True Economics

In  “Positions to be Examined” concerning national wealth, April 4, 1769, Benjamin Franklin rightly commented on how nationns may become wealthy and the origin of true wealth:

  • By war, which permits taking by force the wealth of other nations;
  • By trade, which to be profitable requires cheating. For example, if we give and receive an equal amount of goods and services through trade, there’s no profit other than that obtained in our own production cycle.
  • By agriculture, through which we plant the seeds and create new wealth as if by a miracle.

I have been asked many times, either in emails or phone conversations, what I thought was the nature of true wealth. I have had only one answer and it surprises most people. There is only one measure of wealth and that is RAW MATERIALS. The idea 0f raw material economics encapsulates the prime thought that there is NO TRUE WEALTH THAT DOES NOT COME FROM THE EARTH!

People argue that gold is a store of wealth, silver is a store of wealth, diamonds are a store of wealth. I agree that they are each a component of the raw materials economics but they are not the only stores of wealth. I can argue that oil is also a store of wealth, seeds are a store of wealth, grain, coal, natural gas are all components in raw materials economics. Now, I am sure that some will say, “Okay Codger, oil is a store of wealth because we have the idea of the petro-dollar keeping America afloat, but seeds?”

Yes, seeds. In 1983, the price of gold was generally between $375.00/oz. and $510.00/oz. At that time I operated a commercial greenhouse and purchsed tomato seeds from Bruinsma Seed Co. in the Netherlands for $528.00/oz. Today, it is not unusual to pay $1-2.00/seed for commercial cucumber seeds. With 750-850 seeds per ounce you can see how quickly you can pay $1700.00/oz. of seed.

Raw material economics is not to be confused with commodity trading on some pie-in-the-sky scheme called a commodities market. As I am sure all of you are aware of the government’s manipulation in the gold and silver market, so it is for the commodites market.

It all began during the Roosevelt administration (FDR) when it was decided during the First Great Depression that Americans could not afford basic foodstuffs. Most Americans are not aware of the concept of PARITY. Simply stated, 100%parity is equal to the free market price set by the marketplace. Unfortunately, with a nation that was out of work and starving most Americans could not afford to purchse wheat, corn, salt, meat, or fiber for its true worth. So, our brilliant government devise a plan to reduce the price by 50%.

This fifty percent reduction in price caused many farmers to plow their crops under, pour milk into the rivers and reduce the size of their herds and flocks. In other words, they killed their livestock rather than sell it for less than it was worth.

Realizing they had made a mistake, one among many, Congress then decided that if the price is reduced 50% farmers must be compensated, in some nature, for the other 50%. This began the monstrous agricultural price support system in place today. Since it was necesaary to stimulate the production of certain key commodities the government “paid” farmers not to grow certain commodities and then promised low interest lows for seed, equipment, and to buy more land. This was the beginning of the end for free market driven commodities.

One thing Congress did not fully understand: if you take 50% of a farmer’s wealth and replace it with a low interest loan you have destroyed wealth, not created it. Before the A. A. A. (Agricultural Adjustment Act) farmer’s were free to sell the produce to the highest bidder and receive 100% of what they thought was a fair price. (As a farmer I know first hand that you NEVER get what you think it is worth.) After the A. A. A. the farmer received half of what he should have and now he has to pay the interest on his low interest load with half of the income he should have received. Sound familiar doesn’t it?

This is the very same system used by the Federal Reserve to sap the wealth from America as a whole. The Treasury Department authorizes the printing of a certain sum of money, say $100. The Treasury Department must now issue notes or bonds to equal this amount. This is taken as collateral by Osama Ben Bernanke who now gives approval for the money to be printed by the Treasury Department. Now the Treasury Department must pay the Federal Reserve not only the $100 but must also pay the interest which is varied and can be a fractional number or in the double digits like we saw in the late seventies.

