The last post discussed this article touting the salvation of the Crudaros (Dairy farmers) in Uruguay, by stimulus money. We will discuss where that money is coming from in the next edition and who is gaining control by loaning the money. But first, we need to understand that this issue is not a single issue that will ruin a country. I’m not making the case, that the sky is falling in Uruguay because the dairy farmers are getting government money. After all the dairy farmers in America have been getting government money for years and we are doing fine; right, Dean Foods? Seriously, I suspect in the near term there will be quite the opposite feeling for everyone involved. the farmers are poor enough that any money will be accepted, and after all it will take more than just the dairy industry to crash a nation. But, what I hope to point out, using this situation as an example is the difference in this international economy that we all currently live under and an agrarian economy this author longs for.
My second response to this article, after I got past the fact that they are moving away from the healthy benefits of raw milk, was how could a country with all that natural wealth, specifically the cattle, have poor dairymen? I always understood cattle to have value and dairy cows that produce to be worth something of even more value, and this country has more cattle per capita than any nation on earth according to the article.
Subsistence dairy farming dates back centuries in Uruguay, the country with the highest number of cattle per capita in the world: 3.8. There are approximately 10 million cattle and more than 15 million sheep in this country, which has a total population of 3.3 million, 93 percent of which is urban.
So then what happened to make these farmers poor? Two things are mentioned in the articles itself. One is an economic system that has a larger is better emphasis and two, the economy began to change and export it’s wealth to other nations.
“The problem is when you’re too small, just too small,” says Claudia Pérez, a small-scale dairy farmer in Uruguay, glancing to her left, where her pasture ends just 50 metres from her modest rural home.”…
In Uruguay, where the economy is driven by agriculture, tourism and banking, beef and wool are leading exports. But until it began to transition into a prosperous export industry 15 years ago, the dairy sector focused on supplying the domestic market.
In other words, when the economy shifted to export, the business model also shifted from a local supply and demand model to large scale production to meet the new higher demand. Like in the US it was, and is, get big or get out. Those that did not have the economy of scale or the desire to produce enough volume to compete with large export corporations now suppling the growing export market were forced to accept the new lower prices brought about the changes in the production model.
Now, some would argue that low prices is the primary goal in food production and I don’t believe low prices are bad. However, what the corporate model misses when the focus is low price and high profits is manifold. But two things come immediately to mind. One is a way of life and two is a quality product. I’ll touch on these briefly.
First read the story and look at the way of life for these families and specifically the community relationships. The Crudaros, life required them each day to come in contact with their neighbors they served. I’m certain some days, perhaps most days, that was monotonous. But at the same time, you know those people, or at least you were in a position to know them and to be part of their lives as they could be part of yours. Think about the social ramifications that one aspect has in relation to building a strong community. Knowing people and being part of a community produces an environment where a family name means something. It puts social pressure on people to perform and “be on their best behavior” because there are connected with everyone around them.
Next think about how those relationships and your standing in the community effect the pride in the quality product you are providing them. That is, at least in a system that puts a value in quality and relationships. In the article we see them watering down the product to try to stretch it and get enough volume to compete and feed their families at the lower prices. We also see them traveling into the city to find enough poor people that are willing to pay a cheaper price for a lesser product.
My position on this, is that when an economic system puts a value on price alone, which corporations always do, you remove the driving factors for quality. When you remove the face to face interaction with the customer, you remove the thread that weaves the complexity of community relationships together.
Lastly the article passes over these driving factors and goes to the fact that the government is going to help these poor farmers. The solution will provide much needed money for these dairy families, but in the process it furthers the destruction of their community and makes them a slave on a subsidized plantation instead of a freeman on their own land. In short, the system, either by design or greed, drives the prices down so the independent family farmer can not compete and then offers the shackles of debt to help him.
It would be easy to point to the Uruguay government as the one’s to blame, and I’m certain they hold their share of the responsibility. But in the next piece I want to look at who holds the notes and ultimately who benefits from this world economy.
This is going to be a little complicated, but bare with me and let me attempt to explain my thoughts on this article from Poverty News Blog, which quotes this source article, URUGUAY: Pulling Small Dairy Farmers Out of Poverty. Let me get a few quotes to give you an idea of where I’m starting.
