The 1980’s Farm Crisis

Mary Jo Irmen and Wade Borth discuss the 1980’s Farm Crisis. How it happened, the role that government interventions played, and how it all affects us today.

Transcription:

80s Farm Crisis

Mary Jo: Awesome! Okay. Good morning everybody. I just want to introduce you to Wade Borth – He is a colleague of mine out of Fargo so he’s only three hours away from me. So, I didn’t tell you Wade we got snow so you’re welcome. It’s coming. Itís snowing right now so it’s going to be kind of an icky day. But I’ve worked with Wade for seven years now?

Wade: No.

Mary Jo: Six?

Wade: It probably feels like 15 but it’s probably more like six I think.

Mary Jo: Okay. Yeah, and so Wade has been studying the Infinite Banking Concept actually longer than I’ve been studying the Infinite Banking Concept. And he’s a farm kid as well so I just wanted to bring him on and talk about this 80’s crisis because him and I talk all the time about the dollar and inflation and how infinite banking wraps up to it all and what’s going on with the crisis today. And Wade was a financial advisor before he came over to the other side. So he understands the markets and the bonds and all that kind of stuff. And so I thought it would just be a great opportunity for Wade and I just to talk about what we see going on. We recently got Lara ñ Carlos Lara and Robert Murphy write an LMR report based on Austrian economics. And we recently got that report and everything just kind of has been circling and making sense. And I just wanted to share a lot of that with you guys along with how that tying into the 80s crisis. And I watched a video recently and I’ve shared it on the page a couple of times. So, I know there’s some of you that have seen it because I’ve seen that it’s being shared. And what happened during that crisis and a lot of our younger farmers don’t know how bad it was. We have a generation that we’ve changed, and even in the video they talked about that, that we don’t learn from our mistakes and give it a generation and we’re going to forget what happened with all the awesome, you know, crisis we had in 2000 and 2001 and 03 and all that stuff. So, or 13, I guess 2013 is when we have the big crisis for corn and all that kind of stuff. When it came to a head, 2013 is when it came to a head before it dropped again.

So, anyway, if you guys are just tuning in please leave some comments, feedback, whatever while we go. So, we’re just going to have a discussion today about how we typically have our discussions. I mean it’s just going to be Wade and I and hopefully, we can answer some questions along the way. But if you haven’t seen the video, I just want to start by giving you a little bit of a glimpse of what happened. Maybe you went through the 80s and you remember it, but if you are younger you are tuning in and you haven’t lived through the 80s, what happened? I am 44 so I was in first grade when a lot of these things are happening. I don’t remember that I mean I remember dad feeding cows out of the car. But I don’t remember how bad it was. And so just a quick recap of the video, they kind of go over the fact that what started the problem in the 80s. And it was interesting to watch the video, and Wade pointed this out as well when we talked about it that the high demand in the 70s for food. And you had people in government encouraging in their words, ìPlants fence row to fence row and get big or get outî because commodity prices were high, interest rates were low, the demand for food was high. And so people were planting and buying and banks we’re in competition from each other. And Wade maybe you can explain this better, but the banks were in competition with the Fed, correct?

Wade: Right. So, just on that point so just to give you a little back; so I grew up on a farm, I call it Central North Dakota you probably call it Eastern North Dakota from where you live. But I remember my parents going to the federal land bank to buy land. That’s a government agency which was in direct competition with all the other local banks and Farm Credit Services. So, the point was is that we had these quasi government aid these with the backing of the government competing with the banks. And so you had a tremendous amount of money bidding for your business. And so what happened, the government through their entities and the private banks were just all in competition trying to get these loans because land prices are going up or we’re going higher and they saw a larger and larger loans. And so they saw an opportunity to make money. So, they were just forcing money into these farmers hands. And so what does the farmer do? He goes, I should expand. My bank is telling, my government’s telling me to expand.

Mary Jo: So, back up, back up Wade, the federal banks were competing against the local banks, we talked about this the other day. [right] Because you have a federal bank backed is a federal loan from the federal land bank or whoever you were talking about, right. And then you have the banks and the banks are trying to compete and because everybody wants the farmers money at this point. We’re in the 70s and it’s great, and everybody wants that money. And they want that money because of fractional reserve banking, because the more money you give them, we can lend 10 times. So, in 79 or in 71 Nixon removed the gold standard. Well, now we can print as much money as we want to lend more money to farmers creating this massive problem of over lending and inflation.

Wade: Inflation on the land especially and inflation across the board. So, back in the late 70s, we saw inflation rates hitting 14– and all inflation rates, what that means is the price of everything going up at a percentage basis. So, what I try explain to my son is like you know your box of Cheerios today we buy for two dollars and then a year from now where we paid 2.15 for it. So, it’s the same box of Cheerios, same size of box of Cheerios but we’re paying more for it and that’s all inflation is.

