An election coming up? Really?

Of course, I can only dream of the day when I’ll be unplugged enough that I can truthfully say those words.  Instead, I sit here eagerly awaiting the relief that will come once the vote is over. It will be over on November 5th, won’t it?

Meanwhile, take comfort from these admirable words written by from Dave Black, a brother with a solid biblical perspective on politics:

What matters is that the Christian should overcome evil by good, not by secular politics. The Gospel transcends feuding ideologies in the present age. To say this won’t make you many friends anywhere. But I need to be about the kingdom, not about any crusading ideology – even that of the Constitution Party.

Of course, one can recognize the relative political correctness of one’s own party affiliation. And at times it might be best to opt out of the political system altogether, exercising our right to engage in the politics of not-doing-politics. The challenge always it to maintain the biblical Gospel in the face of whatever regime or party or political philosophy rules the day and to refrain from placing too much confidence in the glories of human ideologies. […]

My personal opinion is that God can and will accomplish whatever He has in mind for our nation whoever He installs in the White House in January. As Vernard Eller (I think it was) once quipped, our confidence that a pebble from our measly little sling shot of politics will bring down the Goliath of evil is nothing but a silly pipe dream.

And so, my friend, on Nov. 4 vote for whomever you believe is the most qualified – or even the least unqualified – candidate to be president of these United States. But know this: I won’t ask you who you voted for should we ever meet.

I won’t ask you, either.

Banks now ready to forgive credit card debt

I was surprised to read this:

Big banks have formed an unusual alliance with consumer advocates to urge the government to allow huge portions of credit card debt to be forgiven, a turnabout from recent years when the banking industry lobbied strenuously to make it harder for consumers to erase their credit card debts in bankruptcy.

The new pilot program — which the banks hope will become permanent — could involve as many as 50,000 people struggling with credit card debt. On an individual basis, the amount of debt to be forgiven would rise according to the severity of the borrower’s financial situation, up to a maximum of 40 percent. […]

In an increasingly tough economic climate, banks and other mortgage lenders already have been agreeing to modify loans of distressed homeowners to help them avoid foreclosure. Now, banks making credit card loans have reached a point where they can lose less by forgiving part of the debt than seeing the consumer walk away entirely. [emphasis added]

This is the very first move I’ve read about that I think might actually mitigate the current crisis. Every move up until now has failed to recognize that it is not the terms of the debt that are causing the difficulty, but the size of the debt.

The clearest example is with houses. If I took a $500,000 loan to buy a house which is now worth $250,000, no matter how the debt is refinanced I can’t avoid selling at a loss (i.e. would not be building equity) until I have paid the loan down to $250,000, which could take twenty years. If half the loan amount were forgiven, though, then the balance would match the value of the house and I’d be able to sell the house without taking a loss, or keep it and be building equity as I paid down the loan.

I wish that someone smarter and wiser than me would begin to sort through the moral issues involved in this situation, because I think we should not sacrifice fairness to our belief in an economic system, and it is obvious to me that the outcome has been very unfair to those holding consumer debt, whether on a house that is now worth half the loan amount, or on a college education or vocational training that was grossly overpriced for the benefits it will yield, or even for expensive toys that now can hardly be given away.

If people are so inherently gullible, foolish, greedy, and self-indulgent that they are doomed to ruin their lives when given such opportunities, then it is probably not a good idea to structure a society so that some can benefit greatly by playing on those weaknesses while being legally insulated from the damage they inflict. As to how we go about unwinding this mess so that the damage done is distributed fairly among those who cause it … I’m still waiting on that smarter and wiser person to explain it to me. But forgiving excessive amounts of consumer debt might be a start.

It’s good to be the de facto world currency

I don’t have a very sophisticated understanding of economics. That is partly due to my limited brainpower, and partly due to my calling being elsewhere. But it is also partly due to my belief that superficial complexities can often distract us from deeper, simpler truths. So when the explanations I am offered are just too difficult for me to understand, I don’t accept or reject them, but just file away as much as I can remember in hopes that some later fact or explanation will cause the penny to drop. One dropped today.

