With the talk of a new recession, I dug a little deeper into our family history of dairy farming. In 1647,my great-great grandfather got his name changed from Maarten Martens Jzn to Maarten de Jong, the Dutch meaning for “the son”. You ask, what does this have to do with the recession?
Apparently, as I go back in history I find that, in every century we went through serious set-backs. On my mother’s side they had their changed name also in the same period; also to de Jong, not related to each other. Interestingly, my wife’s name is also de Jong, again not related.
In the 16th century, a big recession started when the Dutch capture the Spanish silver fleet, this created a short fall in payment of the Spanish Government and total collapse. In the 17th century, the Tulipmania, where trade in Tulip bulbs went up to about $20.00 per bulb collapsed, and created a large economic set back. In the 18 century, the explosion of the volcano Krakatau in Indonesia, created a world-wide miss harvest, resulting in famine all over the world. As a result of a large economic recession in the 20th century, trade in the stock market collapsed the world’s economy. And now in the 21st century, any huge sun storm can destroy the satellites and all the internet and phone companies could collapse as a balloon. What I am implying is, recession is guaranteed, every century.
In the big recession, only my maternal grandfather did not lose the farm. I recall my mom telling me at one time, it was because her Dad only had a $500 debt load on the farm, if you had more than $5,000 debt, you didn’t make it and the bank reprocessed the farm. However, my paternal grandfather, lost the farm and my wife’s grandfather also lost his farm. They both, were able to keep renting the farms from the new owners, who lived in the city.
Things changed when the Second World War ended and there was a big demand for dairy products and meat. Both families that lost their farms were able to buy them back, while my mother’s family expanded from a single farm to owning 4 farms – so all their children were able to start farming.
What we can learn from this? If a recession hits we still would be able to farm even if we don’t own the farm anymore. These days the debt dollar amount is so high in farming, I honestly don’t know how we can survive an interest rate of 15%, or more; as we had in the 1980’s.
The goal for the upcoming year is reducing my debt load, because even with the low interest rates, we hardly see any growth in our economy and are getting closer to a recession, with a 3% interest rate. This means any interest increase will have devastating impact on repayment of the farmer’s debt load. The lower Canadian dollar helped this year, to show a small growth, but seeing the numbers of economic increase in consumer goods, there is no real growth and it gets tougher to pay your monthly bills and taxes.
If farmers fall into default, each level of government will be unable to provide their funding to services, like schools, hospitals, other municipal services. Currently, 60% of our property taxes is for school taxes.
The provincial and federal governments are going in a large deficit when recession is looming; it may work the first time but definitely not the 2nd time when the interest is this low. Households and farmers alike, are finding it difficult to pay the bills, this is not the moment to increase our taxes on services and fuel, which impacts directly on our daily cost of living.
Therefore, we are not going to be making big investments in the coming years, and try to focus to lowering our debt. The same approach as my most successful great-great grandfather did. If that doesn’t work, we learn from history – rent the farm, until better times come around.
Have a great holiday season!