Mary Jo: Right. But that inflation is caused by the gold standard going away and we can just print money however we want. So, when we remove the gold standard from the bank now, what happens? Now, we can plant as much money as we want, lend as much money as we want to these farmers and causing the price of the land to go up. Well, then you know that was in 71 then, the banks were competing for all these loans because they wanted money coming to them so they could go turn it 10 times. And then in 79, I’m reading my notes here, in 79 local raised interest rates to peak at 21Ω%. So, now interest rates are 21Ω% and you’re trying to buy land and you’re trying to farm and you’re trying to refinance and whatever. Then Carter in 79 as well, so though we have a Russian embargo and we’re stopping all grain going into Russia. So, now we have this commodity price issue. We can’t sell our commodities and then, in the late 80s we had a drought which that didn’t help anything either because we need the commodity to sell to pay for the operating loans. And then this was the interesting thing that I heard from one of the ladies on the video is that she went to the bank because she wants to buy couple boars because they had hogs. And so she goes in to finance these boars and the banker says, ìYou need to restructure all of your loans if you are going to buy more boars. Not just I’m going to give you new loans for these boards. No, no, we’re going to restructure all of them to 20-some percent interest rate at the time most likely.î So, now the bank’s got the upper hand. And so Wade, you said this the other day when we talked and you said what is the biggest problem you saw in the first 30 minutes of that video?

Wade: I see a lot of things so help me out, where was I going with that?

Mary Jo: Wade, it was good, government intervention.

Wade: Oh, yes. So, you have the government pushing up the price of land then, you have the government pushing up the interest rates, and then you have the government driving down the price of commodities; all government intervention.

Mary Jo: Right, and so the problem was created by government essentially, right? So, the problems created by government. I mean if we look back at what I just reviewed the government says, ìGo buy all the land, farm. We have low interest rates, farm fence line to fence line and the banks can lend you as much money as they want.î And then the banks recalled the notes and the gold standard went away and the embargo came on. And so the government telling us in one hand to expand, and then on the other hand they’re taking it away from us. So, we really have to think, do we want the government intervention? And even with today the markets the way they are, farmers will say, well I need help from the government. The government should be put in some sort of place on commodities. Do we want government intervention or do we want an Austrian based system where it’s just supply versus demand?

Wade: There’s another article you’d sent over actually, it was this morning where the guy says, ìHey, the farm crisis today isn’t nearly as bad as the farm crisis in the 80s.î And I found that rather interesting and it might be true, I don’t see it being as bad. I mean again, I was 13 years old and we had to sell our farm 81. So, I understand the direct impact of what was going on.

Mary Jo: So letís talk about it Wade because I have it in my talking points. I did send Wade talking points clearly, he’s not following them.

Wade: I didn’t see those.

Mary Jo: Theyíre in a word doc.

Wade: That’s alright, I can’t read any how.

Mary Jo: So, since he already went there let’s go there. The guy that he’s referring to and the article that he’s referring to he says, there’s four things that aren’t going to cause a repeat of the 80s, there’s four things. And one he said is the–

Wade: He says increased regulations.

Mary Jo: He says stronger real income accumulation, ahead of the current downturn, farmersí accumulated much more income especially cash than they did in the 1910s and 1970s before the previous farm crisis. So, basically, what he’s saying is farmers have a lot more money this time, a lot more liquid cash this time or accumulated cash this time to help them through. Now, I’m going to argue, I’m going to argue on that point because I talked to thousands of farmers, and they don’t have the cash. They don’t have the flipping cash. They had cash. I mean you saw it Wade, you were with me at farm shows. In 2013 right after the book was out and farmers would walk by me and laugh in my face and say, ìI don’t need that book, I’m farming without cashî and they puffed their chests out, right because they have the cash. Today, those same farmers don’t have the liquidity because they’ve put it into equipment. And they thought that equipment was going to be there forever or they overspent or whatever. Is it all of them? No, it’s not all of them. Some of them may survive because they remembered the 80s, but some of them are canister because they didn’t remember the 80s and they thought that it was just going to last forever. And there one other article, let me get this in one sec. I know you got something to say. But this guy survived the 80s. In this article and he said, ìI’m thankful for it. I’m thankful for the 80s because I kind of know, I’m thankful for it because I kind of know don’t forget that those times could come again.î And he was always prepared. He said, ìThe 80s taught us about world trade, they taught us about exchange rates, they taught us about interest rates, they taught us about inflation. Things that farmers before them may have been aware of, but they didn’t realize that what happens on the world stage could put them out of business.î So, I mean do you think we have the liquid cash; farmers and non-farmers a like?