Pérez has just 10 dairy cows, which produce a few dozen litres of milk a day, bringing in a small income when she sells it on the outskirts of the city of Durazno, located 183 km north of the capital, Montevideo. She lives on her small farm or “chacra” with her husband and two children, who are in primary school.
Her family’s way of life is shared by just over 200 other small-scale dairy farmers in the departments (provinces) of Durazno, Florida and Flores in Uruguay’s central region, most of whom have no more than two hectares of land…
…”We just scrape by,” he (Oscar Moyá another “crudero”) says, “but at least we can survive on what we earn.”
…The milk sold by the “cruderos”, above and beyond any possible nutritional properties, is cheaper, at 23 cents a litre compared to 30.4 cents a litre for pasteurised milk.
Subsistence dairy farming dates back centuries in Uruguay, the country with the highest number of cattle per capita in the world: 3.8. There are approximately 10 million cattle and more than 15 million sheep in this country, which has a total population of 3.3 million, 93 percent of which is urban.
But now, the business sector and government institutions have come together to provide solutions aimed at drawing small-scale dairy farmers into the economy of scale.
In Uruguay, where the economy is driven by agriculture, tourism and banking, beef and wool are leading exports. But until it began to transition into a prosperous export industry 15 years ago, the dairy sector focused on supplying the domestic market.
That newfound prosperity, however, has not trickled down to rural families who continue to eke out a living on their small dairy farms.
Two years ago, Mauber Olveira, director of development in the Durazno city government, and former mayor Carmelo Vidalín were the driving forces behind one of the alliances to integrate the “cruderos” into the modern milk processing industry.
The formula, Olveira told IPS, was to get Nutrísima, a Uruguayan dairy company, to build a plant in the city of Durazno, which has a population of 35,000 and is the capital of the department of the same name.
The plant buys raw milk from local farmers, pasteurises it and sells it to supermarkets and other buyers.
The project included financial aid agreements to enable dairy farmers to purchase equipment and livestock to boost production.
This will be multi-part post as I’m going to attempt to point out the different economic focus, that is local, national, and international, and who benefits from each one. I will be making the case that Uruguay is already a wealthy nation according to agrarian standards. Look at the quote above. They have the highest number of per capital cattle of any country in the world! I will further be pointing out the control they are loosing both from the Cruderos (Dairy Farmer) standpoint and at the national level by taking the money from the wealthy lender nations who are providing the capital. I’ll give you those quotes in the next post. For now check out the article and let me know what you think; is this a good thing or a bad thing?
It has been said that every life is bookmarked by two dates. There is the date you were born and the date you die. In between is a dash… that is our life.
That always seemed to be a good reminder of just how short and insignificant our lives are in the scope of history, and how valuable each day is. While, that thought can help to keep us humble, it can also as a motivator to live each day to the fullest as it will never be repeated.
Johnny Cash perhaps understood that in a way many of us never will due to his fame and notoriety. Yet, as an older and wiser man, this song is what he had to say about it all.
This is the most absurd propaganda piece I have seen in years. I use to get upset when the evening news would cover a prolife event we were participating in and talk about us while showing clips of the purple haired tattooed one-world socialist tree hugging save the starving third world co-dependent lesbian whales crowd. (HT George Grant for the run on slur). But this is about as flagrant as the so called media can get. The real concern is what possible reason can they have for stoking the fires of racial tension??? Enjoy the clips.
While I’m very thankful for the tractor and all that it can do - the actual impact of progressive farming was exactly opposite of what this old film clip portrays. In fact, Beth recently quoted from “The Hind Tit“, Andrew Nelson Lytle essay published in 1930 on this very topic. Check out this little clip for the story that was sold:
Then you might contrast that with this quote or the entire essay to see what was purchased:
Industrialize the farm; be progressive; drop old-fashioned ways and adopt scientific methods. These slogans are powerfully persuasive and should be, but are not, regarded with the most deliberate circumspection, for under the guise of strengthening the farmer in his way of life they are advising him to abandon it and become absorbed. Such admonition coming from the quarters of the enemy is encouraging to the landowner in one sense only: it assures him he has something left to steal. Through its philosophy of Progress it is committing a mortal sin to persuade farmers that they can grow wealthy by adopting its methods. A farm is not a place to grow wealthy; it is a place to grow corn.
