Blog 9 April 6, 2014 Farming is at the heart of our economic problems… and our economic solutions

Blog 9 April 6, 2014  Farming is at the heart of our economic problems… and our economic solutions

(apologies this did not get published previously... please refer to Blog 8 and 10 for its placement in sequence). 

Scenario: there is an important strike, some problems are for more money, the government is deep in debt and has no spare money… so now what?

Conundrum: Approximately 50% of people work for the Nova Scotia government creating essentially no new wealth. This leaves 50% of which 25% cannot work due to being either too old or too young, and the remaining 25% (of which 5% can’t work) leaves only 20% of the population to create the needed wealth to run Nova Scotia. This 20% is seemingly diminishing, so what now of the future? A mystery to me! However, maybe there is a partial solution: Parity. Some years ago a parity Bill 215 was debated. This Bill would put the economy back on track,  get the unemployed and youth to work.  It will guarantee farmers cost of production plus a small profit.  It will lead to a balanced government budget and will not require subsidies or stabilization spending. Sounds too good to be true?

National prosperity is the dream of all Canadians. National prosperity is possible. The key is reintroducing the Parity Bill.

Parity is the truth.  It is a fact, not theory.  It has been proven in history backed with 40 years of research and a national economic audit. This key to national prosperity is parity based on Wilken’s law. Wilken’s law states that for any nation in the world to prosper, new wealth must be created.  New wealth comes from our basic resource industries farming, fishing, forestry and mining. New wealth represents something new is created, something of value coming from the soil or the sea.  Example: a farmer plants one bushel of corn and reaps 300 bushels of corn. That is 299 new bushels of corn that never existed and haves created.  That 299 bushels of corn is new wealth. Still behind the Wilken’s law is this: at the end of the great depression in the 1903s the US government hired a brilliant mathematician and economist Carl Wilken.  This task was to research and document what led to and caused the great depression.  In the course of his work, Carl Wilken uncovered an incredible relationship between new wealth and the state of the overall economy. Wilken discovered that of the four basic industries agriculture provided 70% of the new wealth into the economy each year. But what is more fascinating is that he discovered a direct relationship between farm income and national income.  Here is the key: Wilken’s research revealed that whenever farm income equaled 1/7 of the national income, the entire nation prospered, and whenever farm income equals less than 1/7 of the national income we slide into a recession, and if low farm incomes persist, we plummet into a full scale recession. I believe we are possibly on the brink of that right now, this certainly applies to Nova Scotia.

That is Wilken’s law.  The income of the family farm is the key to the economic well being of everyone in the entire nation. It is that simple. But government and society fail to recognize it. Why is it that farm income is so important for the nation’s people? First of all, farmers create new wealth - 70% of it! Secondly, farmers support all the service industries.  Have you ever counted how many service industries ride on the farmer’s back? Look around you. Everyone receives from the farmer… the butcher, the baker and candlestick maker. Half a million Canadians are employed directly by the agriculture industry. If you think unemployment is high now, you have not seen anything yet. It can get worse, unless governments get back to basics, and support the agricultural industry. Why? The income that goes to farmers for producing new wealth turns into income for the rest of the people in the economy. These people spend it again, jobs are generated and the whole economy percolates.

Farmers are spenders! Simulators! And don’t hoard dollars in savings accounts. Every dollar that a farmer spends generates 7 more dollars into the economy ($3.65 stays in the county where the farmer lives). When farmers receive true value for the food they produce we call that parity. Parity gives the farmer the cost of production plus return on his/her investment.  That sounds fair and reasonable, doesn't it? A short while ago it was stated that the average North American farm family unit feeds themselves and 90 others. Parity gives that farm family adequate income to buy back the goods and services of 90 people.  This is what you call a perfect balance. This is what gives a nation or a province balanced economy.

We used to have a balanced economy and this country has known prosperity.  It is a national fact that the years 1942 – 1952 have been recorded as the most prosperous years ever known in history for entire nations. Do you know why? Because from 1942 to 1952 the farmers in the US, especially, were guaranteed parity by law (fair price) positive economic ripple effect was felt right around the world. Why farmers were guaranteed parity is because of Carl Wilken. How they lost it is the horror story we are living with today. I believe this applies now (but let us be positive). We can make changes for the better.

The next blog will be the history of Parity and we will continue the story.

Some resources: Carl Wilken

http://www.heritech.com/pridger/unforgiven.htm

http://againstausterity.org/article/wither-farm-bill-prosper-nation-0

Blog 10 May 11, 2104 - Farming is at the heart of our economic problems and solutions - Parity is a viable solution.

Blog 10 May 11, 2014  

Farming is at the heart of our economic problems… and our economic solutions – Part 2 This is the story

To repeat: The current conundrum is that 50% of the people in Nova Scotia work for the government. This does not create wealth.  Of the remaining 50%, 25% cannot work because they are either too young or too old to create wealth.  Of the remaining 25%, supposing 5% cannot work for whatever reason, this leaves 20% to create the wealth to run Nova Scotia. This 20% is diminishing. Parity and agriculture can create wealth. Thus this is the story of Parity.

