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Banks Warn Bernanke Of The First Two Bubbles: Student Loans And Farmland

Tyler Durden's picture





 

A panel of bankers warned the Fed in February that their extreme monetary policy is forcing institutions to "accept greater credit-risk" than "makes sense" and student debt and farmland prices are in a bubble. We first started to explain the bubble in student debt over two years ago and since then the bubble has become larger (and the underlying structure much more fragile as delinquencies soar). Farmland rose in price over 16% last year (according to the Chicago Fed) and has surged 8% per annum over the past decade. Credit risk is now at levels associated with the CDO-driven liquidity excess of 2006. "Further accommodation is not warranted," the minutes of this meeting show - uncovered by Bloomberg via the FOIA. The comments should cause Bernanke and his merry men to pause for breath but of course it is likely what he wanted all along. "Growth in student debt... has parallels to the housing crisis," and "agricultural land prices are veering further from what makes sense," are just two of the bankers' comments, adding that this "will ultimately result in higher loan losses," which is odd since every bank is adjusting down its loan-loss-reserves and juicing earnings.

 

The credit bubble...

 

The Farmland bubble...

 

The Student loan bubble...

 

Via Bloomberg,

A Federal Reserve panel of bankers warned policy makers in February that record stimulus was pushing financial institutions to take on more credit risk and creating a “bubble” in the price of U.S. farmland.

 

“The margin pressures that the low-rate environment has put on financial institutions, coupled with dramatically increased compliance and other infrastructure costs, have caused many to seek higher returns by accepting greater interest-rate or credit risk,” the bankers said on Feb. 8, following a Federal Open Market Committee meeting on Jan. 29-30.

 

...

 

Bloomberg News obtained the minutes in a Freedom of Information Act request.

 

...

 

Still, several bankers warned Fed officials in February that “uncertainty over health-care costs, tax policy, and the mounting U.S. debt” were among the reasons commercial and industrial loan growth remained “tepid” and credit lines were “chronically undrawn,” according to the minutes.

 

The panel also said in February that farmland valuations posed an asset-price bubble caused by unusually low interest rates, ...

 

“Agricultural land prices are veering further from what makes sense,” according to minutes of the council’s Feb. 8 gathering. “Members believe the run-up in agriculture land prices is a bubble resulting from persistently low interest rates.”

 

...

 

Data compiled by the regional Fed banks have documented a rapid run-up in farmland prices, particularly across the Midwest’s Corn Belt. The Kansas City Fed said irrigated cropland in its district rose 30 percent during 2012, while the Chicago Fed reported a 16 percent increase.

 

...

 

At a meeting in February 2012, the council said “growth in student-loan debt, to nearly $1 trillion, now exceeds credit- card outstandings and has parallels to the housing crisis.”

 

Student lending shares features of the housing crisis including “significant growth of subsidized lending in pursuit of a social good,” in this case higher education instead of expanded home ownership, the council said.

 

...

 

“Further accommodation is not warranted,” the bankers said, according to the minutes.

 

The advisory council warned of distorted bond prices resulting from the Fed’s purchases, limited impact on the economy, and “uncertain effects” from an eventual unwinding of the balance sheet, including “risks to price and financial stability.”

 

...

 

“The combination of a sluggish economy and muted credit demand, very low interest rates, abundant bank capital and liquidity, reduced fee income and dramatically increased regulatory and compliance costs is causing some aggressive banks to lead a broader relaxation of risk/reward tolerances,” the council said.

 

“Aggressive pricing and looser underwriting, including extended terms and weaker transaction structures, are likely to persist and even get worse,” the bankers said in December 2011. “These accumulating risks, including interest rate risk mismatches, will ultimately result in higher loan losses.”

 

...

 


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Wed, 05/08/2013 - 09:51 | Link to Comment thismarketisrigged
thismarketisrigged's picture

can someone please tell me what time the pomo is today? thank you, there is no bubble, this is all '' great fundementals''.

 

source- cnbc

Wed, 05/08/2013 - 10:00 | Link to Comment SafelyGraze
SafelyGraze's picture

jim rogers told me to buy farmland

Wed, 05/08/2013 - 10:04 | Link to Comment aint no fortuna...
aint no fortunate son's picture

that panel of bankers obviously needs to be investigated for anti-American propagandizing... the nerve of them to question the great man

Wed, 05/08/2013 - 10:08 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

 

 

Speaking of farming and debt, our Mortgage Lifter Heirloom tomatoes are looking great!

Fuck you, Bernanke!

Wed, 05/08/2013 - 10:09 | Link to Comment MilleniumJane
MilleniumJane's picture

Those are beauts!  Are you caging them, or staking them?  I have heard pros and cons both ways.

Wed, 05/08/2013 - 10:11 | Link to Comment camaro68ss
camaro68ss's picture

The bernake just needs to print $170 billion a month. That should fix things for a little bit

Wed, 05/08/2013 - 10:35 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

 

 

Radiator Charlie’s Mortgage Lifter Tomato

 

This tomato was developed by M.C. Byles (went by Charlie) of Logan, West Virgina in the 1930s. Charlie owned a radiator repair shop and had no plant breeding experience - this tomato was the only breeding work he ever did. Charlie took 10 tomatoes and put them in a circle with a German Johnson tomato in the center. He collected pollen from the 10 outer tomatoes in a baby’s ear syringe and then squirted it on the flowers of the German Johnson. After seven years he had a stable tomato with the qualities he wanted. He was a good marketer and sold his seedlings for $1 each. After 6 years he was able to pay off the $6,000 mortgage on his house. This tomato’s story has helped keep the strain alive.

 

http://www.slowfoodusa.org/index.php/programs/ark_product_detail/radiator_charlies_mortgage_lifter_tomato/

Wed, 05/08/2013 - 10:57 | Link to Comment MachoMan
MachoMan's picture

Hedgeless is right in that the fruit must get off the ground... 