It is telling him that he can bring the city way of living to the country and that he will like it when it gets there. His sons and daughters, thoroughly indoctrinated with these ideas at state normals, return and further upset his equilibrium by demanding the things they grew to like in town. They urge him to make the experiment, with threats of an early departure from his hearth and board. Under such pressure it is no wonder that the distraught countryman, pulled at from all sides, contemplates a thing he by nature is loath to attempt . . . experimentation.
If it were an idle experiment, there would be no harm in such an indulgence; but it is not idle. It has a price and, like everything else in the industrial world, the price is too dear. In exchange for the bric-a-brac culture of progress he stands to lose his land, and losing that, his independence, for the vagaries of its idealism assume concrete form in urging him to over-produce his money crop, mortgage his land, and send his daughters to town to clerk in ten-cent stores, that he may buy the products of the power Age and keep its machines turning.
The entire essay can be read here. For the record I do not believe there is a more revealing work anywhere that has so completely captured the decline of the family and the family farm in the last 150 years. I don’t believe it is about technology and the age of the tractor as much as it is the philosophy that came with the equipment.
Thomas Moore, the chairman for the Southern National Congress, wrote a great essay late last month, that is well worth sharing. He gives a great high level fly over of the root problem in the corporate food industry. It doesn’t matter if the new laws, such as the Food Safety and Modernization Act of 2009 or the Food and Drug Administration Globalization Act, intend to curtail an individual’s right to purchase, trade, or consume healthy food grown from their own land, that is the effect.
In fact, we are already seeing many tyrannical “enforcement” activities on other less intrusive laws that are being used to intimidate and curtail the efforts of small family farms. The existence of an organization called the “Farm to Consumer Foundation” who’s sole purpose is protecting small family farms against this abridgment of our rights by the federal and state government should tell us something of the times in which we live.
In fact Mr. Moore, declares that in these times planting our garden is a revoutionary act:
Today I committed a revolutionary act. It had nothing to do with firearms or marksmanship training. I didn’t organize a protest march or join the Underground. In fact, it had nothing to do with politics, except in the broadest possible sense. But it was revolutionary nonetheless. Today I finished spring planting.
How can such a benign activity be revolutionary, you may ask. In a sane and normal world it wouldn’t be. People have grown their own food from the beginning of the world. Agriculture has always been the foundation of civilization and the farmer a benefactor of mankind. But today we don’t live in a sane and normal world. The criminal Regime we live under is not content just to rob us of our liberty, our property, our dignity and humanity. It also seeks to control us by controlling the food supply. It seeks to strip us of food self-sufficiency and make us dependent, first on the central state, through food stamps, for example; and second, on the state’s real masters, the giant agri-businesses who determine Federal food policy. I call this process food fascism.
Read more of this revolutionary article here and commit your own revolutionary act by planting your garden today!
While many states have passed state sovereignty resolutions recently, Tennessee is the first to have the governor’s signature affixed to the bill. Now if we could wean ourselves from the federal dole we might actually have something. We can work on a free economic system for TN as we move forward, but at least this is a starting point.
Check out the full article and the text of the resolution at the Tenth Amendment Center.
Here is another movie that just opened on the 12th, called Food, Inc. We haven’t seen the entire movie yet, but we will. Based on this interview, I’m sure there are parts of the movie that we will disagree with, such as a solution to the problem which includes “Changing Walmart” or other corporations. Having said that, it sounds like the producer does a great job of identifing the problem with our food supply.
Check out this interview:
Then you can check out the trailer of the film here:
The amendment completely changed the bill. In a small farm hostile state it needed to be clearly stated that it is not illegal for us to consume milk from our own animals… Here is the amended language: http://www.capitol.tn.gov/Bills/106/Amend/HA0244.pdf
Shawn Dady gave a good comment on the importance of this wording on the Tennesseans For Raw Milk site and if I had read this before I posted, maybe I could have avoided spreading confusion about the prescriptions!