I’ve heard repeatedly that the U.S. dollar is the world’s de facto currency, but I never quite understood that. As far as I could tell currencies were easily convertible, so what did it matter if, say, oil was priced in dollars or euros or yen? Lately there has been a growing chorus claiming that it is a bad thing for dollars to be the world’s currency, but I wasn’t any closer to understanding it. Here is a good example of such a claim, taken from a front page editorial in an official China newspaper:

The United States has plundered global wealth by exploiting the dollar’s dominance, and the world urgently needs other currencies to take its place, a leading Chinese state newspaper said on Friday. The front-page commentary in the overseas edition of the People’s Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencies. […]

"The grim reality has led people, amidst the panic, to realize that the United States has used the U.S. dollar’s hegemony to plunder the world’s wealth," said the commentator, Shi Jianxun, a professor at Shanghai’s Tongji University. Shi, who has before been strident in his criticism of the U.S., said other countries had lost vast amounts of wealth because of the financial crisis, while Washington’s sole concern had been protecting its own interests. […]

"The U.S. dollar is losing people’s confidence. The world, acting democratically and lawfully through a global financial organization, urgently needs to change the international monetary system based on U.S. global economic leadership and U.S. dollar dominance," he wrote. Shi suggested that all trade between Europe and Asia should be settled in euros, pounds, yen and yuan, though he did not explain how the Chinese currency could play such a role since it is not convertible on the capital account.

Pretty strong words, but no explanation of why the situation makes it possible for the U.S. to plunder global wealth. Although there is a hint in the last sentence, which suggests that trades should be settled in currency other than the dollar.

Today I stumbled across a brief piece on Minyanville in which the writer explains that he thinks the unfolding crisis will come in three parts: credit, economy (i.e. jobs), and funding. About credit we’ve heard more than enough; jobs, not so much. Here’s the writer’s simple observation:

In the last expansion, economic growth was almost entirely about real estate. GDP growth, excluding mortgage-equity extraction, was almost nonexistent. In addition, when you consider that 30% to 40% of all jobs were real-estate-oriented, it’s clear how hollow the economy was liable to be going forward.

Given the capital destruction and credit contraction now underway, I have a hard time seeing where new jobs will come from to handle all the layoffs that are going to take place. Additionally, given how wild consumer spending has been, there are lots of marginal businesses that are simply not going to make it, on top of all the carnage in anything related to real estate or finance.

I definitely share the writer’s confusion on this point. It seems that Americans don’t make much anymore besides houses and cars; the rest is purchased from other nations, with money earned mostly by providing services to other Americans who have the money to pay for them. As the service economy evaporates, what useful work will there be for the folks it once employed?

But then came the eye-opener, as the writer described the third phase of the crisis, funding:

The third crisis that I see coming, which is more theoretical but I suspect cannot be avoided: At some point, the US won’t be allowed to finance all of its debts in dollars. We have proposed more than $1 trillion worth of bailouts, and there will be more money thrown at the economy, I’m sure.

I can’t see why foreigners will fund a couple trillion dollars in spending in our currency, given our recent behavior. Thus, somewhere down the road, we’ll have to borrow in foreign currencies, which will cause another set of problems. Hopefully, we’ll be far enough along in the first 2 crises so that this won’t be a catastrophe, should it come to pass.

Aha. There it is. If a nation’s currency becomes the de facto world currency, it gains an unfair advantage because its debts are denominated in dollars. When the time comes to pay off those debts and there aren’t enough funds in the treasury … well, just print up some more. The nation with the de facto world currency becomes the nation that cannot default on its debts. As well as the nation which can at will devalue the world’s currency reserves. Just by turning on the printing presses.

It all works, of course, until it stops working. At some point the Japanese will require us to buy goods from them with yen (or some other currency they trust) and the only way to obtain the yen will be to sell something of value to someone who has the yen to buy it. Which raises the question: will we have anything of value to sell to other nations?

Although the writer ends in pure speculation, he wins points by using a baseball metaphore and so I’ll repeat it here:

To sum up in baseball metaphors: I believe the credit crisis is probably in the eighth inning. The economic crisis is still doing batting practice. As far as the funding crisis goes, I don’t think folks have realized that the game has even been scheduled.

Battle of Leatherwood

This weekend Chris and I played music for two days at a Civil War re-enactment, the Battle of Leatherwood. Roy Tackett, who often plays these events with his group Rich and the Poor Folks, needed some help because the other band members had schedule conflicts. So he asked Ron Short, who in turn invited us.

