Friday, March 20, 2009

Money
(Some philosophical thought)

There are several kinds of money or money equivalence which vary in interconvertability and other characteristics. These relations are something you have to get straight in your mind.

Land is one kind of money. It always has a value (it never disappear like stocks and bonds can), but the value varies with time. Land was at a low when I started to farm in the 1950’s- $20,000 was the price for about any piece of land, large or small. It’s not that way anymore! The price of land goes down with depression, superabundance of farm products (the case when we bought our farm), cheap imported food and so on, and goes up with abundant money, increased population and desire for rural residence (the present situation) and better access because of new roads.

Land is difficult to get anytime, because location, topography, prior use, size of tract and similar characteristics determine the usefulness to the buyer. It is easy to sell (if the buyer can get the necessary financing), in part because there are so many people who benefit from you selling it. Some of these are: the broker (about one-twelfth of your sale price), the banker (who adds one third or more to the buyer’s cost, if he does not have ready cash), the tax man (tax is always greater after land changes hands) and the fellows who supply the inputs to change raw land into a farm. The fellow that buys land is like the fellow in Greek myth that had to carry the weight of the earth on his back, because there are so many people who add to the burden.

It is often wise to let someone else own much of the land you farm and rent what you farm, if you can make an agreement that is favorable and stable. You need some land of your own for a homestead for the farm, a place to keep machines and have some stock and crops so you can use close-up management of these resources. Land ownership is more a goal than a method.

Land also is a place to live that conveys much the same benefits as owing your own house. It conveys status, it is an excellent collateral for loans (because you are highly motivated not to loose it) and it is something you identify with psychologically. It gives space between yourself and neighbors.

Buying and selling land will be considered in more detail elsewhere.

Labor is another kind of money. You can sell your own or buy someone else’s, and you can use it for your own benefit, or your family’s. Many people who farm both sell and buy labor, that is, they work for a wage or salary or have a business, and hire help on the farm. Labor can be traded (trade work with your neighbors), too. And, it can be wasted (by doing the wrong work or by using an opportunity to work for doing something else that does not give equal satisfaction), just like any other form of money. Everyone has a huge supply of their own labor at birth, and it is the only thing many people ever have much of. Managing one’s own labor is the biggest single problem in a free society. Labor must be a major input to farming.

Assets are a third form of money. If you are going to farm you must have fences, cattle and machinery to work with, whether you have land or not. Assets are more mobile than land and may be accumulated more easily, being bought and sold over time. If you make a mistake in other forms of money, this is the area you have to make it up in. If you want to grow larger, this is where you must achieve it. Your assets incease by the birth and growth of your animals, crops and timber. The increase may be maximized by careful management, by supplying inputs such as fertilizer and lime, labor, adequate fences, predator control, brush control and all the rest. And they can wasted away by neglect.

Cash is like oil and grease, it makes the whole thing go easier up or down. You have to have cash to get the goods you need from others, and that’s what you have to supply to compensate for most of your mistakes. But it is not the objective of farming. You hear of people hoarding money, thousands of dollars hidden way. Not good! It can be stolen or lost and you have nothing, and it doesn’t make more money (in the broadest sense) sitting under your mattress. Too much show of cash makes others envious. Having lots of money makes it easier to make bad decisions, because you don’t think much about how it is used.

Good will is not usually interconvertable with other kinds of money, but it has value. Cattle get out, fences need to be kept up, various disputes occur, and the good will of your neighbors is valuable. A farmer has many things he can give away that mean more to his neighbors than to himself. Fire wood, help in emergencies, a little tractor work, or machine loan, hunting, information, even a good story now and then are very valuable in this regard. Respect is something everybody needs, and like love, it is something you get more of when you give it away.

Money isn’t everything. If it is to you, I don’t recommend farming. There are more profitable places to put your money. The biggest cash payoff in farming is to get out of it. The biggest input is the labor of thinking it all out. Far more than labor in the usual sense. Fortunately, you can think and labor at the same time, and there is no better time to think.

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