However, our traditional method is to cage initially, then move to fencing once more developed.  It's simply a matter of practicality and how many plants you have...  if you're in the 50+ tomato plant category, then it's a lot easier/cheaper to just put up a wire fence and tie the plants to it with the branches up (and weave them through the fence).  The problem with caging over the life of the plant is that it confines growth...  stakes are just...  awkward.

Wed, 05/08/2013 - 14:25 | Link to Comment Strut
Strut's picture

We grow 1,000s of plants a year and have found that cages are best, as long as you use the right ones. Most welded wire fencing is much too tightly woven to work well for tomatoes, the best thing we have found is concrete reinforcing wire. It’s the right height, large enough openings for both plant growth and fruit collection, and they will last many years. One full roll will make ~80 cages and run you about $80.

Wed, 05/08/2013 - 10:17 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

 

 

Are you caging them, or staking them?

Tall stakes with trusses spread between them, under the vines, for support.  Getting the fruit up off the ground seems to be important.

With so much horseshit flowing through the economy, if we aren't growing something, then we are missing out.

Wed, 05/08/2013 - 11:47 | Link to Comment Rustysilver
Rustysilver's picture

I have done both: a wire cage and a stake.  What you want to do as the plant grows use a soft cloth strips and tie it to the cage or stake. Sometimes I use more than 1 stake.

If you have an old bed linen tear it into 1 inch strips and various lengths.

Wed, 05/08/2013 - 12:10 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

Now you're cooking. Or will be.

That's the kind of Asset Diversification I can sink my teeth into: No counter party risk, little risk of nationalization/seizure or manipulation, and nice yield curve. And even Francis will like the fact that I own the 'Joos', it does not own me. ;-)

Cook you, Bernanke!

Wed, 05/08/2013 - 10:22 | Link to Comment AlaricBalth
AlaricBalth's picture

 

In History of the World, Mel Brooks hilariously stated "It's good to be the King." 

http://www.youtube.com/watch?v=KuMQjKiaDTg  (.09 seconds)

Well it is obviously good to work for the king as well. Below is a list of public sectors vocations which are eligible for student loan cancellation if you are employed in a public-service job at the time of such forgiveness and have been employed in a public-service job during the 120-month period (excluding time served as a Member of Congress).

 Public-service jobs:

  • Emergency management
  • Government
  • Military service
  • Public safety
  • Law enforcement
  • Public health
  • Public education
  • Social work in a public child or family service agency
  • Public interest law services
  • Early childhood education
  • Public services for individuals with disabilities or for the elderly
  • Public library sciences
  • School-based library sciences and other school-based services
  • Faculty member at a Tribal College or University and other faculty teaching in high-needs subject areas or areas of shortage

 

Wed, 05/08/2013 - 12:18 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

And you wonder why people want Gov jobs. Even the C students have figured out the System, and that Free Enterprise is much harder than proclaimed.

Fact: > 90% of new businesses fail in the first 2 years. < 0.6% of new banks fail in that same period. Paging Peter Schiff, paging Peter Schiff, to Line 1 on your new bank phone please.

Wed, 05/08/2013 - 10:21 | Link to Comment AlaricBalth
AlaricBalth's picture

Dupe. My bad.

Wed, 05/08/2013 - 10:45 | Link to Comment RaceToTheBottom
RaceToTheBottom's picture

5 years ago.  and you would have had that run-up.  Fabor was also saying it.

Wed, 05/08/2013 - 18:08 | Link to Comment Freewheelin Franklin
Freewheelin Franklin's picture

jim rogers told me to buy farmland

 

Not in the US.

Wed, 05/08/2013 - 09:52 | Link to Comment Cursive
Cursive's picture

This is like telling your mom you don't like your allowance because you think it makes you lazy.

Wed, 05/08/2013 - 10:11 | Link to Comment Jason T
Jason T's picture

wealth without work .. .one of Ghandi's seven deadly sins.  

http://deadlysins.com/features/gandhi.htm

Wed, 05/08/2013 - 12:26 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

He was wise and shrewd, but he just re-spun Jesus's parable if the rich man, the needle and the camel.

Funny how few 'Christians' truly are Christ-like. JC has become a mass-market mascot and brand for products & services, than as a way of life. Start down-arrowing, you hypocrites!

Wed, 05/08/2013 - 09:54 | Link to Comment ebworthen
ebworthen's picture

The FED is encouraging higher farmland prices because it increases taxes and pushes out familiy farms making it so only corporations can run farms.

The student loans are mostly underwritten by J.P. Morgan Chase and Wells Fargo - so guess who will get more taxpayer money via bailouts?

Wed, 05/08/2013 - 09:58 | Link to Comment otto skorzeny
otto skorzeny's picture

There are no young farmers(unless it's family land) because they can't afford the $12k/ acre for decent farmland. And if they do farm leased land they are essentially sharecroppers.

Wed, 05/08/2013 - 11:50 | Link to Comment Rustysilver
Rustysilver's picture

Otto,

That's what I calculated: 400 acres * $12k /acres= $.5 mil.  Not including building machinery, etc.  Unless your dad or mom own a farm there is no way.

Wed, 05/08/2013 - 10:08 | Link to Comment Dr. Engali
Dr. Engali's picture

Bingo. The fed is doing all it can to force consolidation into large corps. They know that they are forcing prices ( land, grain, or fertilizer, and fuel) making it harder for the family farms to compete. You add the high price of land to the mix and farmers are taking the opportunity to sell.

Wed, 05/08/2013 - 10:10 | Link to Comment otto skorzeny
otto skorzeny's picture

Don't forget about all of the tax breaks and write-offs that owning farmland entitles one too- Congress is full of people that own a little farmland just because they know all of the tax loopholes you get to take advantage of.

Wed, 05/08/2013 - 14:50 | Link to Comment WillyGroper
WillyGroper's picture

And here's 1 of the worst. If memory serves to the tune of about 1/2M$

http://www.google.com/imgres?imgurl=http://everything-pr.com/wp-content/...

