Economy in the Heartland
Chris Malek
interesting comments.
Chris Malek
Slice of central U.S. safe from recession shrinking
By Ben Neary And Mike Schneider
The Associated Press
Salt Lake Tribune wwwsltrib.com
Updated:07/31/2009 02:15:27 PM MDT
Torrington, Wyo. » Carl Rupp and his neighbors follow the old
rancher's creed: "Keep your money in your pocket."
Rupp has farmed his whole life. He lives in Goshen County, a rural
spot along the Nebraska line where cattle outnumber humans 16 to 1 and
you can still see the ruts cut by wagons that hauled pioneers along
the Oregon Trail. "We're very conservative," said Rupp, 62. "We don't
go out too far on a limb."
That prudent financial bent, matched with the high prices paid for
crops and energy in the past few years, has largely protected Goshen
County and a core group of several hundred other counties in 10 states
from the recession's chokehold. The Associated Press Economic Stress
Index shows they make up a "safe zone" that covers a long swath of
middle America, from the Great Plains south to Texas.
But the safe zone is shrinking. Energy production and prices are
sliding, especially for coal and natural gas. Crop prices are
dropping, too, as there's less demand in Asia for American wheat, corn
and soybeans. There were 800 counties in the safe zone a year ago, a
number that dropped to about 300 counties in May and slid further to
200 counties in June.
"To say that you're doing pretty well is just to say that it's the
best-looking puppy in a pretty ugly litter," said Wyoming Gov. Dave
Freudenthal, who recently imposed a 10 percent budget cut across his
state's government in response to falling tax revenue from the energy
sector.
The contiguous counties in the safe zone start in Montana and North
Dakota, and cascade into Wyoming, South Dakota, Nebraska, Iowa, Kansas
and Oklahoma, and end in northern Texas and eastern New Mexico. Those
in the safe zone had an AP Economic Stress score under 5 in June,
making them the economically healthiest in the United States.
The AP calculates a score from 1 to 100 based on each county's
unemployment, foreclosure and bankruptcy rates. The higher the score,
the higher the economic stress.
The safe zone is largely rural -- all but a dozen of the counties have
populations of less than 25,000 people, many of whom make a living in
agriculture. As the rest of the nation was riding the mortgage bubble,
many farmers and ranchers in the safe zone who suffered through the
agriculture crisis of the 1980s took on comparatively little debt. And
when the recession hit, it didn't dampen demand for the row crops
grown on the Great Plains.
Consumption of food and feed grains has increased 3 to 4 percent
annually in recent years, while a federal mandate that gasoline
contain certain levels of ethanol has also kept demand for corn and
soybeans high.
"The last few years, ag has been pretty good," said Rupp, who sells
alfalfa to dairies and feedlots. "In the long run, if there is such a
thing, it's more stable than being in a county with energy as a
primary industry. We miss out on the booms and busts, but overall
we're in pretty good shape."
But while not in a bust cycle, ag prices are still down enough from
last summer's highs to worry Doug Goehring, North Dakota's agriculture
commissioner.
"If you really want to hurt the economy, beat the heck out of
agriculture," Goehring said. "It is a primary sector in our economy.
It is generating new wealth. You can't just rely on services to drive
your economy."
Elsewhere in the safe zone, the business is energy, and the recession
is starting to take a toll on a business that was booming. While oil
prices have increased this summer, it's the price of natural gas and
coal that matters most here. Natural gas that traded for nearly $13
per 1,000 cubic feet last summer is now available for less than $4.
The spot price for coal is running around $9 a ton, down from about
$13 last year.
The number of rigs in Wyoming drilling for coal bed methane dropped to
zero in May, down from 19 the previous year, while the number of
conventional rigs drilling for natural gas and oil is off by more than
half. No coal mines have closed, but annual production could drop as
much as 10 percent as the recession stalls the need for electricity
nationwide.
"The prices of coal are down. Production is going to be down," said
Marion Loomis, executive director of the Wyoming Mining Association.
"So we're going to see a pretty significant reduction probably this
year, and it's really just based on the amount of electricity that the
country is using."
When booming, energy extraction kept unemployment low. In Oklahoma,
for example, unemployment began creeping upward not long after as
energy prices began sliding in September. It stood at 6.3 percent in
June, up from 3.8 percent in June 2008. Wyoming's unemployment rate
was 5.9 percent in June -- far below the national average of 9.5
percent, but the highest in the state since June 1999.