Update 5/22/09: Greetings! What an historic day. The TN Cow-Share bill is now law. The governor signed the bill into law today and it is a done deal. What this means is not that raw milk sales are legal, but it does mean that cow-shares and boarding have been fully recognized and declared as now legal. Contract law and private property rights, as outlined in our constitution, will be upheld in our state. This law SOLIDIFIES the postition that it is perfectly legal for an owner or a PARTIAL owner to drink THEIR OWN cow’s milk. PARTIAL is a very key word in this bill. In fact, without this word, the bill would not be the same and would not carry the weight and strength that it does. Partial owners are cow (or any hoofed mammal) share owners and the bill states their legal position loud and clear. Now farmers can enter into share/boarding contracts free from worry that a government agency will tell them they cannot. This bill clears the way for them.
It is always exciting to find new encouragement in the area of farming. We recently found these trailers for a new movie call, “Fresh The Movie”. It seems to be a little bit of a mix between “The Future of Food” and Joel Salatin’s farm videos. We are looking forward to the new release and have offered to host a screening here in Middle TN if they would allow us. Check out all 4 trailers. At the end of each clip there is an option for “more” that will take you to the next trailer.
Large-scale swine producers in Mexico deny that their industry is the source of the deadly new influenza strain, saying the animals are all healthy, and that it is scientifically “not possible” for hogs to infect people with the illness. But lawmakers in the eastern state of Veracruz are now charging that large-scale hog and poultry operations are “breeding grounds” of infection that are making people sick and fueling the pandemic.
The article goes on to say:
Mexican newspapers have been reporting for weeks that residents living near Granjas Carroll’s massive hog facility at La Gloria are falling ill with severe upper respiratory diseases. One five-year-old girl in the village just tested positive for swine flu – the bodies of two more children who died recently are being exhumed.
According to an April 5 article in La Jornada newspaper, “Clouds of flies emanate from the lagoons where Granjas Carroll discharges the fecal waste from its hog barns – as well as air pollution that has already caused an epidemic of respiratory infections in the town.”
More than 400 people had already been treated for respiratory infections, and more than 60 percent of the town’s 3,000 residents had reported getting sick, the paper said. State officials disputed that claim, and said the illnesses were caused by cold weather and dust in the air.
The problems began in early March, when many neighbors of the hog CAFO (confined animal feeding operation) became sick with colds and flu that quickly turned into lung infections, causing local health officials to impose a “sanitary cordon” around the area and begin a mass program of vaccination and home fumigation.
“According to state agents of the Mexican Social Security Institute, the vector of this outbreak are the clouds of flies that come out of the hog barns, and the waste lagoons into which the Mexican-US company spews tons of excrement,” La Jornada reported. “Even so, state and federal authorities paid no attention to the residents, until today.”
How can anyone seriously believe that raising hundreds or thousands of animals in confinement houses is perfectly healthy and natural? Factory farming practices are at the core bad and have serious consequences. We are all subject to such practices whether we like it or not…visit any restaurant or any grocery store and you are subject to the factory farm food. That’s just what happens with mass globalization and industrialism.
There has been a huge surge in family friendly farming over the last couple of years. Consumers are seeing the failures and dangers of factory farming and are turning towards alternative means of feeding themselves and their families: buying from family farms, farmer’s markets and community supported agriculture co-ops (CSAs).
More and more people are wanting to buy food from family farms. Many people are sick and tired of the denatured, substandard, sub-quality, altered, globalized factory food we have been eating for decades. We’re all about localized economies and the swine flu pandemic is another reason why these local economies are vital for the health and the well-being of those in the community.
Even with cutting back, buying sales, and strategic meal planning and grocery shopping, many families are still seeing an increase in what they are spending on food and household supplies. It isn’t so much the increase cost that is driving our family back to the land, but the extreme dependency that we find ourselves in. The majority of people depend on stores for every bit of their food. We have lost the know how and the work ethic to be able to produce our own food. That’s a dangerous place to be in!
“With the recession in full swing, many Americans are returning to their roots — literally — cultivating vegetables in their backyards to squeeze every penny out of their food budget.”
Industry surveys show double-digit growth in the number of home gardeners this year and mail-order companies report such a tremendous demand that some have run out of seeds for basic vegetables such as onions, tomatoes and peppers.