At the beginning of WWII, Wilken, who we mentioned before, went to congress.  He warned them that the USA would go bankrupt and loose the war if they did not have a means of paying for the war. Few believed him, however, he did convince the committee on banking and currency that agriculture provided 70% of the new wealth into the economy, and that agriculture could finance the cost of war.  So they drew up what was called the Steagall Amendment (see some links below) which guaranteed farmers PARITY. To insure that congress would not veto the amendment, they attached it to the National Defense Act. People were led to believe that war brought prosperity when in reality it has always been agriculture, and the other three basic resource industries, that foster economic prosperity. Historically, the farmers at the beginning of the 1900s were the bankers of  the local area.

What is happening now?

At the end of the war, as industry the world over converted from military to domestic needs, everyone prospered. People paid off their debts, very few were borrowing, and at that time the banks were only lending 37.5% for each dollar deposited. (Now the banks only keep a small amount (in more recently years I believe the rule has been 5-7 dollars for each $100.00; this means the banks have no money in the bank and nothing in reserve.)  That is when bankers said, “Look we have to take the fat away from the people.  There is too much prosperity.  We have got to force people to borrow more money from the bank.” And they have done just that.

Banks planned, thus to short change the monetary system.  If  fair prices to producers of new wealth brought prosperity to the nation, than the opposite will force a down turn of the economy.  Since agriculture provides 70% of the new wealth into the economy each year, that became the target industry to undermine.  In 1953, the bank lobby scuttled the Steagall Amendment.  Government switched to a sliding scale where by farmers would only get 90% of Parity. The next year they would only get 90% of 90% and down and down each year.  Farmers  were put in a position to borrow from the banks to cover lost income. Pretty soon it backed up the entire system until every segment of society was borrowing money. When the plot to scuttle agriculture was set in motion in 1953, that created the current situation now known to be the most fantastic debt infested economic situation the world has ever known. We have a global condition of government debt, business debt and people debt all because farmers were denied a fair price for their produce, and of course now, we have very few farmers left.

If you are still puzzled about farming parity, and its relationship to the economy, if you still wonder what this  has to do with employment and debt, just take a look at one piece of equipment the farmer buys and how it affects others: tractors.

In the last 30 years we have lost 300,000 Canadian farmers.  If they had remained in farming, each of them would most likely have bought a tractor about every 10 years. That means that there were 900,000 tractors that were never sold.  That represents millions of dollars that no farm equipment dealers earned one penny of profit on, the servicemen would not had them to service, no railway men or truckers moved them, no working man in any factory received a salary for building them.  It represents 3,600,000 tractor tires that no rubber company was able to provide.  It represents 900,000 tractors’ worth of steel that no steel company received a penny for producing. It represents tons and tons of iron ore that no miners ever mined.  Then, there were all the office workers, advertisers, sales people and so on who lost jobs.  All of this represents business, work, wages, profit and earned income that was gone, gone because farmers did not receive a fair price for their product. And of course now, we have to look at pension plans and realize that future generations may have no pensions at all. 

Here is a different example of how far far away from parity we have deteriorated. In 1973, 9300 bushels of corn would buy a large combine.  In 1983, it took a farmer 25,000 bushels of corn to buy the same sized combined. If Parity had remained in place, the farmer would still be able to buy a combine for the equivalent of 9300 bushels. Do a little calculating and you will be amazed at how this works out in bags of potatoes, litres of milk, pound of pork, etc. Society and government have lost touch with realities of where new wealth comes from, how vital it is, and how it will restore us back to national prosperity.  However, new wealth alone is not the answer. Parity prices on new wealth is the answer.  (Parity price = fair price for product.)  Agriculture is the backbone of the economy and farmers are the backbone of agriculture.  No longer can farmers go to the market place with nothing more than hope that they will be paid a fair price.  Farmers are the only people who have not joined the human race in putting the price on the product and a price on their labor. What should be the price of their labor? (will be addressed later in a blog

Any mathematician or economist studying the workings of any economy will discover that whenever farm income goes down, unemployment goes up.  For every 1% increase in interest borrowing rate 10,000 people become unemployed. We can no longer as a nation, or province, or as individuals borrow ourselves out of debt, you cannot borrow yourself out of debt. Parity will help create a better balanced world and a peaceful world. Do we want this? Or do we do nothing and let our world collapse.  PARITY – THE KEY TO NATIONAL ECONOMIC PROSPERITY.

Next blog – questions and answers about Parity.

Link re Steagall Amendment:

http://www.gpo.gov/fdsys/pkg/GPO-CDOC-105sdoc24/html/ch5.html