right to receive money from the government, it is almost impossible to stop it,’ Marc continued.

So what will happen now, one member of the audience wanted to know.

‘I don’t know. No one knows. But the best thing you can do to protect yourself is probably to buy a farm in a remote location.’

Marc is not necessarily bullish on agriculture prices. Instead, he is bearish on central banks and central governments. Between the two of them, they will bring on a disaster. Having a little farm of your own may be a good investment – no matter what happens to the price of wheat and soybeans.

Some things are more important than money. Like survival, for instance.

‘The history of the human race is a history of war,’ says Marc. ‘And the next war may not be groups of tanks facing off with one another. I can imagine that London’s water or electricity will be cut off. Or, the system of internet connections…or the electronic banking system… will be shut down.

‘We all depend on those things much more than we realise. Society has become very complex and very interdependent. A breakdown anywhere could mean a breakdown of the whole system. That’s when you’ll wish you had followed my advice and gotten a farm where you could be more or less self-sufficient… at least for a while.

‘That could be the most important investment you ever make.’

In terms of return on investment, a farm may not be the best move you ever make. But neither is a smoke detector. But now, central bankers and central governments have matches in their hands and pyromania on their minds. It’s time to take precautions.

Regards,

Bill Bonner
for The Daily Reckoning Australia

From the Archives…

China’s GDP Growth Ponzi Scheme
19-10-2012 – Greg Canavan

An Australian Property Boom and Bust all at Once
18-10-2012 – Greg Canavan

The Fed’s New Stooge
17-10-2012 – Bill Bonner

Discordian Religious Advice for the Investor
16-10-2012 – Nick Hubble

Electric Cars and Platinum Mines
15-10-2012 – Dan Denning

2 Comments

  1. Ross says:

    Ethanol is only the second part of the story. It kicked in when the rest of the world got flattened and export volumes proved unsustainable. The same scenario as Europe’s butter mountains was forecast and the politicians knew that the bankers and industrial farmers and the US ag equipment and pesticide suppliers would soon be rolling out Bob Dylan and John Melloncamp and Tom Petty if they didn’t act.

    http://www.youtube.com/watch?v=6RlUryDUv4Q

    the answer is always more impetus and new boondoggles in the name of the little guy who gets less than 20% of the benefit and none of the lifestyle and no prospect of ever seeing a high enough world price that would get the family farm junkies off the junk.

    The first part was the subsidies driving industrial farm production volumes up to the extent that it lowered (smashed) world prices and raised farm land prices for bankers. The lower the world price and the high the subsidy to keeping the little farmer just above the survival line the better. The industrial farmer lives on the delta between his production price and the little guy’s production price with his multiple then determined by only by his output and how much rent he pays to his banker who ramps up the leverage on the industrial operation.

    The trouble revisited when US production got smashed by the natural bad season cycle. Meanwhile unsubsidised farmers on productive acreage globally had already got wiped out and a global inventory pool that once relied upon supply diversity didn’t exist anymore. But you can’t turn Zimbabwe back on in 5 minutes and the Brits don’t show any sign of showing up with the cash they promised in their Chatham House deal let alone making reparations for the unfair economic sanctions that went along with the dirty trick narrative they played to avoid paying what was due.

    And if a few did survive in desperate Africa the US government will send in the aid cargo grain during a drought to wipe out the last of them that turned out a poor yield crop into what should have been partially compensated by higher prices before the “liberal” aid cargo showed up with George Clooney’s or Angelina Jolie’s smiling assassin faces painted on it.

    And you want to buy into this mess?

  2. Your black walnut proposal sounds fine. A few years ago wWe tried a similar thing in NZ. We planted 140 hectares in radiata pine which has about a 25 year cycle. Eight years later the Labour Government introduced a carbon tax which made the whole enterprise uneconomic. Luckily (and that’s all it was) they left a small window b4 the tax became operative. We cut and mulched 100 hectares of the trees, losing the entire investment plus the opportunity cost of not grazing the land for 8 years. We learned the hard way that the obvious market and natural risks of growing long cycle crops pale by comparison with political risk posed by governments elected by the people, for the people.

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