Wade: Well, I would go back and say that in that article he talks about income, stronger real income leading up to the crisis. And I would tend to say yes, that is the case. They had income but what did they do with that income? Did they save it, did they reserve it? Very few people reserved it. They punk down half a million dollars in a grain handling system or they plunk down same amount of money, whatever they had reserves to put up buildings or to do improvements on their operation because they’re taking over from dad or whatever it was. I think there are some great real income in those glory days but there was no reserving of money. So, I think his statement is kind of correct, but your statements probably even strong in the sense of at the end of the day, there’s no money to be had. There’s no cash to be had. They have assets and we talked about this all the time; what’s more important, assets are or cash flow or cash? Assets look good as long as somebody’s willing to borrow against that asset. And that’s really what happened in the 80s if you remember again the land prices went up, they’re going to collateralize it and this is the same thing that’s happening now that land prices went up and they go, ìOh, yeah we’ll borrow your money because land prices are increased and so they’re going to give you money.î But when things started to go bad, what happened? Now, they wanted to re-collateralize your loan and now, instead of taking in that quarter of land that you’re trying to buy and using that as collateral; they wanted that quarter plus the other two quarters that surrounds your house. That was in the 80s, sounds real familiar with what’s going on today, is it not?

Mary Jo: Yes, yep because we’re going to put one piece of land up as collateral for another piece of land, and [crosstalk] that’s actually talked about in the LMR report. But before we get there I want to go to and I don’t know Wade, I can’t see her like you’re looking the other way.

Wade: Oh, I’m sorry.

Mary Jo: Thatís okay. Just move your screen to your other…itís nice to see you. So, the other thing that he talked about was, he said the second thing that he thinks is going to be a different factor is that low interest rate– well, we have low interest rates now which we did before, before we did in the 80s as well. However, he said interest rates are going to come up at a much slower rate this time than they did before. And you and I talked about that exact same thing the other day as well. And you had a great comment about that meaning it was catastrophic in the 80s. I mean we went from seven to 21% where now we’re going up slowly, but we’re going up slowly to slowly bring down inflation because the one thing that LMR talks about as well and I think I can put a link to the LMR report in the comments when we’re all done here. But what they talked about is that their – he made it clear in 2010 that – 0% interest rates and QE program would directly drive up prices in the stock market and all to create wealth and increase confidence in our dollar system. And when we have low interest, rates people buy homes; people buy land, people buy whatever. And so we’ve now created this 08 bubble that we had in 08. And so now we’ve created– we’re repeating that, right? Don’t you feel the same way?

Wade: Very much so. Again, interest rates are low so now we have again to keep confidence and so that everybody feels more confident, the more– he calls it the wealth effect. So, the wealth effect was hey, I can go out and I can buy this $300,000 house or you know land at $5,000 – or whatever it is I have I can afford to buy that now so I feel wealthy because the price is up. Well, know what’s going to happen is as interest rates rise, because interest rates or cost of owning that business, or owning that piece of property; those property values are going to come down. And then what’s going to happen is the banks are going to go, ìOh, wait a second we borrowed you $300,000 on a $300,000 house if your – in town, now that house is worth 250, now a lot more collateral. So, now they’re going to either take more or not give you a loan.

Mary Jo: Which weíve seen. So, in the farming industry, the banks want 40 to 50% down. It used to be 20 in 2010, in 2011 and whatever it was 20%. Now, they want more. I’ve got farmers who have paying off equipment, paying off land and the bankís not releasing it as collateral.

Wade: No, because the value has come down, they’ve inflated, the price, gave you a loan and now the value has come down. So, now they can’t, you know I have it on the books because they would say well, we had this million dollars in land, then we borrowed it a million dollars to you on and now that price is down to 750. So, if you come in for the other loan we got to find $250,000 of your cash to make up the difference.

Mary Jo: Or as Carlos says in his article in the LMR report, he says, ìWhat happens with these inflated values deflate is that collateral will not cover the loans. And banks are forced to take more collateral to cover or seize the property before a total collapse. [exactly] And so if the bank feels like your million-dollar collateral isn’t enough because they’re going to fall below a million and they don’t have any more collateral to take from you; theyíre just going to seize, it they’re going to call the note. And so if we look back at the 80s, that’s why they were selling and that’s why they were having all these share of auctions is because they didn’t want to lose any more than they had. They wanted to get it turned and sold as fast as they could. And we say it over and over, banks don’t want assets, they don’t want your land. They want cash flow. And so if you put one piece of land up for another piece of land, and guess? What if that’s 2 million and now between the two of them they’re worth a million; you lost both of them.

Wade: Right. And again so then think about the effect of that. Also, now we’re having more and more land come up for sale and what is a mass supply of land being sold will drive down the price of everybody else’s land. It’s like grain, it’s like anything else; supply and demand.

Mary Jo: Same thing with housing right now.

Wade: Yeah and so it’s same thing with housing. You see that spiral. So, it’s not just like oh, it’s going to tilt and go down nicely; it’s going to go fast like we saw in 08. And that’s exactly what happened with real estate because also there was a glut of properties for sale; drove down all the other good properties and so everything went down the drain kind of all because of that.