“People’s home grocery budget got absolutely shredded and now we’ve seen just this dramatic increase in the demand for our vegetable seeds. We’re selling out,” said George Ball, CEO of Burpee Seeds, the largest mail-order seed company in the U.S. “I’ve never seen anything like it.”
Gardening advocates, who have long struggled to get America grubby, have dubbed the newly planted tracts “recession gardens” and hope to shape the interest into a movement similar to the victory gardens of World War II.
Those gardens, modeled after a White House patch planted by Eleanor Roosevelt in 1943, were intended to inspire self-sufficiency, and at their peak supplied 40 percent of the nation’s fresh produce…”
This week the current White House broke ground on what will be a 1, 100 square foot garden on the lawn of the White House…the first plot garden since Eleanor Roosevelt’s victory garden.
The article goes on to say:
Seed companies say this renaissance has rescued their vegetable business after years of drooping sales. Orders for vegetable seeds have skyrocketed, while orders for ornamental flowers are flat or down, said Richard Chamberlin, president of Harris Seeds in Rochester, N.Y.
Business there has increased 40 percent in the last year, with the most growth among vegetables such as peppers, tomatoes and kitchen herbs that can thrive in small urban plots or patio containers, he said. Harris Seeds recently had to reorder pepper and tomato seeds.
“I think if things were fine, you wouldn’t see people doing this. They’re just too busy,” Chamberlin said. “Gardening for most Americans was a dirty word because it meant work and nobody wanted more work — but that’s changed.”
While I think the majority of the garden interests springing up is merely a “let’s try our hand at this” approach, still, it is a serious resurgence and noticeable increase in gardening. I think a lot of people are connecting the dots on our food vulnerabilities and dependencies. But the reality is probably only a small percentage of people will actually do something about it.
We have had beautiful weather the last couple of days…right before it gets cold again later this week. I am ready to get out in the garden. We still have some more prep work to be done before. It is a great time to plant cool weather veggies like cabbage, lettuces, broccoli, peas. I probably should already have those out, but time has prevented me from getting around to that yet.
We planted some seeds in several seed trays this year but because of the soil, they quickly popped up and then promptly died? We planted our fall pumpkin seeds in some seed trays and they are nice and big now. Not sure what we will do with those since it isn’t pumpkin planting time yet?
Still, there is a simple math about planting your own garden.
“If a person has been laid off, and had a finite amount of money, they’re looking at spending $2 for a head of lettuce that’ll last two days,” says Greg.
“Or for $2 they can buy a packet of lettuce seeds that has 300 seeds and eat lettuce all summer long.”
I know these times sure have made us think about spending and saving differently.
The kids are collecting okra seed from last years okra pods.
A slow economy seems to make for busy times. But in the midst of the busyness one thing keeps running through my mind. How can we build an independent local economy that will be a shelter to our families and our community when we can no longer depend on the world economy?
I’ve posted before about the idea of a parallel economy here and here, and talked about the subject of investing in real wealth here. This is essentially what a barter economy is made of. People with different skills, talents, products, and services come together, not so much for the sake of a profit in dollars but for the sake of a fair trade. In essence they are willing to take real wealth that they have either in labor or product and trade it for what someone else has.
I’ve come across a few videos lately that speak to this topic that I’d like to share. First there are several bartering communities that exist in the UK already. One of which is called, KUTLETS. I think this quote from the site frames the group and my interest in bartering really well:
“Being a member of KUTLETS is a way of getting things done when you may not have the cash to pay for them, and of helping out other people. It is also a way of keeping in touch with your local community.”
That almost sounds… well… Christian. Here is a great news clip about them.
I also recently watch a great presentation by Catherine Austin Fitts, the former Assistant Secretary of Housing under the first Bush regime. She addresses how the economy managed to get into such a mess and then discusses the idea of developing a local economy through barter. This is probably the best hour and 20 minutes I have spent to understand the current crisis we are in.
Imagine what you could do in a community with a bag of face value silver and a conversion calculator. In this system you could buy a dozen Vaughnshire eggs for a little over a quarter!