Wed, 05/08/2013 - 10:12 | Link to Comment otto skorzeny
otto skorzeny's picture

dupe-I fucking hate this new Chrome.

Wed, 05/08/2013 - 10:12 | Link to Comment kito
kito's picture

We all need to be farmers....a little plot in the backyard and we have a victory garden.....small victory over tptb who look to strip us all of independence for the greater collectivist state........

Wed, 05/08/2013 - 10:14 | Link to Comment fonzannoon
fonzannoon's picture

I go outside and stare at my tiny garden everyday. It makes me happy.

Wed, 05/08/2013 - 10:21 | Link to Comment edifice
edifice's picture

Sorry, I read that as, "A little pot in the back yard."  I do live in Colorado...

Wed, 05/08/2013 - 11:44 | Link to Comment Meat Hammer
Meat Hammer's picture

Damn right, Kito!  My 5 y/o and 2 y/o sons are growing corn in a 2x2 raised bed....there will be no debt slaves in this family.  Mrs. Meat and I have a 4x8 bed with all kinds of victory garden goodies in it.  

Freedom, bitchez.

Wed, 05/08/2013 - 10:42 | Link to Comment Urban Redneck
Urban Redneck's picture

The higher taxes don't push the smaller farmers out as fast as the convenient over-leverage from the Banksters turning against the borrowers who then flip their foreclosure acquisitions to their Cargill clients.  Then of course there's that re-instated death tax - which only supposed to affect the evil greedy rich bastards, but in fact results in more independent farmland being sacrificed and flipped to the immortal evil greedy rich Mega Farm Inc. - at the expense of independent farmers.  

 

Wed, 05/08/2013 - 11:02 | Link to Comment NotApplicable
NotApplicable's picture

Factor in the KC Fed's report of 30% price appreciation of farmland in their region, and it doesn't take much to push a farm into the "have to sell to cover taxes" category.

Wed, 05/08/2013 - 13:39 | Link to Comment Urban Redneck
Urban Redneck's picture

That depends on the exact structuring of the land-use tax statute/exemption in a specific jurisdiction, which can be more closely tied to commodity pricing than land price, but it does vary.

Wed, 05/08/2013 - 10:43 | Link to Comment tango
tango's picture

The FED is encouraging higher farmland prices because it increases taxes and pushes out familiy farms making it so only corporations can run farms.

 

Obviously you have never been around farms.  The VAST majority of farms (I have one) were either inherited or bought by individuals seeking to either diversify investments or as a safe haven (both counts for us).  The price of farmland is controlled by many factors - geographic location, access to water and utilites, type of soil, inflation.  I am familiar with over 1,000 farms in Tennessee and not one is owned by a "corporation".   

LOL  Why in the hell would a corp want a farm?  It's a hell of a lot of work for little return unless you get on the gov't dole with all their imaginative ways to give out money to those who don't work.  

Wed, 05/08/2013 - 11:11 | Link to Comment MachoMan
MachoMan's picture

This...

It's also specious at best to claim that big corps get all the tax breaks on farms when phase outs happen to ensure they don't and the "warm body" rules. 

I would also add farmers to the list of folks who buy land...  farms are being consolidated into the hands of the most successful farmers...  (many of whom got their start with inherited lands).  Unforunately, they have few replacements waiting...  the primary issue is that farming, although simple in concept, is incredibly difficult to do at a professional level...  there are so many facets to the discipline that most people can't hack it.  Some of the smartest people I know are farmers who received little or no formal education.  (this also explains why so many farmers fail...  it isn't the weather, it isn't the evil companies, it's the fact that you can't manage an incredibly broad business).

If you go to any yokel money manager or bank and ask who has the most money of the locals, 7/10 will be farmers.  (of course, other people tend to have as much revenue, it's just that farmers tend to be more frugal in their personal lives...  the succesful ones anyway).

PS, with vertical farming, people can grow vastly more produce/crops in their back yard than large scale farmers per acre...  so this is not a reason for crowding out of the small guys (it actually benefits the small guys because they're more efficient).

Wed, 05/08/2013 - 11:35 | Link to Comment Big Corked Boots
Big Corked Boots's picture

You are correct on all points.

In my area, the people who have true wealth are not the assholes in leased BMW's - they are the muddy booted locals with paid-with-cash $25k second owner F250's and paid-off $250,000 combines.

They are a hell of a lot nicer people, too.

 

Wed, 05/08/2013 - 18:46 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

PLENTY of return when partnered with Monsanto

Wed, 05/08/2013 - 09:52 | Link to Comment Dr. No
Dr. No's picture

High price farmland = high price food.  Thankfully a simple change to CPI calcualtion can remove human food from the formula.  This will keep inflation in check.

Wed, 05/08/2013 - 10:28 | Link to Comment krispkritter
krispkritter's picture

Always hear that industrialized nations have 'cheap food'.  I think maybe cheap calories but certainly not 'food'.

http://www.dailymail.co.uk/news/article-2319825/The-great-global-food-gap-Families-world-photographed-weekly-shopping-reveal-cost-ranges-3-20-320.html

 

Wed, 05/08/2013 - 10:39 | Link to Comment DosZap
DosZap's picture

Dr. No

Thankfully a simple change to CPI calcualtion can remove human food from the formula.

 

FOOD nor FUEL has ever been factored in the CPI #'s,therin lies the lie about TRUE consumer costs of living.

Wed, 05/08/2013 - 09:53 | Link to Comment emmadavis
emmadavis's picture

You can get car loan without down payment regardless of your credit status. Car loans bubble is coing soon. http://www.investmentcontrarians.com/stock-market/forget-what-the-bulls-are-saying-red-flags-are-surfacing/1988/

Wed, 05/08/2013 - 10:35 | Link to Comment MilleniumJane
MilleniumJane's picture

96 month car loans seem to be touted more and more on tv and radio.  What I can't believe is that people are actually falling for it just to keep up appearances with the neighbors. 