Both Ron and Roy had lots of period gear for us to wear, so we made sure that our pants and boots weren’t inappropriate and selected hats and shirts and vests from their collection. I should have thought to take a camera but didn’t.

Roy set up a 10×10 awning tent in the vendors area, and during the day Saturday and Sunday we were either playing there, or we would cross a swinging bridge to the field where the battle would be re-enacted to play for folks wandering around there. And Saturday night we provided the music for the ball, where a caller instructed the dancers in some reels, square dances, and such.

I’d never seen a re-enactment before, and can’t imagine the amount of work that goes into staging such an event, but it sure was a lot of fun to be part of the result. The participants are very serious about being true to the period, and so for a couple of days we got a small taste of what it must have been like to live in the mid-nineteenth century. The clothing in particular is authentic, and it was instructive to study what folks wore and think about why it was the way it was.

Part of the delight for us is that as a duo Chris and I don’t get to play much old-time instrumental music, sticking with songs because we really need the harmony singing to fill out our sound. But with Ron on fiddle and Roy on guitar, Chris was able to focus on his banjo playing, something he truly excels at. And it was a special treat to spend the day playing old-time music with Ron, who is unusual in that circle because he knows the words to many of those songs and doesn’t hesitate to sing them.

I don’t know how regularly the four of us will play as a band, but I hope it happens a few more times. We sounded pretty good in general, and there were a couple of songs in particular where I thought we created the sort of old-time groove that was a specialty of the late, lamented Reeltime Travelers. A groove that I think the listeners were responding to.

Some common sense about housing prices

Here’s a good brief article that says some obvious things about the future of housing prices. These four paragraphs are the best writing I’ve read about housing in several months:

The Case/Shiller price index, a measure of home prices going back to 1987, shows California home prices still at about twice where they were at the peak of the last big housing cycle back in 1990. So just to get back to the top of the last peak, prices would have to drop another 50 percent. Interest rates at that time were substantially higher, in the range of 10 percent a year. If you take that into account and look not at sales prices but at the cost of paying mortgages, we’re still in for another drop of 30 percent. That’s if prices don’t fall below the last peak and interest rates stay at 6.5 percent or less. In other words, it’s a best-case scenario.

These numbers are so dire that they might sound like scare mongering, except that if you look through the recent sales listings at any number of online sites, you won’t have to search very hard to find price drops right along the lines of these numbers. This house in Riverside, Calif., for instance: bought for $586,000 in 2006, foreclosed on in November 2007, and now sold again this summer for $147,000-just 25 percent of what it sold for two years ago. And here’s another heart-stopping fact: Even that vastly diminished sales price was financed, according to real estate records, with a 100 percent mortgage. Good luck getting one of those now.

What this means for homeowners is that if you happened to buy at the peak of the boom, your house is unlikely, in inflation-adjusted terms, to get back to the price you paid for it for another decade at best, if ever. You may think that this goes just for the most inflated markets like the real estate speculation capitals of California and Florida, but that’s not true. Look at the historical numbers, and you’ll see that just about any coastal market is still priced 75 percent higher than it was in 2000. And even markets like Charlotte, N.C., and Cleveland have real estate prices twice (and sometimes three times) where they stood at the end of the late ’80s boom.  The bottom line is that incomes just haven’t risen enough to support this kind of increase.

Just a few days ago, Alan Greenspan, the pope of the economic boom, confessed that he had no idea that home prices would crash the way they have because, well, it had never happened before. Clearly, we’re past the point now at which anybody believes that. But the prevailing wisdom remains that if you hold on to your house for a long time, eventually you’ll do fine. Don’t count on that. Yes, markets come back, but a bubble is an irrational rise in prices, and once the balloon is pricked, it doesn’t magically inflate again. For a cautionary lesson, look to Nasdaq, the stock market on which most technology companies were listed at the height of the Internet and tech boom. Even before the market crash of the last weeks, Nasdaq hadn’t come anywhere close to getting back to its March 2000 top.

Appalachian snapshot

The following is a post from a financial forum I read occasionally. I offer it without comment, except to say that it should give the reader an inkling of how Appalachia came to be in its current twisted shape; for more details, read Harry Caudill’s Night Comes to the Cumberlands.