Last year when a restaurant told us they only wanted white eggs we reluctantly started researching white egg layers. It was not that we have anything against white egg layers, but we had just purchased around 40 brown egg layers and the brown eggs just seem more “back to the farm”.
None the less, we purchased 100 White Leghorns raised them, fed them….fed them some more and now they are producing eggs. In fact they are producing a lot of nice size white eggs for us. So many that we just surpassed 1,000 eggs these little guys have provided so far this year!
If you click on the image you can see our home school business math class as our 13 year old maintains a SharePoint list to keep up with his eggs production, feed costs, and customer purchases.
You find some interesting facts out when you track your production and your sales. For instance he found that although he had no eggs left at the end of January, he had a deficit of 34 dozen eggs between what he collected and what he sold. Does any want to guess how many eggs a family of 10 eats in a month? Apparently about 34 dozen!
What this means in practical terms is that in January our 13 year old was able to produce and sell enough eggs, to pay for his feed cost, put a little bit of cash in his pockets, and provide about $70 worth of eggs for our family economy. At the very practical level, this child blessed his family this month. We are loving the lessons the farm provides.
This is from the Farm-to-Consumer Legal Defense Fund (FTCLDF). Please see below for actions you can take today to help insure you have access to healthy milk products for your family in the future.
Congressman Ron Paul has introduced a bill (HR 778) that would repeal the current ban on raw milk and raw milk products for human consumption in interstate commerce. The ban has made it more difficult for consumers to access raw milk and has hurt the ability of raw milk producers to make a living.
Passage of the bill into law would go a long way to stopping the U.S. Food and Drug Administration (FDA) in its efforts to completely shut down the supply of raw milk.
To be successful, HR 778 must have co-sponsors. Your help is needed. Now is the time to mobilize consumers and farmers across the U.S.
Your Action is needed
The bill, HR 778, has been assigned to the House Energy and Commerce Committee. The first step you can take is to contact the Committee Members to let them know they should support your right as a free citizen of the United States to make purchasing decisions for yourself and your family. The list of members and their contact information can be found here.
Secondly, you should contact your representative to request that they support this bill and co-sponsor it. Some points you can communicate to your representative follow - again from FTCLDF:
1. The bill upholds consumer freedom of choice. The consumption of raw dairy products is legal in all fifty states. The bill enables consumers to exercise their legal right in States where the sale of raw milk and/or raw milk products is illegal or where there are no in-State sources.
2. The bill upholds States’ rights. Decisions about the safety of raw milk should be made at the state and local level, not by the federal government.
3. The bill supports family farms by expanding their markets for raw dairy products. The bill increases the chances of survival for those dairies that are no longer able to subsist solely on the income from the dairy cooperative system.
4. The bill promotes the local food movement by connecting consumers to producers who happen to live just over state lines.
5. The bill would free FDA to focus on the pressing problems in our food system, e.g., tainted imports, under-inspected large-scale food processors.
Introducing Legislation Allowing Interstate Shipment of Unpasteurized Milk
January 29, 2009
“Madame Speaker, I rise to introduce legislation that allows the shipment and distribution of unpasteurized milk and milk products for human consumption across state lines. This legislation removes an unconstitutional restraint on farmers who wish to sell or otherwise distribute, and people who wish to consume, unpasteurized milk and milk products.
My office has heard from numerous people who would like to obtain unpasteurized milk. Many of these people have done their own research and come to the conclusion that unpasteurized milk is healthier than pasteurized milk. These Americans have the right to consume these products without having the federal government second-guess their judgment about what products best promote health.
If there are legitimate concerns about the safety of unpasteurized milk, those concerns should be addressed at the state and local level. I urge my colleagues to join me in promoting consumers’ rights, the original intent of the Constitution, and federalism by cosponsoring my legislation to allow the interstate shipment of unpasteurized milk and milk products for human consumption.”
In part two of this series, I joked about northern auto workers moving south as carpetbaggers, but the truth of the matter is the south is no different in her positioning during these hard economic times. This is shown by our southern leaders who talk with a draw, but spend our tax money like they are on a shopping trip in Manhattan with someone else’s credit card. See these southern Senator’s votes on the other bailout packages. With the new auto numbers released today, I fear the stand a few southern Senators are taking is less likely to be based on a moral high ground and more likely to be jockeying for position and holding out until funds can be added for their constituents as well.