Case in point, our neighbors, who probably make as much money per year as my husband and me.  Both are in debt to their eyeballs via credit cards and have elderly parents who are constantly asking them for money to pay for prescription meds and the bills.  Both have purchased brand new vehicles in the last two years.  They have been very candid, talking about the stress this has placed on their family, but neither seem to really want to put the brakes on their spending.  I guess once it gets to a certain point, one just doesn't care anymore.

If I remember correctly, Lee Iacocca was the originator of auto loans.  20% down, 36 months to pay off.  It's just unreal how far this country has fallen. 

Wed, 05/08/2013 - 10:39 | Link to Comment otto skorzeny
otto skorzeny's picture

Same here- neighbors just bought 2 new cars last year and the wife heard that their car payments are $800 a month on 1 salary for an accountant. I don't feel sorry for fucking anyone any more.

Wed, 05/08/2013 - 11:03 | Link to Comment MilleniumJane
MilleniumJane's picture

I really understand the frustration.  It seems like we are continually losing ground by going head-to-head against the MSM machine, with their flashy and mesmerising advertisements, and Government & Fed Reserve policy.  It gets very hard to feel sympathy for people when they continually refuse to acknowledge the truth.

Wed, 05/08/2013 - 10:39 | Link to Comment madcows
madcows's picture

Your neighbors may be smarter than you(us).  They've loaded up on assests with free money.  When the collapse happens, they can default on their loans and sell the crap, while we "live within our means" folks will have to foot the bailout bill.

Wed, 05/08/2013 - 10:56 | Link to Comment MilleniumJane
MilleniumJane's picture

I must say that this has crossed my mind many times over the last couple of years.  I guess I was raised differently.  I watched my mother struggle with credit card debt when I was young, and the entire family had to make sacrifices for her to pay that off.  It took her seven years, making the minimum payments, to pay off two credit cards:  one with a $300 limit, the other with a $250 limit.  On top of that were hospital bills, plus time missed from work for caring for my dying grandfather.  Some months, all we had to eat were beans and rice, bread and milk.  I swore then (and now) that I will never put my kids through that.  Credit card offers are always filed in their proper place:  the woodstove.

Wed, 05/08/2013 - 17:09 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

It’s a choice. A person can choose to never get credit, or can choose to make large payments, or can choose to ONLY use the credit system for a credit card that has no secured collateral and deliberately default on it (bankruptcy) to pay less/none on it and keep all the assets yet feel no real punishment so long as further use of the credit system is something you would avoid anyhow.

Wed, 05/08/2013 - 17:06 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

You can’t sell what you don’t own. A car on lease / financed is not in your name and it’s grand-theft-auto to sell cars that belong to someone else but not on their consenting behalf.

Wed, 05/08/2013 - 10:48 | Link to Comment tango
tango's picture

MilleniumJane,

Alas, this is the norm.  I volunteer at a food bank and you would not believe the cars folks drive up in to get free food.  I even go so far as to suggest selling their car and buying a good, used cheaper one with better gas mileage.  ("I know I should but,,,")  Car loans are the new adjustable mortgage loans - no money down, anybody that breathes can get one.  The folks who can least afford it are paying 30-40% more for a car they shouldn't have in the first place. 

Wed, 05/08/2013 - 10:51 | Link to Comment MilleniumJane
MilleniumJane's picture

Absolutely.  Doesn't anyone know how to calculate interest anymore?

Wed, 05/08/2013 - 11:20 | Link to Comment hedgeless_horseman
hedgeless_horseman's picture

 

 

Doesn't anyone know how to calculate interest anymore?

I spoke with two employees, yesterday, that don't even know what interest is!  They thought it was the unpaid principal, or a penalty for late payment.  It is times like this that really strain my efforts to not be a condescending asshole.

Wed, 05/08/2013 - 11:56 | Link to Comment Rustysilver
Rustysilver's picture

Hedgeless,

Go ahead and explain to them the rule of "78". I dare you.

Wed, 05/08/2013 - 12:31 | Link to Comment DoChenRollingBearing
Wed, 05/08/2013 - 13:48 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

1. You mean you don't care a list of log tables or interest tables on you?  Along with a slide rule or abbacus?  ;-)

2. Thankfully my phone has the fancy math and finance functions, when I need more than the "Rule of 71".  Things like NPV finance costs and depreciation.  My Tablet has Excel, etc, so I'm set.

Q:  Whose eyes glazed over or made a funny face of 'WTF?', for #1 or #2.  If you did those things for both... you're fucked!

Wed, 05/08/2013 - 17:00 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

Interesting: if that happens then cars can be taken back, leading to a booming business in repos, tv shows on repos and a sudden collapse of people working since they will inevitably get jobs which require transportation (that will be confiscated)

Wed, 05/08/2013 - 09:57 | Link to Comment Racer
Racer's picture

Things must be extraordinarily horrendously seriously horribly bad if the bwanksters are saying this!

 

Hmmm, they must need more bailouts.... again

Wed, 05/08/2013 - 11:28 | Link to Comment max2205
max2205's picture

I am SHOCKED Ben didn't reverse course after hearing this....in one ear out the other

Wed, 05/08/2013 - 09:59 | Link to Comment Yancey Ward
Yancey Ward's picture

The risks in student loans and farmland mortgages is well contained.  Carry on.

Wed, 05/08/2013 - 11:05 | Link to Comment edifice
edifice's picture

I don't think you can default on the newer DoED-issued loans, so technically, that bubble is secure. Am I missing something?

Wed, 05/08/2013 - 10:01 | Link to Comment thismarketisrigged
thismarketisrigged's picture

and sure enough, the biggest bubble of all has taken no rest as the market is turning green now. we knew it would happen, just  a matter of time.

 

google will prob be at 900 by weeks end, bernanke loves tech these days

Wed, 05/08/2013 - 10:01 | Link to Comment Dr. Engali
Dr. Engali's picture

Okay quick question....if you know there is a student loan bubble, why are you still lending them money? 

Wed, 05/08/2013 - 10:04 | Link to Comment waterwitch
waterwitch's picture

they like slaves?