Mary Jo: And we’re seeing that, you know, I’ve talked to a couple investors over the last week and they’re telling me they’re not seeing it in their town. And maybe it’s just Bismarck because we had this oil boom, and it was some high inflated prices. But I had my house for sale this summer, and it should have sold further 360. I had it appraised last week and it was 337. I mean 12% in a matter of months, and that’s because other people have their house listed for 360 and sold for 340 and they took a $20,000 hit. No, no, they sold for 320, they took a $40,000 hit. And so that now resets the price of my house. And so when you’ve got these auctions which is exactly what Wade just said when you got these auctions. Now, that guy sells out because he has to and it just brings everybody else down. But should have it been there to begin with; I knew my house was inflated, I knew it. And so I was just trying to beat the refi to get the money out of it because I also know I can make the payment on that. But guess what I didn’t beat the refi because it came down so fast that I was months late. And so the same thing is going to happen in the 80s or the same thing happened in the 80s, but are we going to see it today? And people say no the banks– this was this guy’s third thing that he talked about was that the bank regulations on agricultural lending limits were tightened after the 80s farm crisis. So, he’s saying the banks learnt because everything was tightened after the 80s. I don’t know about you, but I am not going to agree with that statement because if that was the case, just as a guy in this other article said, a guy in the farm crisis video said; if they learn from the 80s and we basically repeated it with the 08 housing crash. So, it should have if the banks truly learned, they should have landed and we should have never had an 08 housing crash. So, now we have an 08 housing crash and now we’re in 2018 and we’ve got inflated values again because interest rates were down and Bernanke is trying to boost– Bernanke you know purposely did that to boost up the dollar, so what’s going to happen?

Wade: It’s a game of musical chairs and everybody wants to be– All the banks think that they’ll be able to get out before they’re the last man standing, and that’s what happened in 08. Everybody thought that they could profit from and I think everybody kind of knew that everything was overheated and overvalued. And I remember Bernanke saying there was irrational exuberance if you remember that statement in market and they were talking about this irrational exuberance. Well, everybody kind of knew it but it’s like what’s going on the stock market today. We see institutional investors leaving the stock market and they’ve pumped it up and they’ve got everybody so excited that individuals are putting money in, and the institutions are leaving and it’s leaving the individuals holding the bag. And we saw this in 2000. I remember that I was in the middle of my financial services practice back in the day, and if you couldnít do 30 or 40% for people, you werenít going to talk to them because they can throw a dart at the board and get that. But what happened, if you look at the numbers, all the big institutions were starting to back out in 99 and 2000 and then when all of a sudden one individual start saying, ìHey, this is way overvalued and there’s like a race you know all the rats were leaving the ship and then the last rats were the individual investors. But before then, all the institutions and all the guys, big hedge funds had already left. And that’s the same thing with land you know, with farming I think – not farming, but with the outside guys buying land; they’re going hey, well this is probably overheated. We’re going to either going to sell or we’re not going to buy anymore. And so now you’re seeing that land come down. And the negative impact of that again goes back to the fact that the banks, they want collateral. To that guys point, increased regulations, they’re required to hold more collateral. Yeah, okay. All those things that, that guy talked about that article and the last one he talked about was a crop insurance participation is all designed to protect the lenders. Nothing there is designed to protect the farmer.

Mary Jo: Good point, good point. That’s exactly right and there’s crop insurance but what kind of crop insurance are you buying? Are you buying crop insurance to protect 90% of your crop or are you buying crop insurance to protect 50% because it’s so expensive? You know, what is it that we’re buying? So, we have to look at that too. But I want to backtrack just a hair Wade. [yes] Weíve talked about and Carlos mentioned this in the article as well that people like you and I are buying stock when it plunged here a few weeks ago. So, people like you and I are buying these stocks, but the actual institutions aren’t selling. [right] Can you explain how that works?

Wade: So, big institutions, let’s go to California. The California State Pension Fund, huge billions of dollars. So, they have parameters of valuations and different stuff they look at and they say, okay. We’re going to buy as long as all these things kind of fit in our parameters. But when things start to get a little out of line by rule or what understanding; they’re going to say hey, we have to get out of these positions now. But they’ve created so much excitement because people pick up the paper and go oh, the stock marketís up 30% this year, I need to get in. So, you get enough individual investors getting in while the big hedge funds, the billion dollar, you know, 100 billion dollar hedge funds are getting their positions out. Does that make sense?

Mary Jo: Yeah, yeah.

Wade: And so you’re replacing the people that no one have access to information, those people are leaving and they’re being replaced by individuals that don’t have access to information. And again, the music stops and theyíre the ones left standing.

Mary Jo: Right. So, you’re buying when they know something’s going to happen. Theyíre selling and weíre buying it because it plunged and we think it’s a great deal. So, we’re going to buy what they’re selling.

