'Intelligent discontent is the mainspring of civilization.' -- Eugene V. Debs

Friday, November 21, 2008

Deflation is Here (Part 2) 

From today's New York Times:

The farmers said it would not last, and they were right.

When the price of wheat, corn, soybeans and just about every other food grown in the ground began leaping skyward two years ago, farmers were pleased, of course. But generally they refused to believe that the good times would be permanent. They had seen too many booms that were inevitably followed by busts.

Now, with the suddenness of a hailstorm flattening a field, hard times are back on the American farmstead. The price paid for crops is dropping much faster than the cost of growing them.

The government reported this week that the cost of goods and services nationwide fell by a record amount in October as frantic businesses tried to lure customers. While lower prices are good for consumers in the short run, a prolonged stretch of deflation would wreak havoc as companies struggled to stay afloat.

In this lonesome stretch near the Texas border, farmers are getting an early taste of a deflationary world. They have finished planting next year’s winter wheat, turning the fields a brilliant emerald green. But it cost about $6 a bushel in fuel, seed and fertilizer to put the crop in. That is $1 more than they could sell it for today, and never mind other expenses like renting land.

Finally, the peril is perceived, but is it too late?

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