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April 2010 Archive for Economic Sense

RSS By: Matt Bogard, AgWeb.com

Matt's primary interest is in the biotech industry and ag policy.

Financial Reform or More Handouts to Wall Street

Apr 27, 2010
By Matt Bogard

Leading up to the financial crisis we saw the government manipulating markets by socially planning interest rates through the fed, which created excessive growth in the housing market and speculation. Even after warnings by economists about the dangers of the current stance of monetary policy, investors continued to take on more risk, partly because they knew the fed would attempt to engineer a soft landing once the bubble burst, partly because government sponsored organizations like Freddie and Fannie would continue take on more private sector risk, and partly because of regulatory mandates such as the community reinvestment act ( which economists warned us about from the beginning).

Despite Wall Street being the most regulated industry in the U.S. economy, these government interventions led to one of the worst financial meltdowns we've seen since the depression. In response, the government implemented a bailout scheme (TARP) which has enraged voters across the country. This was despite many alternative solutions such as speed bankruptcy or debt to equity conversions.

Now, congress is planning a financial reform package. While commentators are claiming that this is a way to 'punish' Wall Street and prevent the next crisis (based on the false assumptions that the crisis was due only to excessive greed and very complicated derivatives), it is nothing of the sort. It is nothing more than another handout staked on taxpayer dollars.

In a recent article from Bloomburg news we find the following:

"Government rules will establish quasi-monopolies, and discourage competition. In exchange, the affected firms will be exposed to constant bureaucratic meddling, but will have the ability to manage this by influencing political appointments.. The Dodd bill will establish a set of companies that will be implicitly established as too big to fail, or TBTF. These firms will, according to Plosser, have an advantage: “when stock and bondholders of TBTF firms win, they profit, but when they lose, they become eligible for a government bailout.This will lower the cost of capital for the firms so designated, since lenders will understand that the U.S. government will be there should calamity ensue. If you lend to a little guy, you lose if he runs into trouble. If you lend to a big guy, you get your money back from taxpayers."

And we see that Goldman Sachs' stock prices continue to climb and we have yet to address the root causes of the financial crisis. Instead, it has become an excuse for doling out more political favors at the taxpayer's expense, and forwarding political agendas. In other words, more of the same failed policies that led to the crisis in the first place. Lots of ideas are on the table for responsible reforms, such as changing capital requirements,convertible debt arrangements, and cranking down on discretionary monetary policy. But these reforms don't as easily enrich special interests by picking winners and losers by having government reduce their competition and guarantee their profits.

Reference:
Goldman Sachs Money for Obama Wins at Monopoly: Kevin Hassett  Bloomburg April 26,2010

Earth Day: A Great Time to Agvocate

Apr 20, 2010
By Matt Bogard

Farmers have become very effective at speaking out against the attacks from point of view journalism, celebrity authors, and novelty film makers that have cleverly crafted arguments against 'industrial' farms, while stealthily undermining the practices of most family farmers. But, with earth day conversations going on this week across the country, just like every year, modern agriculture is likely not to get an accurate portrayal by some.
 
Fortunately, I’ve noticed leading up to earth day this year, farmers have gotten a lot of coverage taking a stand in great numbers against many short sighted views and elitist agendas. What’s different than before I think has a lot to do with changes in technology and the way information can be quickly shared through media like Facebook and Twitter. Things are changing. Politicians are going to be held accountable for making up their own facts to support things like soda taxes and climate change legislation, and some businesses are starting to be held accountable for their actions. Some examples from the past year can be found in the following headlines: 

The Omnivore’s Delusion: Against the Agri-intellectuals

By Blake Hurst- The American July 30 2009

"He quieted and asked me what kind of farming I do. I told him, and when he asked if I used organic farming, I said no, and left it at that. I didn’t answer with the first thought that came to mind, which is simply this: I deal in the real world, not superstitions… He was a businessman, and I’m sure spends his days with spreadsheets, projections, and marketing studies. He hasn’t used a slide rule in his career and wouldn’t make projections with tea leaves or soothsayers. He does not blame witchcraft for a bad quarter, or expect the factory that makes his product to use steam power instead of electricity, or horses and wagons to deliver his products instead of trucks and trains. But he expects me to farm like my grandfather….. He thinks farmers are too stupid to farm sustainably, too cruel to treat their animals well, and too careless to worry about their communities, their health, and their families...The most delicious irony is this: the parts of farming that are the most “industrial” are the most likely to be owned by the kind of family farmers that elicit such a positive response from the consumer. Corn farms are almost all owned and managed by small family farmers. "

Farm official: Elitists’ efforts would mean more hungry people
Saturday, December 12, 2009
Agrinews Online

“The elitists have been able to put in place zealots who are causing proposed regulations to come down the pike that will affect production agriculture more than ever,” he said. “They are trying to carry out their concepts, their ideas, of what needs to be done to forge what they perceive as a lifestyle that everybody should participate in.”