Wade: Yeah, and they say buy in the dips well–

Mary Jo: And they’re getting out before the bottom falls out of it.

Wade: Correct. And they’re already out. You go back to– I just think back in 2000, I remember the market would go down like 6 or 8 or 10% and everybody was in a rush to get back in so then the market run back up again. And then it would dip again and the market run back up again because we were told to take our cash, our liquid cash and take advantage of those dips. Well, we kind of lost sight of the fact is that when it came down, it didn’t come down 10%; it came down 30, 40, 50, 60, 80 % in some cases. And then everybody was out of money because you put your money in towards the top, so what did the institutions do? They go oh, it’s in our evaluation again, now we can go ahead and we can buy their stocks at that valuation. Yeah.

Mary Jo: Oh, that makes sense. Okay. You guys, I don’t understand the market think. I never liked it, I never played it, and so that’s why I like Wade to chime in on some of this stuff because he can put it into English. And if he doesn’t, I make him put English so that the people like you and I can understand that because I wasn’t in that world in 08 and 09. I just was pissed off at the world because I was losing my money, and I was told to just leave it there just hanging in there Mary Jo, it’ll come back. And then you’re told to invest which is exactly what Wade was just talking about. You’re told to invest, invest with what? I didn’t have any money to invest with. And when do you– how do you know when to buy? It’s just like marketing your grain. You have to be timely about it. But when the market has been manipulated by the big dogs, that’s the scary point. And this is one thing that Carlos had in his article is that, I want to get the exact quote. So, Carlosís attorney had talked to him three days before he wrote this article. Now, this article was written just a few weeks ago and Carlos’s attorney, the attorney was told by his broker, sell stock position you own immediately. When your stockbroker is giving you that advice, that’s alarming. And is it just affecting the stock, I know we kind of got off track a little bit. Is it just affecting the stocks? How is it affecting the farmers as well? Well, if you haven’t off the farm job and your money sitting in a 401k or an -A, it’s going to affect it. If the inflation is still the land prices, it’s all going to be affected by this rise of interest rates to bring the land value down, and banks are pulling back. And they are not pulling back solely because of commodity prices. They are pulling back because the value of the land is going down, and they understand inflation. The value of our dollar is popped up like it is right now, there is inflation. And I am sorry to tell you but it is not Walmart’s problem that your Oreos are more money, okay. The Oreos are more money because it takes Nabisco more dollars, I think it’s a Nabisco, it takes them more dollars to create that Oreo. Everything is more expensive. At the end of the consumer is getting it; they’re the ones paying for it. The bag of Oreo sizes went down, the price of Oreos went up, the cost to get them to Walmart went up; all of that stuff went up. So, don’t think that is just Walmart’s fault. You have to go back to the origination and who started it and what is the value of our dollar. The value of our dollar is so inflated because we don’t have a gold standard, and we have to look at that big huge picture. Now, another thing that he talks about in the LMR report Wade, and I don’t totally understand this so I’m going to need you to explain it. He says that the 08 crisis put many companies in a position to stop paying dividends in order to prevent the sale of company shares. So, no dividends are paid so they don’t have to sell company shares and they use the low interest rates to issue their own corporate bonds, and use that cash to buy back their own shares to prop the company up. And now we have 50% of the 2.47 trillion dollars of corporate debt weighted triple B bond markets. What does that all mean?

Wade: Okay. So, all the dividend from a– weíll pick on Walmart because you picked on them Walmart earlier. So, if you have stock in Walmart, they have excess cash or profitability and all the dividend is just a return of profitability back to the shareholders. So, in 08 what was happening is that the companies because A, they were running scared and they weren’t sure what was going on and this really happened in the financial marketplace if you have Wells Fargo, Bank of America or any of the other financial stocks; they were running scared. So, what do people do when they run, right? They hoard cash, right. So, they stop paying their dividends. And then what happen is interest rates start falling, and so they or excuse me, interest rates start to go down so what they do is they take their cash and then retire their existing debt because their debt maybe was they were paying eight or 10% on those existing bonds. So, they take their cash and they buy their bonds back so they don’t pay that interest rate. Then what they did is then they reissued bonds at 3% but the company now went from having an A rated stock or A rated debt down to a triple B or double B rated because now the financials of the company aren’t as strong as they were if that makes sense. So, now theyíre lower rated but they’re buying it back at a– they’re issuing bonds at a lower interest rate, but it also comes with a lower quality. And so really what all that says, so then the company would then take that extra money that they raised by having a lower interest rate and then they would say well now the stock is half the price so we’re going to buy back our stock from all these people that can’t afford to hold their stock.

Mary Jo: And prop the company up and make it look good.

Wade: Right, so then yeah, so you have a lot less stock outstanding. So companies like Wells Fargo again, and the banks or Walmart, whoever it was they took advantage of the low interest rates and they said well we can take reassured bonds, have a lot more cash flow and we can buy a bunch of our stock back because you as the individual investor is hurting; you’re willing to sell your shares back to us that are very discounted price.

