Dr. Val Farmer
Rural Mental Health & Family Relationships

Readers Respond: A Doctor Of What?

April 6, 2009

Here are three responses I received about an article I wrote comparing our current economic dilemma to the farm crisis of the early 80s.

- Dear Dr. Farmer, First I would like to let you know that you have written many articles that I have cut out and saved for the future. I am sure that you have helped many people. I always appreciate your clear rules and Christian values.

The question I have is in the, "Farm Crisis Compared to the Mortgage Crisis," article - you made reference to Pres. Reagan's response to the ATC strike. I was farming then and I remember the cause of the farm crisis to be Pres. Carter's voiding of the grain sales contracts with USSR, and the following tumble in soybean prices.

Other than that omission, I thought the article was "spot on". Keep up the good work. I look forward to future articles.

- Dear Sir, I went through the 80's and it wasn't Reagan’s fault that we had trouble in the 80's. Jimmy Carter and his cohorts had no guts to stand up to the unions that had driven up prices and interest rates. Mr. Volker who was in charge of the Fed then raised interest rates to all-time highs and broke the back of farmers who had made loans through PCA, another "government boondoggle."

So you err when you say it was because Reagan broke the Air Traffic Controllers Union that wanted to control our lives thru higher fees so that they could rip us off. That was only a small symptom and it didn't affect farmers that much. I had friends that had over extended themselves and they had no one to blame but themselves.

Just like the idiots that have taken out bigger mortgages on houses they can't afford now and our (profanity deleted) government wants us to bail them out. Let them be on the street awhile and they will learn their lesson like we had to in the 80's.

You never cure the problem unless people learn their lesson. We will see it again as long as people let greed get in the way of common sense. You sir, need to learn some economic lessons, my friend.

President Reagan understood well that farmers had over extended themselves and there was a shake out. The strong survived and they have been the back bone of the future of agriculture since then. Stupid ones are starting to show up again.

- Dr. of What??? I'm not sure if you’re too young or too dumb, or never lived in the mid-west. In reference to your Farm Crisis of the mid-80's, your article states "Then President Reagan pierced the inflation bubble by crushing the air traffic controllers strike and the economy went into a major recession during 1981 and 1982.

WHOOOOOOO!! Where on earth did you get this tidbit of propaganda or are you trying to rewrite history....????

Granted inflation and speculation was way out of hand thru 1979 – but the dodo-dodo who decided to end inflation was then chairman of the federal reserve Paul Volcker. Just his name causes anger and consternation in farm country. Fed interest rates averaged 11.2% in 1979 and were raised to a peak of 20% in June of 1981. The prime rate rose to 21.5% as well in 1981.Today we are at 3.5 % prime.

This Volcker cigar smoking jackass about killed farm country and most small business with it. You’re a Ph.D. but you don't know beans about economics, let alone history...Good luck writing about something else!

I may be too dumb but I am not too young and I do live in the mid-west. How rapid devaluation of land values in the early 80s got started is inconsequential compared to the fact that it was fundamentally overvalued in the first place. The main point I wanted to make was the combination of easy credit and lax credit standards coupled with enticing "too good to be true" inflation of property values was at the core of the problem.

Whether it was the mid-80s or now, debt was being promoted as an investment strategy and increased valuations would cover the risk. It is easy to make mistakes when conventional wisdom says, "Take advantage of this opportunity to get ahead," and the money to do it is so available. Lenders awash with money to loan, loaned it.

In our current situation, very few people understood the greater danger of how the financial services and investment industry, in a lax regulatory environment, packaged these faulty loans, insured them and sold them to investors worldwide. Bad credit masquerading as good credit magnified the pain throughout the global economy. We are dealing with financial and insurance corporations "too big to fail" and everyone is paying the price.

Our economy is quite fragile and has started into a downward spiral. In uncertain times, people pull back, conserve and liquidate debt. Consumer spending shrinks. Jobs are lost. More people default on debt. It’s a vicious cycle that is the mirror opposite of the "irrational exuberance" of a bubble economy.

The jolting take home message in this is to live within our means, to be careful about debt, and to be prepared for a "rainy day." Some day in the distant future when memory fades, easy credit and surefire investments will tempt us again. It’s happened before and it will happen again.