Gene Logsdon and Friends

Licking Inflation The Homestead Way

In Gene's Weekly Posts on August 10, 2011 at 6:35 am

From GENE LOGSDON

One of the biggest laughs of the last decade or so has been the way our vaunted economy has “licked inflation.”  Every time we took another lick off of the delicious ice cream cone, the price of farm land leaped another lick higher. Every time the Federal Reserve licked interest rates lower, the price of houses jumped another lick up. Every penny “saved” on interest meant two or three pennies spent on construction that became a colossal loss when the owner could not make payments. We licked inflation so well that the price of corn went to historic highs this year, dragging food prices up with it. Fertilizer costs have spiked 18 percent recently according to the latest report.

Even when manufacturers purportedly “hold the line” on prices, inflation wins. The hoe you buy today for nearly the same price as the one you bought fifteen years ago will need repair or replacement twice as soon which means that the inflation occurs not only in your wallet but in the increasing height of the landfill.

Or, what is very prevalent right now, the manufacturer holds the line on the price, but when you check the package, it holds somewhat less than it did previously.

However, I think inflation is good because otherwise I could not have survived as a writer but would have had to find an honest way to make a living. I learned how to use inflation to my own benefit by studying the Amish. They produce farm goods in a horse and buggy economy and sell them in the super jet airliner economy. So I learned to produce words in a one lane country back road economy and sell them to a market ruled by the million lane Internet superhighway. The Amish enjoy the way they live so do not mind the seemingly lower cost of living. That turned out to be true for me too. Keeping costs down has more rewards than just keeping costs down. The Amish know that driving a buggy saves thousands over driving a car, it also gives them an excuse to avoid a lot of unpleasant and unnecessary travel. In the same way, refraining from vacations that are not very relaxing, boring social functions, all sorts of costly entertainments that are not very entertaining, gives a writer more time to write or more peace of mind to focus on writing.

Every dollar made is equal to two or three in the inflationary world.  I might have borrowed to buy a bigger farm, a bigger car, a bigger house, but to be an independent writer, I dared not. And curiously, that decision turned out to be just about as profitable as if I had decided to take the high road. The Amish know. Some of them end up able to compete even with the big boys in the inflationary world of industrial agriculture.

I’m sure the economists would find all sorts of things wrong with my reasoning, but it seems to me that inflation hurts the rich a lot more than the poor and that’s why the powerful and privileged try so hard to lick it. If you have ten million dollars socked away, runaway inflation will make it look like five million in no time at all. This is not an issue I will ever have to worry about.
~~

  1. Gene
    I must say your insite on inflation is so skewed that it actually makes cents. Since the most recent squabbles by the republicans and democrats over the issue of cost cutting measures, our society as a whole is forced to do the same. I don’t necessarily agree with your views on inflation although I understand your message. My crystal ball tells me the developed world will enter into a deflationary time in the next 3 – 10 years. Which may sound rather awful but we keep hearing that we are in a world economy which means we have to accept the world price structure which means we have to accept that wages will decrease while developing nations increase wages and somewhere find equilibrium. I never hear this subject discussed in the media.
    Which brings us back to the Amish way of living. This lifestyle is capturing the imagination of very few people in our consumer society as many believe that to not consume frivolous stuff is to miss out on something.

  2. David – one other thing that is required by the Amish lifestyle is commitment. Commitment to God, to church, to family and to community – all of which is sorely lacking in the US. Sure there are people who commit to one thing or another – but very few that commit to all.

  3. If you replace the word “writer” with the word “stay at home mom” in this article it is pretty much word for word how I feel. I stay at home and make all of our meals, tend the garden, put up the food we grow, take care of my kids as opposed to paying someone else to watch them, etc., and we still have more extra money then the people I know who work themselves to death and never see their kids. All because it PAYS more for me to stay at home and do the things I am supposed to pay everyone else to do for me. Plus we are a hell of a lot happier! Thank you inflation!!!!!!!!! (and thank you Gene, you are our inspiration!)

  4. Hmmm. My husband tells people that I only keep chickens so I’ll have an excuse to stay home all the time. (No one else knows how they like their food to be placed, so only I can feed them.) Your post today makes me wonder if perhaps he’s right, and also … should I sell my car?

  5. There is much to be said for some self-sufficiency. Looking at a barn full of hay, a shed full of wood and a freezer full of food from the garden is immensely satisfying. I’ve never felt that same contentment from looking at a bank account balance – no matter the amount.

  6. Gene, I’m with you all the way! Tomorrow we butcher the cow that will provide us with beef for most of the next year. If I bought it in a store it would cost me about $8-10 a pound for equivalent quality. In fact, I venture to guess that my beef is of such high quality I couldn’t buy anything like it in a store. I could maybe buy similar quality from Joel Salatin but he won’t ship to California… I figure I might have $1.75 per pound invested in it, when I add in the extra freezer I had to buy (used) for storage. Strikes me as a pretty good deal!