Mary Jo: And so what happens when and what point do those bonds collapse and the company goes under?

Wade: Well, so what happens as long as the interest rate stay low, lower quality bonds are just fine as long as the company can make a profit, right. But as interest rates start to rise in order for that company to keep operational, they might have to issue some more bonds at a higher interest rate. So, now the cost of operation goes up, maybe the profitability goes down and so it can be very tenuous if you don’t have a good business model to say hey, we can operate in a 8% or 10% interest rate environment versus a 3% interest rate environment. So, what happens is that they’re just more likely to default on those double B or B rated bonds.

Mary Jo: And when they do that, then we hear these reports that they bought these you know that all these companies are doing great. Their stocks are up and so when the companies are doing great in the stock are up, we think that our dollar is strong. And everything’s fantastic and we have all these jobs the economy is fabulous and it’s expanding and we have nothing to worry about.

Wade: Yeah, not necessarily because again, because that can come and unravel fairly quick. I mean granted, there are a lot more jobs being created, are they high-paying jobs is a lot of discussion around that. But the point is companies are going to have to use automation to become a lot more efficient.

Mary Jo: But the point is by selling, by not paying dividends, buying back these bonds at a lower rate, it makes your company, look great it makes the economy look great, it makes us feel good.

Wade: Right, exactly. Go back to the irrational exuberance like they talked about or like Carlo said in what did he call it, he called it the wealth effect.

Mary Jo: And you guys, I just printed it out here but Iíll put a link in there and there’s multiple articles within the LMR airport, but it’s called the wealth effect. And the moral of the story that he’s trying to say with backs up information is that what we feel good about our dollar, our dollar will stay high, and everybody feels fantastic. In Venezuela, just collapsed and it’s because people lost confidence in their dollar. And that’s exactly what can happen in the United States, and that’s what if we’re going to have a run on the banks like we did in the 30s; it’s because people don’t have the confidence in the dollar. So, when companies are buying triple B rated bonds theyíre selling their stock– they’re not paying dividends and they’re investing it back in to buy triple B rated bonds and they’re propping their companies up; it gives us confidence in our dollar. So, we really have to look deeper than whatever the news is telling us, and how awesome it is. And I don’t care what News Channel you listen to, they’re all for bullshit as far as I’m concerned. Because they’re all telling us that it’s great the only one telling us that it’s great. The only one thatís telling us itís not okay are the Austrian economists, and they’re saying hey, we got a look at the big picture. We can’t just look at XY and Z; we have to look at A through Z. And we have to use some common sense along the way. And so that’s what Carlos Lara and Robert Murphy who is an Austrian economist, that’s what their report is always about. And that’s always an awesome, awesome report. And so this one is just really good and it really tied into whatever the video was that I saw on the 80s crisis and can that be repeated. And you know it for me, I look at it and say absolutely, it can be repeated. Is this guy right that interest rates are going to go up slowly, and it’s going to bring everything down? Yes, sure. But I listened to another report this morning, Farm Bureau has something that they did in March of this year and it showed that the guy talking about the fact that farm bankruptcies are up a 100% in 17, in 16 and 17. So, if farm bankruptcies are up 100% from– I don’t know what the period was before, he didn’t say. [crosstalk] We’re starting to see– did I send you that?

Wade: Yeah, I see– I watched it.

Mary Jo: So, we’re starting to see that the bankruptcies are starting. So, then we go back to this other guy that said well, we have the cash reserves built up; did we? If our farm bankruptcies are up 100%; did we– and I mean 100% could go from zero to one; that’s a 100%. Let’s be realistic on what a 100% is. They didn’t give any actual numbers, they did have a little map on the bottom of that, that showed as of March what areas of the country were up and what areas of the country were down. And the Midwest was up, and Texas was up, and the only people that were down were over like by Washington and stuff. But we still have to– we still have to take that into consideration that we’ve got an increase in farm bankruptcies. Because we need to have liquid money, we don’t need all of that money in assets. And when the bank tells us to expand, like one guy said in the 80s video he said the banker came out on Sunday and said, ìHave you lost your mind? Why aren’t you ready to buy that land that’s for sale? There’s another 240 acres or something for sale.î And he said, ìI can’t keep up already. Why would I buy more?î And he goes, on to say, ìIf I would have bought that I would have lost everything as well in the 80s.î And all these talking heads were telling them, oh, you need to buy, you need to buy, right. So, we even had– I forgot…whatever his name was said, ìYou need to farm fence line to a fence line. You need to get big or get outî, right. So, we had the government telling us to get big and get out. We had the bankers telling us we were idiots if we weren’t going to expand, and we had the government coming in and saying– or we had just the banks and the government right. So, the accountants was coming in to and saying, ìHey, you need to buy XY and Z to write off all this income.î And like I talked about all the time, what part did the farmer play in that? They’re still a farmer involved there and the farmers that said, ìNo. I know my books. I know my cash flow. If times are bad I’m not going to be able to pay for that because what goes up must come down.î And when the government says, ìWe’re going to stop beans going to China, we’re going to stop grain go to Russiaî; we are playing Russian roulette with our commodities. And we have to understand that the government fingers are in our business. I don’t care if you’re a farmer or non-farmer; the government’s fingers are in your business. And if you allow them to have their tentacles in there, you better be prepared for worst-case scenario. And if that is what Nelson – that I talked about the founder of the concept Wade and I teach; he does not like government intervention. And that is why he is very adamant that if you’re going to take some things from the government, it means you have to give them something so you they can give you money back. So, if you’re going to get anything, if you’re going to get a soybean bailout, guess what? We have to pay taxes and in order for that to come back to you as a soybean bailout. The government doesn’t create its own money. They take from us to give to you or they take from you to give back to you. So, do you want the government intervention? If we look back at the 80s, it’s what created it. If we look at what’s happening right now, it’s what’s creating the problem today. It is what has created the problem of land inflation, of housing inflation. If you really listen to what’s going on, banks have more debt right now than they had in 08 and 09. That’s scary.