I promised to report to you on my coal mining trip. I spent the last few days in the mountians of West Virginia checking out the met coal (metallurgical coal) boom. I found myself riding in a pick-up bed, transversing narrow hairpin turns on dirt roads, trying not to look down at the ravines while dodging low-hanging tree branches. I won’t even get into the ritual of hanging out with the locals in the deep woods, shooting at beer bottles with a beretta (9mm), hoping that no one would say, “when I pull your ear, I want you to squeal like a pig”. For three days I saw no people of color in an area where a dentist would starve. 

The year old Holiday Inn Express in Claypool, WV (pop. 1,700) had no vacancies. There was a lot of money there chasing met coal, and natural gas deals. The would be coal baron, who was hoping to extract my investment dollars, took me to meet a woman who lived, with her two kids, in a 500 sq ft tarpaper shack with a broken out window and no electricity. The woman, who was only in her late 20s but looked like she had lived a lot longer than that, offered to sell him her 700 acre property, with serious met coal seams, heavy hardwood timber and great natural gas well potential, for a million dollars. Most of these proven strip mines kick out 30,000 tons a month. Just a $1 royalty can make an inversor $30,000 a month for sometimes up to 10 years. The local nat gas company will drill wells that kick off other royalties. The timber is supposed to bring six grand an acre. 

The night before I left, I was ready to sign up, but I still wanted to talk to the biggest met coal buyer in the area. He told me that he had paid a $300 a ton a few months ago on the spot met coal market (met coal goes for much more than steam coal). Now he was paying in the $150 to the $180 range, and, with steel production down, the spot coal market had disappeared. He couldn’t guarantee that in six months he’d only be offering $85, and that he might be forced to give someone with a current $150 contract, a haircut. Mining costs could be as much as $95 a ton. 

I could fill pages writing about the partners in these deals that were suing each other, the miners who were stealing coal by the truckloads, and the town’s people who were happy enough to sell some flatlander a worthless mine, but I came away knowing that the met coal and natural gas boom was little more than a bubble, and that the air was already rapidly leaking out.

Farm report

Another blessed day of rain, and boy, do we need it. We had a bit of rain last week, enough so Chris could quickly till the moisture in and then build the raised beds we’ll need for this winter’s garlic crop. But it’s still been far too dry to plant, so rather than soaking down the beds ourselves we’ve been stalling. It looks like we’ll end up with close to an inch, which will be just about right. Most likely we’ll lay plastic mulch on the beds on Monday, get it as secure as possible, then plant the cloves later in the week.

This morning I drove to Lexington to deliver produce. I have to say that one small benefit of the current crisis is that NPR news is now almost totally focused on economics, which interests me far more than the American politics or world turmoil that usually dominates their coverage. I listened to nearly all of Morning Edition today, some of it twice, and for the most part didn’t feel that usual yearning for some other news station. Well, there was that one story on a small Republican-leaning town in Missouri … and a way too long segment where Pennsylvania voters got honest about the matter of race in this year’s presidential contest ….

During the summer when I drove produce I was waking up at 3:45am, leaving the house by 4am, arriving at Jerome’s by 4:30am, arriving at Good Foods in Lexington by 6:30am. This was partly to avoid the warmth of the day; much of the stuff I take goes from Jerome’s cooler to the Good Foods cooler but is not refrigerated during the ride up.

Today I didn’t arrive until 8am, partly because the mornings are now dark and cold, but also because there is now no one in produce to receive the delivery before 8am. Worker hours are being cut back. On Tuesday I arrived just as the produce fellow was clocking in; he took a quick look at the schedule board, said “Let’s see who’s working with me today … hmm, looks like nobody.”

A couple of years ago I bought two 2000′ rolls of plastic mulch, and we just used the last of it this spring. So after getting back from Lexington I drove over to Martin’s Produce Supplies to get another roll. It was pretty quiet there; I asked Edward Martin if the rain was keeping folks inside, and he said that in fact it had been a surprisingly busy morning for him. He fetched a roll of mulch, and said the price had gone up—it was $72 now, rather than the $40 I had paid before. Wish I had invested in a few more back then.