Clearly the big three auto makers, bogged down with the overhead of socialistic unions, are loosing big, but all the automakers, including the foreign companies now located in the south are sinking fast. Toyota said they will be halting production for 11 days next month due to the sales numbers and as the chart below indicates every one took a loss in the latest numbers.
The real difference between the two groups seems to be business models that plan for rainy days verse business models that build in an exaggerated expectation of a federal safety net. In the end, the safety net, built upon the future prosperity of our children, will be extended to all that ask. This is the nature of the economic system we have, it can be no other way.
Of course the real problem is us. We may be late to the game and slow to learn but we are beginning to awake to the mess we have before us. That happens when our investment and retirement accounts take a 40%-60% hit.
You see the “thought leaders” in our country tell us there must be a federal bailout to save this industry or that industry and they play on our emotions showcasing all the workers and families that will suffer if our tax dollars do not bail them out.
While, it is sad to see people forced to look for new work, that is a fact of life. That is the nature of the economic system we have. When you sell yourself to someone else to make a living you are dependant on the business practices they have and their ability to keep you employed. Even most self-employed folks are dependant upon the corporations spending money with them. We are tied to this American economic system and as it collapses around us, it causes us to readjust our priorities.
Because we are re-adjusting our priorities the government must take our tax dollars and bailout the corporations. The consumers are not going to bail them out by continuing to spend hard earned dollars on over priced low quality products. As we look to the future we stop spending for today. Consider the following from the article:
U.S. household debt, which has been growing steadily since the Federal Reserve began tracking it in 1952, declined for the first time in the third quarter of 2008. In the same quarter, U.S. consumer spending growth declined for the first time in 17 years.
That has resulted in a rise in the personal saving rate, which the government calculates as the difference between earnings and expenditures. In recent years, as Americans spent more than they earned, the personal saving rate dipped below zero. Economists now expect the rate to rebound to 3% to 5%, or even higher, in 2009, among the sharpest reversals since World War II. Goldman Sachs last week predicted the 2009 saving rate could be as high as 6% to 10%.
As savings increase, economists say, spending is likely to contract further. They expect gross domestic product to decline at an annualized rate of at least 5% in the fourth quarter, the biggest drop in a quarter-century.
“The idea that the American family will quickly spend us out of this recession is a fantasy. It won’t happen,” said Elizabeth Warren, a professor of law at Harvard University who last month was named chair of the Congressional oversight panel tasked with overseeing the distribution of the government’s Troubled Asset Relief Program funds.
What kind of false economic premise are we operating under that would be damaged by families saving money? As Gary North points out in Closet Keynesians Emergepublished last Friday, this is Keynesian economic theory. He summarizes it great in the section entitled, Wealth Through Thrift:
To tell American consumers that they can improve the productivity of the economy merely by going out and spending money is Keynesianism. It is utter nonsense. The only way to increase the productivity of the economy is through thrift. The money generated by this thrift must then be invested wisely, in terms of future conditions, so that the company or fund making the investment can reap a profit. If economy cannot do this through increased productivity, it will eventually find itself incapable of raising additional capital. Without additional capital, there can be no increase in productivity.
Economists are supposed to know this, but ever since the Great Depression and the publication of Keynes’s magnum opus, most economists have not believed this. They believe that we really can spend ourselves into prosperity, either through personal spending or through government spending. The Keynesian system is opposed to investing during recessions.
I can remember the slogan that was promoted by the government in 1958: “you auto buy now.” It was preposterous then, and it is preposterous now. The government today is lending money to Chrysler and General Motors because American consumers are not buying the output of those two companies. The government understands that it cannot afford to give every citizen enough money to go out and buy a new General Motors or Chrysler car, so it uses tax dollars to offer below-market loans to companies that would otherwise go bankrupt. This is the government’s alternative to relying on the general public to go out and spend money in a way approved by politicians…
You may have seen this spoof ridiculing the folly of the current line of thought as well. While Fred Thompson does not identify the economic theory he is poking fun at it is Keynesian economic policy:
Friends when we discover such an unjust system, that is harmed by people saving money, it needs to go. This system has been in place for a long time and has brought a promise and even an appearance of wealth. But as the curtain is being pulled back we are seeing for the first time the shackles that come with this system and the true value of the wealth it provides. It is going to be a hard road as the inflated prices for our goods are adjusted and many companies will fail. But this is the time to change directions. This is the time to throw off the shackles and to learn to walk in freedom once again. Freedom comes with responsibility for one’s self, and a duty to help your neighbor. You can only do that if you are financially free.