Wed, 05/08/2013 - 10:07 | Link to Comment fonzannoon
fonzannoon's picture

follow up question. If you are a parent, why let your kid end up a debt slave before they have a chance to figure out what's going on for themselves?

Wed, 05/08/2013 - 11:02 | Link to Comment edifice
edifice's picture

I did it in reverse: got the corporate job, then went to college.  This was during the tech bubble, when they were handing out jobs like EBT cards. 

I'm still paying on loans for the masters, though.

Wed, 05/08/2013 - 10:51 | Link to Comment RaceToTheBottom
RaceToTheBottom's picture

"if you know there is a student loan bubble, why are you still lending them money? "

 

Cause that is where the bailouts are

Wed, 05/08/2013 - 10:58 | Link to Comment Dr. Engali
Dr. Engali's picture

I already knew the answer. It was a rhetorical question.

Wed, 05/08/2013 - 11:07 | Link to Comment NotApplicable
NotApplicable's picture

Actually it was an incoherent question. ;)

You <> Unaccountable Agency Named Sallie Mae

Things are placed out of our reach for a reason.

Wed, 05/08/2013 - 10:01 | Link to Comment fattail
fattail's picture

After the drought last year, We are due for some huge crops the next few years which will take care of the farmland bubble.  India is sitting on about 20 mmt of wheat they need to sell before it rots; World wehat production expected to be a record this year; chinese demand for soybeans is expected to be down for the first time in forever.  Huge bean and corn crops coming out of SA, and  with the drought broke in the corn belt we are due for a record crop.  If congress would get serious and cut these farm subsidies the Farmland bubble would deflate pretty quickly.

Wed, 05/08/2013 - 10:11 | Link to Comment nathan1234
nathan1234's picture

Once irradiated these stocks have no value.

Which can happen in the event of a nuclear event.

Wed, 05/08/2013 - 11:05 | Link to Comment tango
tango's picture

You're confusing radiation with irridation - two completely different things.  It's a trade-off.   You give up a little nutrition to get food year round.  Sure, I'd love picking fresh lemons, mangos and papayas from the backyard.  It'd be nice to catch some fresh sea food.  And what I wouldn't give to get fresh beets, squash and corn in the dead of winter.  

People whine that we should eat local and in-season the way we did as a kid.   Looking back, my mom tried to vary the meals but without 60% of what we find in stores today, it was difficult.  Irridation gives us strawberries and blueberries year round (instead of one month).  It gives us veggies in the winter and allows fragile foods to be shipped across the nation.  

Wed, 05/08/2013 - 10:02 | Link to Comment waterwitch
waterwitch's picture

Time for a  do over. Bring it.

Wed, 05/08/2013 - 10:02 | Link to Comment yogibear
yogibear's picture

All you need is a program to front-run the POMO. A mindless program will make you rich. It seems to be working very well.

Wed, 05/08/2013 - 10:04 | Link to Comment JOYFUL
JOYFUL's picture

For the past year or so I've read repeated admonitions here from various well-intentioned persons...

to buy buy buy.... farmland. I've resisted the impulse to respond to what I believe to be very poor advice. After all, what do I really know... I'm not a Phd economist or anything.

Buy physical metals. When the great reset comes... their value translated into land and resources will be astonishing. That does not mean, however... that you will be wishing to 'buy' land...

as that completely antiquated and discredited notion of rentier economic system will have expired along with the fictional 'right' of the moneychangers to extort their fee for selling us back our own birthrights... in watered down form.

Wed, 05/08/2013 - 11:07 | Link to Comment machineh
machineh's picture

'Buy physical metals. When the great reset comes... their value translated into land and resources will be astonishing.'

Sure will ... sorta like 1980-2001, when land prices tripled while gold lost two-thirds, freezing out PM victims forever.

Now gold charlatans are touting this same worn-out meme again.

Next gold goofball that wanders onto my farm, I'm gonna pop his sorry ass. 

'Looked like a danged varmint to me, officer.'

Wed, 05/08/2013 - 11:42 | Link to Comment tarsubil
tarsubil's picture

1980-2001 was the period the fiction seemed real. Shouldn't use that for any argument about reality.

Wed, 05/08/2013 - 11:50 | Link to Comment JOYFUL
JOYFUL's picture

You've clearly misunderstood the nature of us gold goofballs...  no reason for us to be comin out to your place - as there's endless mindless zombies types jus like ya everywhere one looks, without goin outta one's way!

Cheers!

 

...freezing out PM victims forever.... classic!

Wed, 05/08/2013 - 15:39 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

The choice is easy: if you can use productive farmland & feel safe there, you should be a buyer. Otherwise you should NOT be because someone else really will use it wisely and can't if you just hold it. Also: you can run with your gold faster than a farmer can run with his farmland if push comes to shove & an exit is needed.

Wed, 05/08/2013 - 10:08 | Link to Comment nathan1234
nathan1234's picture

The warning

Ben- It's either Bailout or Bail in.

take your choice

 

Wed, 05/08/2013 - 10:11 | Link to Comment ebworthen
ebworthen's picture

Here's how the student loan debacle will play out:

Student defaults will continue to rise until the bubble pops.

The TBTF banks will say "Gee, we just can't afford to underwrite these loans anymore or it will destabilize the financial system."

The Government/University/College collective will panic, beause all that student loan money is propping up the Institutions of Higher Affirmation - the idealogue professors - the coproate research "partnerships" - the Green Card/Illegal Immigrant cartel - the housing rentals - the I.T. hardware and software - in  short - 20% of the entire economy.

The bailouts will be large, the bonuses the same, the salaries uninhibited, and the national debt $1 Trillion larger overnight.

Wed, 05/08/2013 - 10:13 | Link to Comment NoDebt
NoDebt's picture

What makes you think the banks hold the paper on student loans?  That's so 1980.  The private loans are dwarfed by the ones held by Sally Mae (direct government-held paper).