The key here is that no WEALTH has been created, only money and now it has been devalued because the supply of money must now increase to “buy” back the bonds and notes. Each time this is done the money supply increases and the value of the money decreases. I think all of you know this and I simply repeat it here so you will see the similarity between what is happening to our money has also happened to our wealth but instead of having to pay 1%, 2%, 5% or 15% in interest, farmers have lost 50% and must pay interest on the remaining 50%.

Do you see now why only the Too Big Too Fail Factory Farms (TBTFFF) are the only ones prospering right now. Con-Agra, Archer-Daniels-Midland, etc are recipients of price supports (50% parity) and low interest loans and have the money to affect the legislation that favors their debt based farming practices. Small independent farmers are essentially barred from competition due to the SCALE of their operation. Instead, small farmers turn directly to consumers to interest them in farm fresh produce and Consumer Supported Agriculture.

Obviously, you can help by supporting your local Farmer’s Market, CSA”s or even by stopping at a roadside stand and buying eggs on the way home from work. Is the fix that simple? NO! We must have 100% parity in the system but as long as the current system benefits the TBTFFF and they have the money to have legislation that benefits them passed then the chances of seeing real wealth restored to this country  are slim to none.

But that is not the worst part. The average age of an American farmer is about 57 years old, which means in 5 years they will be eligible for reducded Social Security benefits and in 8 years full benefits. How many will continue to farm? Who knows? Why stay in a business where one half of your wealth is taken before it is produced?

Now, did I have a revelation overnight to discover this? No! I was very lucky to learn this from a brilliant man, Mr. Charles Walters, who is the founder of Acres USA and also NORM (National Organization for Raw Materials) and the man that has written the 5 Rules of Raw Material Economics. They are:

  1. The amount of raw materials removed from nature becomes humanity’s potential wealth.  The potential wealth of the materials determine the number and value of jobs available to produce, transport, process, manufacture, distribute and retail finished products made from these materials.
  2. The values placed on raw materials determine the amount of money that can be paid for the tools and services used to produce raw materials and controls the price and volume of tools and services purchased by raw materials producers.
  3. Tools and services purchased by raw materials producers and the tools and services purchased by other people during the same economic cycle becomes the original method of job creation and manifests all the wealth necessary to purchase all finished goods.
  4. A fair balance between the value placed on raw materials and the value placed on finished goods automatically creates healthy markets and manifests the wealth required to purchase all finished goods.
  5. The act of production times the fair value of production (AoP x FVoP = wealth), or the proper relationship between production and price, manifests all the wealth necessary for the debt free consumption of all finished goods.

Should you invest in gold and silver? Absolutely, for they are a store of wealth, taken from the earth. But in hard times the real value of gold and silver may be the food or seeds that they will purchase. Please, for the good of your family, invest in storable foods and seeds so that you will have in your survival plan the basic building blocks of wealth.

Good luck and God bless.

For more information about Raw Material Economics go to: http://www.acresusa.com/magazines/magazine.htm

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5 thoughts on “True Economics

  1. Country –

    What intuitive, powerful and cogently-expressed principles and messages. Thanks you for your contribution. This topic is so essential and worthy of an entire semester-length or even year-long course and it should be mandatory (considering that so much bulls – – – that IS being taught is mandatory) that all kids study and assimilate this before they leave high school.

    As long as I’m conjuring my “wish list”, our youngens should also receive a sound foundation in “real world” economics, via the writings of Menger, Hayek, Rothbard, Nock, Hazlitt and Mises, plus J.M Keynes if only to present a contrasting statist recipe for eventual fiscal failure.

    Keep up the good work, please, and God bless your passions.

  2. C…paying people to do nothing, paying people to eat nothing, paying people with something worth nothing…and most people continue to see nothing?

    Soon…all of it will be very clear…thanks for your efforts.

    God bless those of us who want to be left alone.

  3. Excellent post and wonderful points. My farmer grandparents, rest their dear souls, would give you a big thumbs up. I’m thankful for the lessons they left me.

  4. Great article with the final words being dead on, stock up folks, get prepared folks…gold invested in food today, would pay back a hundred to one in gold when things get stupid, maybe more.

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