I asked if he thought that prices would continue to go up, and he said probably not on the mulch, but definitely on the drip tape. Seems that a major supplier (John Deere) had just bought another major supplier, leaving only one other in the field (Toro). And John Deere always prices things high, and Toro always takes the opportunity to match their price. So we’ll be doing some calculations in the next few days and then stocking up before the price increases come through.

Our neighbor Mr. Scott has a pear tree, and a couple of weeks ago he gave us a bushel of so of pears. We ate some, and they were delicious, gritty but otherwise as sweet and juicy as the fancy Harry and David pears someone gave us one year long ago. We already had plenty of canned fruit and don’t usually eat canned pears, so we decided to turn them into pear syrup. As they became ripe Debbie would put them through the steam juicer, then boil down the pear juice into syrup.

After we had some, we tested it out as a sweetener and decided that it was good, more than worth the effort to make, somewhere in the neighborhood of sorghum molasses. I like it in my morning oatmeal; a couple of tablespoons gives it a good, slightly fruity tang while being less sweet than the brown sugar I usually put in. Yesterday Debbie made pancakes for lunch, and it made a fine maple syrup substitute. I’m sure it would be especially good on a buttered biscuit.

Perhaps someday we’ll be in the same position with pears as we are now with apples, able to count on twelve or so bushels. That would give us maybe twenty quarts of syrup, something close to what we would use in a year for breakfast and other occasions.

Popping garlic cloves is the ongoing business right now. We will plant about 2400, then slice and dry the rest. Garlic has been a multifaceted experiment for us, teaching us not only about garlic as a crop but also about growing in quantity. Last year we planted 8000 plants, but only about half of them made it. Although that’s a pretty poor yield, it was still way more than we needed to sell to our current customers. This year’s goals are to figure out as best we can how to get a proper yield, and how to store it so that it is saleable later in the year (right now our garlic is fine until mid-September, and then it begins to go downhill cosmetically).

Despite the many books and web pages that have been written about the basics of farming, it is often difficult to find a good written explanation of a particular thing you need to know. Any novice homesteader needs to be ready to ask what will in retrospect look like the stupidest of questions, at least from the point of view of the traditional farmer. So much of what a farmer knows is never learned through any sort of schooling; the knowledge is passed on however unwritten traditions are passed on, and it is peculiar to them that someone could have been raised without coming to know these things.

Producing good compost is much on our minds these days, and so one of this year’s experiments will be to keep the cows in stalls over the winter, so as to keep their manure off the field and in a place where we can collect and use it. Now, as far as I know there is no book called “Keeping a Cow in a Stall Over the Winter.” And we haven’t yet been able to scare up much written information about the hows and whys of doing it.

So we are going to do the usual thing—start in on it, then ask dumb questions of our farming friends as the puzzles and mysteries and difficulties begin to manifest themselves. Not having any space in our barn …. [pause]

Here’s a funny note that shows in miniature why we try to get on with things rather than planning them out in advance. I was going to write, “Not having any space in our barn, we intend to set up the currently unused greenhouse with stalls for the cows.” But as I began that sentence I began to think, “Why exactly don’t we have any space in the barn? Well, it is currently full of the hay we’ll be using this winter. Hmm. Should we consider moving the hay to the greenhouse, and setting up the barn with stalls for the cows?” I walked into the kitchen and talked it over with Maggie and Chris and Debbie, and for now that seems like it will be the better solution in a number of ways.

It’s almost time to start burning the wood stove again. We’re blessed with being near a gate company that uses a lot of 4×6 lumber and creates a lot of unusable cut pieces that it then sells cheaply for firewood; in fact, what we pay is mostly to cover the haul bill. The wood burns hot and clean, and one truckload will get us through a mild winter.

But we like to be prepared for a severe one, so we want to have two truckloads on hand. Well, it’s difficult enough to get one truckload delivered; Debbie has to call time and again to remind the fellow that we’ve been promised a load but haven’t received it yet. And they are reluctant to deliver a second load until all their customers have received their first one (they only get one truckload a day from the gate company). But Debbie was persistent, and the year’s second load came last week.

Between May and October, though, the price of a load has doubled, from $100 to $200, I assume to cover higher diesel costs. We’re still happy to get more than a winter’s supply of wood for $300, but those $100 truckloads were nice and we’ll miss them.