 

Wed, 05/08/2013 - 10:34 | Link to Comment ebworthen
ebworthen's picture

Correct, that is the trend on newer loans:  http://mercatus.org/publication/student-loans-held-federal-government (very nice chart there).

Private lenders still hold at least 50% of the nearly $1 Trillion: http://www.finaid.org/loans/biglenders.phtml (older data, but if you add up the totals a lot of debt still held by banks).

New York FED student loan charts, 2005-2012:  http://www.newyorkfed.org/studentloandebt/

Longer version more data - New York FED presentation from Q4 2012:  http://www.newyorkfed.org/newsevents/mediaadvisory/2013/Lee022813.pdf

Wed, 05/08/2013 - 10:40 | Link to Comment NoDebt
NoDebt's picture

Yeah, so only about $500B exposure in the private sector.  That's just a couple months of QE money.  No big whoop.

Now if you tell me there are derivatives contracts floating around totalling $10 Trillion based on student loan bundles..... then my ears perk up.  That would be a problem.  But a single Tril in student loans?  Who gives a fuck?  Those that have the loans will be debt slaves the rest of their lives, the banks and Sally Mae will get their usual bail-out and all will be fine.

Right?

Wed, 05/08/2013 - 10:42 | Link to Comment fonzannoon
fonzannoon's picture

I basically agree.

"A trillion here...a trillion there..."

Wed, 05/08/2013 - 10:49 | Link to Comment ebworthen
ebworthen's picture

About right, more of the same skullduggery, S.S.D.D.

Wed, 05/08/2013 - 12:41 | Link to Comment W74
W74's picture

What's troubling about that third chart you posted is that it shows 30-39 year olds in even more debt than those under 30.  That has to be incredibly prohibitive for any kind of real economic growth.

Wed, 05/08/2013 - 11:20 | Link to Comment Ropingdown
Ropingdown's picture

Sallie Mae is a private lender and a private load servicer.  Naturally it has legacy gov-insured paper as well.

Wed, 05/08/2013 - 10:14 | Link to Comment NoDebt
NoDebt's picture

Oh, mercy.  Those student loan charts look positively ugly.  Is there a stronger word than "parabolic"?

I was talking with a buddy last week and he was complaining about how much it cost to send his daughter to Villanova (where I went, too).  He said it's up over $60K now where it was $52K a few years ago.  He wondered why it cost so much and kept going up every year (unabated, even in 2009 in the middle of the shit-storm).  I pointed out that since the government was basically the only payer/buyer the schools could hike the price every year and there would never be push-back.  He said "You know, I never thought about it that way.  You could be right" He's far from a stupid person, but it never crossed his mind before.

Year I started at Nova- 1986.  Tuition was ~$9,500

Year I graduated- 1990.  Tuition ~$14,500

2009 (my buddy's daughter starts):  $52,000

2013 (my buddy's daughter graduates):  $60,000

Plot that on a graph.

Wed, 05/08/2013 - 10:26 | Link to Comment jbvtme
jbvtme's picture

1968...$1200.  1971...$2000.  i paid my tuish painting houses in the summer.  oh, and did i mention the four years was a waste of time?

Wed, 05/08/2013 - 10:34 | Link to Comment NoDebt
NoDebt's picture

Yeah, it was kinda stupid.  A lot of money for a piece of paper that says basically "I'm hirable and have half a brain in my head.  No real world knowlege included, however."

If I had been smart I would have stuck to my landscaping company and never gone to college.  I'm fairly certain I would be ahead of where I am now.  Probably happier, too.

Wed, 05/08/2013 - 10:47 | Link to Comment skipjack
skipjack's picture

Wake Forest 1976 tuition, room, board ~$3100 1979 graduation year tuition, room and board ~$4000.  Paid for by summers spent as a waitress.  With cash left over, I might add.  I bought a 1976 VW Rabbit Diesel for $2000 upon graduation with cash left over from 4 summers of work and after paying all college costs. (I used to clear ~$5k a summer with tips)

 

Try that today.  Fuck the Fed sideways with a rusty chainsaw.

Wed, 05/08/2013 - 11:12 | Link to Comment NotApplicable
NotApplicable's picture

Interesting concept. However, I believe I'd still prefer the performance of a well-oiled machine.

Wed, 05/08/2013 - 12:37 | Link to Comment W74
W74's picture

But you paid a total of about 6K right?  Now that same amount gets you 1/10th of one year or about 40x less.

Wed, 05/08/2013 - 10:28 | Link to Comment Keynesian Mess
Keynesian Mess's picture

How about ballistic?

Wed, 05/08/2013 - 11:11 | Link to Comment css1971
css1971's picture

ballistic is parabolic.

Wed, 05/08/2013 - 15:27 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

hyperparabolic.

Wed, 05/08/2013 - 10:39 | Link to Comment toadold
toadold's picture

Victor Davis Hanson had an online article about the boom in California farmland in particular and his experience in previous booms and busts in farmland prices.

http://pjmedia.com/victordavishanson/the-great-california-land-rush/

One of things that struck me is that a lot of the crops grown there are for the Asian market, mainland China in particular. So if that market demand drops a lot of corporate farms could be in trouble.

It looks like since you can't get a relatively safe return on stocks or bonds, investor money is just chasing from one bubble to the next on what amounts to speculation.....Of course it will be different this time the salesman said, with population growth the price of productive land can't go down. Uhm yeah like where have I heard that before over the years.

Wed, 05/08/2013 - 10:40 | Link to Comment RaceToTheBottom
RaceToTheBottom's picture

First they want you in debt now they don't.  Please make up your mind.