Gary North ends his article with investment advice to ”Save now. Buy later. Buy assets that will rise in price because of increased monetary inflation. ” Someone asked me what I thought those items might be. The thought that immediately comes to mind is the proverbial wheelbarrow of money to buy a loaf of bread in Russia when her economy failed.
Traditionally, the things that people buy when they have little capital is food, shelter, and clothing. The real estate debt bubble and the over building it produced will keep the shelter market prices down for years to come, and I think there are plenty of second hand blue jeans to go around. Although you can expect to see over reaching tyranical attempts by the government to limit the availability of second hand items so that people will be forced to “buy new”.
About the only thing you can not buy second hand is food. So the person who can produce food is going to be a popular fellow in his community. I mentioned previously, we invested this last quarter in tools for production. It may not produce huge profits as an investment, but I am hopeful it will feed the family and keep us on the farm.
It appears this may come to blows before it blows over. The Times Online picked up the heated name calling by the Yankee bailout proponents and have no doubt added more fuel to the fire by running this article. Here are a few highlights.
Almost 150 years after the American Civil War the struggle to save the country’s carmaking industry is once again becoming a battle between the Union and the Confederacy.
In this latter-day renewal of hostilities the union is the United Auto Workers (UAW) whose members are mostly employed in Northern states such as Michigan, the traditional heartland of US motor manufacturing….
Brian Fredline, who is head of the UAW branch in Lansing, Michigan, said: “This is almost like Confederate senators fighting against the Union Army of the North. The parallels are frightening, and it’s almost this mentality that the South will rise again. They hold hostage the economic recovery of anyone who lives north of the Mason-Dixon line.”
Reprisals have already begun. Kentucky’s Republican Senator Jim Bunning, who was once a baseball star in Detroit, was abruptly uninvited from appearing at an event for fans in Michigan at the weekend as punishment for voting against the bailout. And a retired GM engineer last week started a website urging a consumer boycott of Alabama until Mr Shelby is replaced by a senator “who has America’s best interest in mind”….
….Yesterday Mr Corker said that Capitol Hill negotiations on the rescue deal had been wrecked by the UAW’s refusal to accept the imposition of costcutting measures that would have forced the carmakers to operate on the same labour costs as the foreign-owned companies. He dismissed suggestions that self-interest had influenced his position, pointing out that he also had a GM plant in Tennessee which is “very important to my state”.
The UAW folks seem to think like the Gods of the Market Place, that every man should be paid for existing, but no one should pay for his sins. I applaud these few southern senators who are standing on this particular issue, but I lament their failure to preserve my money when banks, insurance companies, and investment houses lined up with their hands out.
No one deserves a forced handout, especially a corporation. As the Gods of the Copybook Headings tell us, “if you don’t work you die”. It appears over-sized debt dependant corporations are no longer working, to which we can only say, good riddance. May the American people north and south see the harsh task master automotive debt has been and may the shackles of debt slavery fall from the people’s pockets.
Let’s not forget it was the real estate debt that surfaced this problem to begin with. Debt bondage is the voluntary slavery of the 21st century! This, just like the slavery prior to the great war, extends to both the North and South.
The UAW may be concerned about it’s workers lossing their jobs in Detroit and how they will pay their debts, but there were no hand outs being offered to save the jobs of the 100,000 people who lost their jobs in December in the rest of the nation. My suggestion to all you folks in the big three auto corporations, get out now. You might head south to find work, but I have to warn you, the south has never really looked very favorably on carpetbaggers.
The Borrower is a slave to the lender
Of course the real problem is us. We may be late to the game and slow to learn but we are beginning to awake to the mess we have before us. That happens when our investment and retirement accounts take a 40%-60% hit. 
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