Economic experts: Conditions mimic farm crisis of 1980s
Jason Henderson
By Lori Potter, The Kearney Hub
Nebraska ag producers who think causes of the current recession sound familiar are right. They have seen it all before.
"We got into this mess because Wall Street didn't understand the farm crisis of the 1980s. They didn't learn those lessons, " said Jason Henderson, vice president and chief economist at the Omaha branch of the Federal Reserve Bank in Kansas City.
In an economic update Thursday at the 22nd annual Governor's Ag Conference in Kearney, Henderson said conditions leading to the current recession are "eerily similar to the 1970s."
Now as then, debt grew because of low interest rates and bankers' willingness to loan large amounts of money on asset value instead of cash flow. The ag economy withered under its debt load in the 1980s, and the housing bubble burst in 2008.
"Debt, use it wisely," Henderson said. "The low interest rates are a huge incentive to leverage up."
He and Gov. Dave Heineman said there is good news for agriculture and Nebraska in general because the state has weathered the recession better than most states.
He and Gov. Dave Heineman said there is good news for agriculture and Nebraska in general because the state has weathered the recession better than most states.
"Agriculture is doing so well that some of you are gonna pay income taxes," Heineman joked. "... That's OK. We can use that money. It certainly would be a good sign of the health of this industry."
Relatively good economic times for Nebraska's No. 1 industry - better for farmers who grew record bushels of corn and soybeans in 2009 than for livestock producers - were critical in softening the recession's blow.
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