Wed, 05/08/2013 - 11:13 | Link to Comment the grateful un...
the grateful unemployed's picture

Richard Gere was in the 1988 film Miles From Home. About two brothers who got foreclosed from their family farm. At the time bankers were out pushing loans for more land, more equipment. The current situation is identical, but even more complicated, primarily through the Ethanol boondoggle. After Bush promoted the corn for ethanol program corn prices tripled, the poor in Mexico suffered, while US agribusiness was backstopped by Fed policies to levitate their share prices. Mexico (which has no agribusiness industry) was consequently taken over by the drug trade. THe process isn't that far from the first American depression, and what happenend in the US, 1980s, when privately owned farms were taxed out of existence, (or foreclosed) and bought by those same bankers. Bush anticipated that his policies would forment revolution in Mexico, so he built dozens of internment camps to handle the refugees. The process of stealing arable land from private ownership remains identical,  though in the case of Mexico it involves sovereign dispute, however as a Texan taking land from Mexico is the natural order of things. For bankers stealing is the natural order of things.

Wed, 05/08/2013 - 12:29 | Link to Comment W74
W74's picture

I know a family up in the northern part of my county who had over 5M in loans for several dozen, mostly adjacent, lots. 

They farmed the land, but when the head of the household couldn't pay the mortgage on the HUGE house he built in the early 2000s and then after selling their reasonable house he had to start selling parcels off....and then more parcels....and then more parcels to the point where he just couldn't make enough farming to pay the mortgage and lost the whole thing.

All because of that debt on the house (and cars, and the whole nine, you name it, the wife was a spender and the kids were spoiled).  Had they also simply bought the land through farm profits and savings over time they'd be fine too, but now are broke and I have no idea where they moved to, but I assume are living with family elsewhere or renting a crappy apartment.

Wed, 05/08/2013 - 15:25 | Link to Comment MeelionDollerBogus
MeelionDollerBogus's picture

Sad to hear it but it makes room for a real prepper / homesteader who intends to use the land for what it's for and not to live beyond their means.

Wed, 05/08/2013 - 11:13 | Link to Comment Whiner
Whiner's picture

How do I short the school loan- iPad financing bubble? Aren't all these guaranteed by Uncle?

Wed, 05/08/2013 - 12:23 | Link to Comment W74
W74's picture

That's the rub of it.  What happens to other facets of the economy when the student loan gravy train slows down for the station?  We all know that a large portion (if not more than half) of student loans go to things other than education such as cars, iPads, apartment rents (750 here and you get 3 roommates), restaurants, and fast food/starbucks.  I can see Starbucks in college towns (5 in mine and 2 on campus itself) getting crushed once the money stops coming in and kids have to actually think about every dollar and penny they shell out...if they're coming to school at all.

That's where that federally guaranteed lending is going folks.  Yeah the schools themselves cost way too much in their own right, but explain to me how a kid going to a state school for 8K/year ends up with 75K in student debt after 4 years?  My folks had to work their way through college, but lucky for them rent was affordable and employers had no problem getting GOOD part-time help.  This up and coming generation is hoisting their own petard and the boomers are cheering them on.

I tell kids these days to go get certified in welding, carpentry, plumbing, HVAC or electrical work, or some combination of the above.  The only 21-30 year olds who're making serious money and living debt free have those kinds of jobs.

Wed, 05/08/2013 - 12:35 | Link to Comment 1eyedman
1eyedman's picture

thats the weird thing.  it is not dischargeable in bankruptcy, and is somewhat/somehow insured by uncle sam....but to what extent?  100cents on the dollar?  figure that out and thats your floor for prices, maybe 50%??  so just a mere 500billion wipeout....perhaps more like 33% default, half of which investors have to eat....so a kick in the head of 15% of the 1tillion mkt,  just $150billion perhaps.     but if thats used as collateral.....ripples, margin calls etc.

 

does anyone know the extent of the 'insurance' uncle sam provides to student loan (stafford etc, not the private crap--thats all toast)  'investors'.

Wed, 05/08/2013 - 11:25 | Link to Comment smacker
smacker's picture

 

                    Benny & the Greenspans: "I'm Forever Blowing Bubbles"

Wed, 05/08/2013 - 11:36 | Link to Comment ChanceIs
ChanceIs's picture

How can there be a bubble in student debt?  "Student debt bubble" is an oxymoron.  There is no market for student debt.  It isn't freely traded.  Its a little like gold and Mr. Buffett - no cash flows (well some today but give it afew years), can't determine its price, can put it all in an olympic swimming pool, etc.  A truly barbarous relic.

Barbarous you say???  Of course.  It's barbaric that those poor students are getting hosed like that.  And its barbaric that those facutlty members (that would be you Larry Summers - when are you going to follow Gov Christie with the tummy tuck) are knocking down $200K.

It you ask me if there is going to be a high default on a mountain of paper, then I would say...hell yes!!!  If you want to call that a bubble, then go ahead.  I suppose that one characteristic of a bubble would be that selling begets selling.  With student debt I would suppose that the equivalent would be default begets default.  That might happen.  Do students go to debt conventions and decide that they will default together?

Consequences of a student debt bubble?  None.  Its all printed money.  Wait?  What's that you say?  JP Morgan has been using it as collateral and/or first tier assets on their balance sheets!?!?  Basel III allowed that for student debt but not gold!?!?!  Gag me with a 2X4!!!!

Wed, 05/08/2013 - 15:19 | Link to Comment MagicMoney
MagicMoney's picture

Well student loans is backed up by the US government printing press, so if there is a huge default on student loans, well Uncle Sam, and his printing press will come to the rescue, however, you must realize how much government stimulus can effect the economy considering the growing educational field in dispensing degrees like a hot commodity itself. The educational system is overbloated indeed, because government inflates it, and contrary to what it is said, student loan stimulus, or subsidies actually distorts, and sucks the vitality out of the economy. So yes student loan can be considered a bubble. Just about anything can be a bubble, if not everything. If student loan bubble were to burst, or where people stop taking out student loans despite government freebies, incentives, stimulus, guarantees, or subsidies, because they feel education is overpriced, this means that colleges & universities which grew on the trucks load of easily accessible cheap college credit will have to contract instead of spending their money on gyms, swimming pools, and other amenities that have really nothing to do with teaching education, people probably have to be fired, or cut useless curriculums. Let's put it this way, student loan prices can't go up forever surpassing the rate of inflation. Prices don't go up forever. Home prices didn't up forever, neither will student loans, or education prices go up in perpetuity. Especially at such a rapid rate it currently is. A mania is a irrational perception of wealth, or priveledge, or benefit. People are going to overpriced universities, and colleges for a degree. The degree is the source of the mania, with government propaganda, along with academia saying that a degree is essential to access riches. Sure lenders more than likely won't lose money, government will bail them out, but the education market is bigger than just lenders when you realize that one of the sources of rapid job growth is lead by this sector, the educational field.