Wade: And interest rates are starting to rise.

Mary Jo: How high do you think they’ll go?

Wade: You know, that’s hard to say. You know, the problem you have is that it’s been artificially low for so long, it’s just like a pendulum right. So, it goes so hard so long to one direction, when it swings back you’re going to see that go probably way higher than it should be, you know, that’s kind of what we saw in the early 80s. Now, are we going to see the 80s interest rates? I don’t want to ever see that again, but who knows? I mean, Never Say Never, right? But the new norm and I have– my nephew actually, heís in the mortgage business and he says people have become outraged when their home mortgages are at 5%. He says the statistical average right now is like still 7% or 6Ω%. And he says but they’re outraged when it goes from three to four and a half. He says they’re still terribly low and so the problem is they’re going to keep going up and you have to balance things in life, right. So, they’ve been held so low for so long that you can get that rebound effect. You might see it you know go really high. The possibility and nobody even want to talk about this, but we see a 10% interest rate to borrow money. Yeah, because what’s going to happen is that again, it goes back to as long as we have the ability to borrow it cheaply we’re going to buy things at a higher price. And then they’re going to slow that down somehow, and that’s going to be raising interest rates.

Mary Jo: And we as consumers need to think. At the 5% interest rate, is it horrible to have to pay 5% to have access to money because it’s balancing the bubble? We want zero and we don’t want a bubble. We can’t have both and so if things would just stay the way they are and government will quit inflating the dam dollar and quit manipulating the interest rates; we would never have these ups and these downs. We could stay level. And if we had the liquidity, and we had what we needed, and we weren’t subject and held hostage by the golden handcuffs of the bank, then we wouldn’t need to sell grain to pay the bank off. We could hold it until the market came back. We wouldn’t need to be having these auctions, right. So, if we band together and that is what somebody said in one of the articles that I read today. Shoot, I think I forgot to highlight it. But in one of the articles, he said if farmers band together, they would be stronger. And I say that all the time. We have all these people that have wheat. They have a wheat commission, they have a – commission, they have soybean commission, they have corn commission, and everybody’s separate. But how about we just all band together as farmers, put our money in one big pool because we’re going to be able to utilize it better and we’re going to be able to regulate things better. And Carlos and Robert talked about it in the book how privatized banking really works, how if 10% of the population just did the three things that they recommend; one of them is stop borrowing money from the bank. And IVC is an aid to that, but if we stop doing that, even if 10% of the farmers stop doing that; that’s the tipping point to say, ìHey, we’ve got control and we can control the market product versus demand versus we’re going to let you control the market for us. And then we’re going to let you change rule, we’re going to let you manipulate our interest places, we’re going to give you everything. How about we take back that liquidity, have that control ourselves and manage our own numbers, and stop letting the accountant manage your operation, and the banker manage your operation. Because that operation is your responsibility not theirs and guess what? The banker and the accountant don’t want that responsibility. They want you to run it yourself, but we have to run it like a business. And your real estate investors that aren’t running their real estate investment companies like a business; they’re going to blow up too just like they did in 08 and 09. And they’re going to over buy, things aren’t going to be worth anything, you’re going to have to call these notes, and you have to pay attention. Farmer, non-farmer, it doesn’t matter; you need to pay attention.