"Attacks on the toolboxes that help farmers increase productivity are at the top of the list. ...The controversial issues of global warming and climate change and international indirect land use are issues on which elitists are focusing as a way of imposing more regulations on production agriculture."

Food, Inc., discussion draws 50 in Fergus Falls

Agrinews- Dec 10,2009

"It's not telling the whole story," said the crop consultant and former farmer. "I think it was quite biased. I am an advocate for agriculture and I support all of agriculture. But this isn't telling the whole story."

Farmer Cynthia Johnson agreed.

"I substitute teach in the school and ag is not painted a beautiful picture in any of the textbooks," she said.


Perhaps some of the most effective methods that farmers and ag supporters have used involve social media like Twitter and Facebook.

Pilot Travel Centers pulls support of HSUS
Brownfield Ag News March 1, 2010
 
“after discovering that Pilot Travel Centers was making donations to HSUS, hundreds of farmers mobilized on Twitter to flood the brand’s Facebook page in protest. “

And from a blog post by Josh Morton:
 
“Self-proclaimed 'agvocates' took less than 24 hours to organize and inundate the company with calls for change.”

Ultimately Pilot changed their policy as a result.

The same could be said for a similar issue for Yellow Tail wine:
 
Farmers sway companies to end HSUS sponsorship
Ohio Farm Bureau News . March 26,2010
 
“In a matter of days, “Yellow Fail”, a Facebook page dedicated to the protest, gained 3,000 fans, and more than 8,000 people watched Hadrick’s video. “

His video can be found on YouTube, (link) which is another very powerful way ag supporters can get their message out.

Farmers and others in the agricultural industry as well as concerned consumers aren’t just picking what's popular at the moment. Many are constantly ‘agvocating’ and discussing issues related to agriculture on a regular basis through weekly tweet sessions like ‘#Agchat’ or ‘#Foodchat’ on twitter or just passing on the latest scientific research by sharing a link via their facebook page.
This week, just like every year during earth day, there may be a lot of conversations and statements made convicting modern agriculture of many things, but more than ever farmers and advocates have some powerful tools they can use to help set the record straight. To quote again from one of the articles above, in the past Earth Day Elitists may have presumed that farmers are too stupid to farm sustainably, too cruel to treat their animals well, and too careless to worry about their communities” but they can’t get away with those prejudices anymore.

Taxation With or Without Representation?

Apr 15, 2010
By Matt Bogard

Some people have claimed that Tea Party activists are ignorant of history because the original Boston Tea Party was a response to their taxation without representation, while it seems obvious that we all have representation today.

The issue is not historical ignorance, but constitutional ignorance, and it's not on behalf of Tea Party goers. When we elect our senators and representatives to represent us, they are to represent us in all things authorized by the specifically enumerated powers in the Constitution. In essence, the Constitution represents our common will and personal interests.

When our elected officials violate our will by voting for policies that are contrary to Constitutional principles they are no longer representing us in good faith and we have lost the most important form of representation that we have, the Constitution.
When we have to pay taxes to support these policies, we have literally, taxation without representation. They are no longer representing our interests, but serving special interests or their own.

Some will go so far as to say that language in the Constitution relating to promoting the general welfare and regulating interstate commerce assure us that many of these questionable policies are Constitutional. However, this is based on court cases like Helvering v. Davis (1937) or Wickard v. Filburn (1942) , but both of which were based on the dubious logic of supreme court justices, making heroic interpretations beyond the cognitive meaning of the actual Constitutional text. This is what economist Thomas Sowell has referred to as ‘the quiet repeal of the American revolution’ and represents a transfer of power away from the people to government and unelected judges and bureaucrats. True taxation WITH representation implies that our elected officials represent us only in those matters that are authorized by the Constitution.
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