Because of a 45-percent dip in demand for its drilling services and
installing pipeline, Three Way Inc. of Buffalo, Wyo. has laid off 145
workers, about 60 percent of its work force from last summer. It was
among a dozen companies in northeastern Wyoming's coal-rich Powder
River Basin that recently auctioned off hundreds of trucks, trailers
and other equipment, said company controller Alex Mantle.
"Definitely people see some doom and gloom and are certainly
disappointed," Mantle said.
Because of their small size, the AP index lacks foreclosure data for
about half of the 200 counties that made up the safe zone in June;
those with a population under 25,000 were assigned a foreclosure rate
of zero. But there is widespread anecdotal evidence that real estate
is an anchor in a place where many families proudly trace their land
titles to homesteading ancestors who settled the frontier in the
1800s.
Aided by low interest rates, the value of farm and ranch land has
grown by double digits this decade. Unlike California or Florida,
there was no largely speculative housing bubble here.
Mike Daly started First State Bank of Wheatland in 1981, first setting
up shop in a mobile home in a southeastern Wyoming town surrounded by
lush farmland. His bank, which now has several branches, never got
into the subprime mortgage market, and he said his customers prefer
the traditional fixed-rate, 30-year home loans.
"The vast majority of our borrowers have had a pretty good run. And by
that, I'm going to say eight to nine years of really [ag] good
prices," Daly said. "They've increased their equity positions, they've
paid down debt, and they're in a position, for the most part, to
weather the storm."
BobbyG
On Mar 19, 5:21 pm, Chris Malek <chrisjma...@gmail.com> wrote:
> This is an article I had on file. It is a little old, but has some
> interesting comments.
>
> Chris Malek
>
> Slice of central U.S. safe from recession shrinking
> By Ben Neary And Mike Schneider
> The Associated Press
And...boom times may be returning in oil extraction. The March 17th
Energy Info Agency tells us that drilling rig count is back up again:
http://tonto.eia.doe.gov/oog/info/twip/twip.asp
I'm making the call: crude oil back to $90 the barrel by mid-July.
To $100/barrel around Christmas or so.
The thing that could derail those price targets would be the onset of
the 2nd dip of recession, probably not directly attributable to energy
costs or availability, but "other" factors..
b.g.
Chris Malek
an explosive combination...or will the banks take ownership of
everything?
Chris Malek
BobbyG
On Mar 22, 1:52 pm, Chris Malek <chrisjma...@gmail.com> wrote:
> Higher energy prices...and high unemployment.....hmmm....sounds like
> an explosive combination...or will the banks take ownership of
> everything?
>
> Chris Malek
>
No, that won't happen. The banks are in very bad shape too. They have
very little real net worth.
Even China can no longer take ownership of everything.
It's all up for grabs I figger.
b.g.
Chris Malek
You bring up a good point. If you assume that the big banks like
Goldman Sachs, etc. will take possession of the property, how will
they do it without a bailout from the public that has no net worth?
Debt can't be increased indefinitely, can it?
Chris
BobbyG
On Mar 25, 11:42 am, Chris Malek <chrisjma...@gmail.com> wrote:
> Bobby,
>
> You bring up a good point. If you assume that the big banks like
> Goldman Sachs, etc. will take possession of the property, how will
> they do it without a bailout from the public that has no net worth?
> Debt can't be increased indefinitely, can it?
>
> Chris
No, I think we've hit the Limits to Growth, and this one (credit and
net worth) has to do with the "real" value of money backed by real
resources of some kind, combined with labor.
b.g.
D Wright Esq & Ann H Wright
might actually be good to have lots of debt and not really worry about it
because these big institutions , or even smaller ones, will not have the
ability to actually take possession. Think about it, if your mortgage has
been sold and then bundled and sold again, who really has it? Some bank in
Iceland! It is a very strange thing.
I think those that get caught in the first go-around might lose their
holdings but if it becomes pervasive then just how could any institution
actually do it? If they were to take possession and the property was worth
less than they have loaned on it, the bank would quickly become under
collateralized and rapidly lose their ranking. This is how many banks have
been folding. The word has it that many loaning institutions are, at the
moment, not actually foreclosing because they don't want the situation to
show up on their books; they are just pretending the owners are paying. It
is widespread that this is happening and has become a below-the-radar
concern in the banking world.
