Monday, July 18, 2011

Farmland Bubble

The value of Iowa farmland has almost doubled in six years. They rose 160 percent in the decade through last year. The super rich are looking for places to put their money. So they are buying farmland hoping for prices to apprciate. Some guy who sold his business for 45 milllion dollars bid $4 million for 430 acres in Michigan. His capital gains are taxed at a low rate. The Republicans say we can't taax these people because the provide us jobs. But, like many other fat cats, they do not create jobs, they just inflate asset values. In this case, there are no more farm jobs than under the previous owners.
Part of the rapid rise in farmland prices is due to government subsidies for ethanol made from corn. The Congress passed this silly subsidy as presidential candidates competed for votes from the Iowa caucus. The same people who oppose Obama's increase in miles per gallon requirements for auto manufacturers probably support the ethanol subsidy in the name of reducing oil dependence.

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