  7. Inflation, deflation, whatever. If you own your land free and clear, and can grow a significant portion of your own food and supply a significant portion of your own energy, you don’t have to concern yourself with the matters of economists.

    However, when you write “it seems to me that inflation hurts the rich a lot more than the poor,” you should keep in mind that most of the “poor” don’t own land and can’t grow food nor produce energy. Sure, we get by pretty comfortably on under $1,000 a month, because our land is paid and our goats, chickens, garden, and woodlot bring us a lot of non-monetary sustenance.

    But a single mom working two jobs that she has to commute a long distance to because rent further out is cheap is probably also spending a ton on child care — she has no choice but to shop the “middle aisles” of the supermarket, getting the cheapest (and least healthy) calories she can.

    I think there’s two “poor” in Amerika these days: those who are frugal and self-sufficient are going to be okay, no matter what comes about. But remember, most of the “poor” don’t have access to organic food, healthy raw dairy, nor even wood heat. Let’s not go overboard glamorizing poverty.

  8. gene,
    you got the inflation argument completely backwards. inflation rarely helps the poor or the middle class. it sometimes helps the rich – but even this depends on many factors.

    inflation always helps
    (1) the debtor – the US government is the biggest one. any reckless debtor who goes into debt to buy real assets – like land are the big winners as long as the inflation lasts.

    (2) the government – the first group to ‘touch’ the newly printed money by government is the government. they benefit the most. they spend it at its face value. as it cycles throug the economy it loses its value. those at the low end of the food chain, pay the price.

    (3) owners of real assets often benefit. this includes – gold, land, pigs, water rights, hoes, corn, etc.

    Everyone else is a loser to inflation. the ones who lose the most are the elderly savers, the low income worker, the pensioner, the orphan, the small business owner who is prudent, the guy who buries his cash in the ground ,etc.

  9. some thought provoking comments here. What came to mind tho as I read your post, Gene, is recently reading about a book called 12×12 where a doctor has chosen to live very simply on like $11,000 a year because she protests the war and is deliberately keeping her wages low enough she does not have to pay taxes so she is not supporting the war. A different way of looking at things.

    I will say that the best way to beat inflation is to do what many of us are doing; growing our own food and energy and bartering for real goods instead of paper money. Our ledgers may not look desirable to the banker or consumer types but as long as they balance on the plus side we will all be ok.

    Yes the poorest people who have to live in cities, who have never even considered growing their own food, sewing their own clothes, repairing or improving their own homes are the biggest losers to inflation. So many people are ignorant of so many things I find it incredible. The fact that we have become a nation of non readers being spoon fed garbage by the media just makes me want to cry. I can do darn near anything when it comes to providing basic necessities and I learned most of what I know through reading good books and trial and error.

  10. One has to be careful when one holds the Amish up for praise as a way to live. For years they had major problems with soil erosion, polluted wells and practised methods of farming that destroyed the productivity of their land. It is a hard life and most of us could not do it.

    It is not the horse and buggy that cut down costs for the Amish. Its how they have reduced their over total cost of overhead. With no car, no cost of insurance, oil or gas. No Electricy, bills for appliances. No TV no cost for cable etc. So a whole bunch of money is saved. However, this means you have to grow your own replacement horse and labor (ie large families) and you need to have parents that pass down land to you so you don’t have to come up with some big bucks for farmland. And you had better like your cousins, cause your stuck with them for life.

  11. The people who left comments have no sense of humor. Herman Cain was right about today’s americans and their lack of humor. Your essay was written tongue in cheek it was not ment to be the state of the union address. Lighten up folks, days are dark enough without you adding to it.

    Gene, I enjoyed your essay, I got a good chuckle out of it and I understood exactly what you’re communicating. I enjoy your writing in general, you have a good sense of humor that I always appreciate. I have several of your books too your my favorite country writer.

    Shaolin

  12. We could use a little inflation right now. Our nation’s biggest economic problem is the collapse in housing values. One in four American homeowners owe more on their mortgage than their home is currently worth. This is the root cause of the recession. (Let’s not debate who is to blame for the bubble bursting or being created in the first place.) Stimulative government spending did not change this, and that is why the recovery has been sluggish at best.

    A few years of moderate inflation would raise home values. Consumer spending will pick up as home equity builds, and that will be the key to economic recovery. That will benefit everyone, rich and poor alike.

  13. Ditto what Eddy said. Inflation is by definition an increase in the money supply. The “inflation” we think of as ever rising prices is the effect of it. Throughout history, gold and silver were considered real money…a store of value. Kings and bureaucrats have been inventing ways to steal from the beginning. The king clipped the coins, the bureaucrats abolished the gold standard and turned up the printing press. Inflation is an invisible tax that brings misery to all people in a society.

  14. Inflation has made millionaires of many farmers who never made very much money farming. They simply sold their land to developers at a price which, thanks to decades of inflation, was many many times more than they paid for it thanks to decades of inflation.

    Inflation certainly does not bring misery to those who make long term investments, financed by loans at low interest rates. Inflation causes the value of the investment to increase, while the loan is repaid with ever cheaper dollars.

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