Plus, as you have said where do the banks get the money? They don't, and
they will have the properties, the underwater properties, on their books.
This thing is not done. There are all sorts of issues that are lingering,
and hidden that are yet to bite. I am not sure Goldman is actually sitting
on any of the mortgages. They may have just been handlers, bundlers or
deriviters that just took out a usury fee ever time the properties passed
over their million dollar desks. In any case, it is all fun and makes for an
interesting distraction while we wait to see if Goldman's activities in the
sovereign debt crisis in Europe also implodes their shaky system.
Maple syrup run was very strange. Small return on a large investment of
time---that's familiar. D Wright
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D Wright Esq & Ann H Wright
environmentally, energy availability and interestingly, financially. It is a
perfect storm. Money, as you say, will have to be backed by something other
than debt. I like energy, or raw materials. Labor sounds good but how would
that be held? D Wright
----- Original Message -----
From: "BobbyG" <land...@charter.net>
To: "Sustain Central Wisconsin" <sustain-cent...@googlegroups.com>
Sent: Thursday, March 25, 2010 12:21 PM
Subject: Re: Economy in the Heartland
>
BobbyG
On Mar 25, 1:31 pm, "D Wright Esq & Ann H Wright" <dkwri...@wi-
net.com> wrote:
> Labor sounds good but how would
> that be held? D Wright
In a "time bank?"
bg
Chris Malek
energy but produces a net energy for children until they are able
enough to produce a net energy of their own. Wealth is the product of
the land that sustains us. However, that wealth does us little good
if we don't apply our physical labor to it to get the food, clothing,
shelter, and sick care we need to stay alive. It is pretty simple,
but we often don't ponder it enough.
Chris Malek
BobbyG
On Mar 27, 7:03 pm, Chris Malek <chrisjma...@gmail.com> wrote:
> I think we would agree that labor is not wealth.
Indeed. Some would argue, as this chap does, that labor is far from
wealth, as far as it can get -bg:
"The laborer becomes poorer the more wealth he produces, indeed,
the more powerful and wide-ranging his production becomes. The laborer
becomes a cheaper commodity the more commodities he creates. With the
increase in value of the world of things arises in direct proportion
the decrease of value of human beings. Labor does not only produce
commodities, it produces itself and the laborer as a commodity , and
in relation to the level at which it produces commodities. 5
"This fact defines more than this: the object, which labor
produces, its product, confronts the laborer as a strange thing, as a
power independent of the producer. The product of labor is labor,
which fixes itself in the object, it becomes a thing, it is the
objectification 6 of labor. The "making real," or realization, 7 of
labor is its objectification. The realization of labor appears in
political economy as the "making unreal," or loss of reality 8 of, the
laborer, objectification as the loss of and slavery to the object ,
appropriation as estrangement , as alienation .
"The realization of labor manifests itself so much as a loss of
reality, that the worker becomes unreal to the point that he starves
to death. The objectification of labor manifests itself so much as a
loss of objects, that the laborer is robbed of the most necessary
objects, not only to maintain his own life, but even objects to labor
with. Indeed, labor itself becomes an object, which only with the
greatest effort and with random interruptions can be acquired.
Appropriation of objects manifests itself so much as estrangement,
that, the more objects the laborer produces, the fewer he can own and
so he plunges deeper under the mastery of his product: capital."
the alienation of labor--
karl marx
economic and philosophic manuscripts of 1844
5 What Marx is arguing is that wage-labor becomes something that can
be bought and sold just like any other object. The more important
products become, the less important humans as laborers become.
6 (German: Vergegenständlichung , often translated as "reification":
"the making into a thing"), that is, labor turned into an object.
Labor becomes an object rather than a thing people do; as a result,
the laborer becomes an object rather than a human being.
7 (German: Verwirklichung ): this literally means "the making real";
this is what the word "realization" means, that is, "making real."
8 (German: Entwirklichung ): "making unreal"; this is the opposite of
Verwirklichung, "the making real." In other words, labor "made real"
in its product "makes unreal" the laborer, in other words, the laborer
is no longer a person who is laboring, he or she becomes rather, the
products he or she produces. The products are more "valuable" than the
people who produce them.
�1996, Richard Hooker