Wade: And I would agree, I would add on to that, that you know Nelson uses the phrase we have to get lending back down to the you and me level. And I think that’s a real key. Because what’s happening is we’ve abdicated this idea of financing to a bank that is looking out for the bank quite frankly and you know, that’s what they have to do. And then we allow them to dictate the rules. [yeah] We don’t take control the rules we allow them to tell us what the rules are. And unfortunately, farmers and consumers, everybody thinks that’s the only avenue. And if you have another alternative then, you’re in control because you can say no. I’m not going to do that or I have a different system. I have a different access to money so I can take advantage of opportunities, and this was a– I remember my dad before he died in the early 80s and I think the farm crisis is kind of what stress is the number one killer, and I think that’s kind of where he was at with the farm crisis. I remember him saying the bank only lends you money when you don’t need it. I could have taken advantage of low lower land prices if the bank lending money. And when you think about the 80s being you know, we saw this inflation of land prices, but there was a quick tipping point also when when the land prices, you know, they felt like crazy. Who’s buying land? It’s people that had liquidity, had access to cash. But his only avenue was the bank, unfortunately.

Mary Jo: Right. Most people’s only avenue and we have to remember, it wasn’t just farmers that were affected in 80s. Firms, for every four firms and in the Iowa report, for every four pairs that when under we lost one business and talents, and we lost a lot of banks at that time too. We lost a lot of manufacturing because it was related to agriculture. Farmers had the biggest hit but we also lost our towns and it affects everybody. So, if you’re not a farmer, don’t think the – it’s not going to affect you because it is. It’s all trickle down effect, you know, and it’s going to hit somebody. Itís always going to get somebody harder than it’s going to hit somebody else, but it’s going to affect everybody. And so everybody needs to pay attention. So, do you have something to say?

Wade: No. I would degree because again, it goes back to– So, here’s just a good example of what you’re just saying, I remember back in 08 I had started the infinite banking process, I had some money in my policies. And we were going to do a home remodel we’re going to add a garage. And Wells Fargo shut everybody’s line of credit off, everybody’s line of credit. And we had our line of credit lined up to build that garage, home equity line of credit. One day it was there, the next day it was off. Our house is still that same value it was the day before, my income was growing, it was probably better than I had ever been but they shut it off because they shut everybody’s off.

Mary Jo: Yeah, and it’s because the valuation of your house was coming down and they wanted to protect themselves.

Wade: Well, it was the valuation throughout the country not so much in North Dakota because remember in 08, North Dakota was in pretty good shape. Well, we had, I mean the economy here was really well. But again, when you’re talking about it, it affects everybody. So, what was happening in California, in Arizona, in Florida have direct impact on us as well.

Mary Jo: Yeah, it does because the banking system is a pool of money but not individual banks, theyíre a pool of money. And so you have to pay attention to that stuff. We need to have liquidity and we need to have control. Assets are not necessarily the key. I talked about this on the Live a week ago or so; you can’t just assume that because you have equity in your land, the bank is going to continue to lend you money. You’re going to walk in from that and they’re going to say nope, sorry, we’re not lending money because guess what? They didn’t lend Wade money, they took his line of credit away anyway. And so you’re seeing that same thing. The banks are pulling back and they’re not pulling back to protect you. I’m sorry to say, they’re pulling back to protect themselves, but Nelson is absolutely right. You need to be your first line of what did you say, first line of?

Wade: Credit.

Mary Jo: Credit, not the bank so the bank should be Plan B not plan A. All right. So, I think that I don’t have anything else to add and I think that we’ve probably talked it to death. But I mean, there’s so much more on the subject, really. So, I’m going to post the links to all that stuff, these are– if you haven’t got my books, these are my books you guys know where to get them from farmingwithoutthebank.com. Nelson’s book is on there as well. And you will see that this is why the concept was founded with kind of the 80s. Nelson’s not a farmer but he was a real estate investor and it affected him as well. And so the concept had to be brought to light because that’s how he managed to pay off his $800,000 of debt at 20-some percent interest. Okay. So, thanks for your time Wade.

Wade: Any questions?

Mary Jo: I appreciate that. No, we don’t have any questions and I don’t know if it’s– we’ve got people watching but I don’t know if it’s because it’s not refreshing. But if you guys have questions or comments, you know what to do. Message me, comment on the video, I will answer those, you know. If there’s something else that you– if you liked this talk and there’s something else that you want us to visit about, let us know. I’m happy to come on here any time and share this information because it’s information that I’m not seeing shared. We’re sharing the typical, ìOh, buy some stuff nowî and we’re not getting into the nitty-gritty of what causing that inflation, what’s happening with the dollar, why is the economy doing so well when everything is inflated, and what’s going to happen? How would the government going to save us next time? We really have to pay attention to that. Do we want that government intervention or do we want to be our first line of financing so we don’t have to worry about the government intervention? That really should be our key is making us that first line, making us plan A, making the bank plan B. Okay. Guys have a great day and let me know if there’s anything I can do to help. Thanks Wade for your time.

Wade: You bet, thank you for having me on.

Mary Jo: Yeah.

Wade: Bye-bye.