Wed, 05/08/2013 - 11:41 | Link to Comment Element
Element's picture

 

 

"... agricultural land prices are veering further from what makes sense, ..."

 

Not for some;

 

"... Sell your house, buy a tractor and start farming. ..."
- Jim Rogers, Oct 24, 2008

 

"... Put your money in hard assets, especially farmland and agriculture ..."
- Jim Rogers, May 2013

Wed, 05/08/2013 - 13:37 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

Here's real estate advice you can take to the bank: 

1.  The best time to buy is 50 years ago.  20 years ago is fine also.  Smart money bought US farmland 3-5 years ago.  All else is now overpriced.  'Cheap' US land is either "50,000" miles from anywhere, or useless (poor soil, little water).  Realtors will always tell you otherwise, of course.

2. "The best time to buy is when there's blood in the streets" -famous Rothschild quote.  Makes me wish I had bought Dalmatian coastal property 20 years ago, when they had a nice war going on.

3. The only time you can be almost sure to make money on real estate is at the FRONT end:  When you buy dirt cheap, due to the seller's misfortune.  The Greater Fool theory of making money at the rear end is akin to (mis)calculated gambling, because you could be the unfortunate seller who is selling on their misfortune.

4.  It is not important for a banker to understand farming, but it is important for a farmer to understand banking. (just made this up on the spot). 

5.  Keep your cash handy (powder dry) to buy on opportunities.  Ignore the hype (even from billionaires), and DYOH.  Crunch numbers, play Excel games. Don't be a Schmuck or Greater Fool.  Figures lie, and liars do a lot of figuring.

6.  "People make money in a bull market and a bear market.  But pigs get slaughtered" - Gordon Gecko.  What did I tell ya... people make money in a Doom, Gloom & Boom market segment.  You may not, but others will.  Hint, hint.

Screw the Up-Arrows -- just send me donations for such sage advice (that keep money in your pocket).  Like Tyler, I do not live on up-arrows alone.  ;-)

Here all week.  Try the organic, Monsanto-free salad. 

Wed, 05/08/2013 - 21:37 | Link to Comment Element
Element's picture

Jim Roger's advice is global advice, an he's especially been directing it towards Asia, not toward parochial US-centric dunderheads who think the US is all of planet Earth, and all of humanity, and nothing whatsoever matters in the whole wide cosmos.

And he's not just shallowly and simplistically talking fiat-money, like you do, he's talking about making sure that people have assured food, and influence over the situation, and can trade, and ride out longer term whatever comes.

Have some rhubarb and get a fucking clue City mouse, the times they are a changin'. ... or, ... be a smug complacent dickhead and die begging for someone to take you're fiat off you for a pumpkin.

Bona Petite

Wed, 05/08/2013 - 12:41 | Link to Comment ak_khanna
ak_khanna's picture

The only thing the Fed can do is print money and hand it over to the too big to fail banks in the form of QE. The money which TBTF banks get in the form of QE is used to speculate in currency, stock, commodities and bond exchanges. None of this reaches the main street and hence recovery in the actual economy is not possible through QE. Moreover speculation in commodities like Oil and agriculture products lead to higher prices thus making the lives of the very middle class paying taxes and the poor more miserable.

http://www.marketoracle.co.uk/Article40231.html

Wed, 05/08/2013 - 14:34 | Link to Comment MagicMoney
MagicMoney's picture

Printing money and giving it to "anybody" ain't a real recovery, nor would it be a actual economy. Printing money period can lead to higher prices. Looks like somebody needs to learn basic economics. Keynesianism whatever form ain't economics.

Wed, 05/08/2013 - 12:42 | Link to Comment sbenard
sbenard's picture

Bubbles Bernanke!

Wed, 05/08/2013 - 12:48 | Link to Comment moneybots
moneybots's picture

"Growth in student debt... has parallels to the housing crisis," and "agricultural land prices are veering further from what makes sense," are just two of the bankers' comments, adding that this "will ultimately result in higher loan losses,"

 

As the old saying goes, Leverage Increases Losses, as the investment banks knew would happen when they got leverage waivers form the SEC in 2004.

Wed, 05/08/2013 - 13:09 | Link to Comment Kirk2NCC1701
Kirk2NCC1701's picture

What do you expect, but a series of bubbles and wealth-redisribution, when this much fiat money is created?

Wed, 05/08/2013 - 13:31 | Link to Comment quasimodo
quasimodo's picture

Farmground is fucking insane around here. Not unheard of for it to fetch 20 large/acre. 

Wed, 05/08/2013 - 14:05 | Link to Comment Jack Burton
Jack Burton's picture

My best friend bought his old family farm years ago. It was in the Federal Program that keeps land out of production to support prices. The CRP program.

Well times have changed and CRP is now not an option for him. So he rents some of the land to a family member who farms it, and I now convinced him to sell a part of the productive land, around 1/4 to a local farmer. Last talk we had I impressed on him that he is sitting with a massive increase in equity since he bought in the 80's. He says he is going to sell another parcel, and keep only the old homestead and a small field for his retirement. He sells now he will make big bucks.

Oddly enough, and this is typical woman, his wife back in the early 90's was so mad at him for spending a big chunk of money to buy his families old homestead farm 200 miles from where they lived and worked that she divorced him! This is no bullshit either, she fucking flipped out over his stupid waste of money. Okay baby, what you got to say now you daft c**t??????????????????

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