Nothing Borrowed, Nothing Gained

Posted by David Widmar on October 17, 2022

By: Brent Gloy and David Widmar

Season 3 of the AEI Presents Podcast

At the start of 2022, interest rates were at career lows, but by year’s end, conditions will likely exceed decade highs. After months of data confirming higher-than-desired inflation, the Federal Reserve began raising interest rates in March and has not shown signs of backing down.

The combination of high inflation and rising interest rates has fueled uncertainty about farm debt. How high will interest rates go? What are the potential implications? The uncertainties are straightforward, but no simple explanation can adequately address all the moving pieces.

A major frustration of ours occurs when the chaos of significant uncertainty – such as a trade war, a collapse in farm income, geopolitical conflict, or macroeconomic turmoil – gets amplified by everyone lamenting – from coffee shop banter to social media feeds – about the situation and contributing to the mire. Everyone becomes inundated with talking, reading, and hearing about uncertainty.

With all this in mind, last spring the AEI team began working on the third season of the Presents podcast. Building off the popular (and award-winning!) earlier seasons Escaping 1980 and Corn Saves America, a deep dive into ag lending seemed appropriate and timely. Careful to avoid piling on, Nothing Borrowed, Nothing Gained steps back and reviews how a farm loan works and answers the question, “Where does the money a farmer borrows come from?”

This fall, the AEI team – along with experts ranging from local ag lenders to Federal Reserve policymakers – will unpack how a local bank works, why the Farm Credit System and Farmer Mac were created, how innovation in ag lending works, and why ag retailers and manufactures provide credit. This season even includes a trip down the Yellow Brick Road, an overview of financial crises during the 1800s, and an inside perspective into Quantitative Easing.

Wrapping It Up

In preparation for this season, an analogy came to mind. Today, it feels like everyone is describing a looming economic storm: the magnitude, duration, potential effects, and how it might develop or shift in the coming months. While everyone is locked onto the storm, little attention is being given to the mechanics of the vehicle (car, boat, airplane – whichever visual you prefer) we’re driving.

Regardless of the uncertainties, how do the farm financial and debt markets work? Why were they built this way? What areas are robust or weak, and how can that knowledge improve our thinking and decision-making?

We invite you to join us this fall as we dive into Nothing Borrowed, Nothing Gained. The first episode is streaming now at Download and listen on iTunes, Spotify, or wherever you listen to podcasts.

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