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RE: Ontario Minimum Wage Hike Is Costing Us Money (Freedom Minute)

in #news7 years ago

Capitalism is Law of the Jungle on steroids. In a free market the direction is for larger and larger farms because there are advantages in economy of scale. Having a barn with a single cow is always less efficient then to have a barn with 1000 cows. However in order to understand what is going on in farming, you need to have a higher level of understanding of economics. In the case of agriculture, there is a divergent cobweb model at play.
https://en.wikipedia.org/wiki/Cobweb_model

This model exists because of the time lag experienced with growing cattle. It takes roughly 5 years for the beef production cycle. Imagine you are a farmer and the price of beef is very good. What do you do? In a simple model you wave a wand and immediately you produce more beef to suit the demand. The problem with beef production, you need to anticipate what the price of beef will be in 5 years time. Before you can increase your herd size, you need to increase the number of female animals that you have (production is actually distributed across the industry ... eg Cow Calf operations are different then Feedlot). This means that after a gestates, you keep more females. Heifers take a couple of years to reach an age they can reproduce at. It might take another year before they produce more male animals to be used for steers. It takes those animals roughly 21 months to reach an age for slaughter. Meanwhile all the other farmers in the industry make a plan similar to yours. Because the price is good today, they project and plan for 5 years from now.

Five years later all the farmers have a surplus of beef ... which forces the price of beef down. Many farmers make a loss because the price of meat is well below their cost of production. Additionally they cull their herds (getting rid of cows) to pay their bills. This drops the price of beef down further. If you look at the chart, you see that at P1Q1 the price is high supply is low. P1Q2 price is high and supply is high. P2Q2 price is low but supply is high. P2Q3 price is low and supply is low. P3Q3 the price is higher than its previous high and its supply is lower than its starting point. This process spirals out of control until farmers become bankrupt and the price of meat is more expensive than before.

In addition to this the agriculture has the largest business risk of any sector. The reason that USA farmers give their animals so many antibiotics and hormones is that there is a 4-16% loss of animals. In the past, there have been outbreaks of animal related diseases (TB, Mad Cow, Bird Flu) which have more than decimated the industries. This isn't limited to animals (so vegans don't feel left out) remember the potato famine ... and countless frosts, molds, smut, insect, and weed infestations which have destroyed crops. On top of that there are seasonal fluctuations in demand (barbecue season anyone) which farmers need to contend with.

It isn't Price Fixing ... it is Supply Management. Your comment that

Canadian farmers may get "fair pay" for their milk, but they don't end up selling nearly as much.

is irrelevant. Imagine your boss came to you and said that he was going to cut the amount that you were being paid into half. So instead of making $10 per hour you would only get $5 per hour. He adds that you don't have to worry about it because you can work twice as much. One thing that you are unaware of is that when I was a child, we were visited from buyers from around the world (including USA) because having more money meant investing more in the technology (creating better breeding material).

The economy as a whole pays the price, from the farmers to the fishermen. And deferring costs can often lead to prohibitive logistical issues and debt.

During the late seventies and early eighties the interest rate skyrocketed to 18 percent. At that time the beef farmers who had been so braggadocio about their big paychecks five years before came to my father in desperation to borrow money. They were losing their farms ... but as a dairy farmer each month he was getting a steady paycheck.

In the US Farm Aid was started with the hope of saving farms.

I am sorry but not only do I have a degree in the subject but I have lived through the worst times in recent history.

Also, commodity coins may be in use currently—but once people realize they don't service an actual purpose (apart from complicating ledgers), they will be abandoned. Speculation is keeping them afloat.

I wonder why you are even on STEEM. Speculation has nothing to do with the value of commodity coins ... it is just some people "get it" and some people don't.

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I have my reservations about Steem. I was waiting for you to call me on that. Your 'bigger is better' (economies of scale) model of capitalism is not necessarily always successful (as you have demonstrated), and is therefore not always followed. It is also totally wrong to assume that a large sum of money will necessarily be squandered, or that a steady check will be saved responsibly.

The recession in the late 70's was a result of Nixon's instating wage and price controls (the mechanisms that you think save the day), his taking us off the gold standard, and the mounting effects of LBJ's 'great society'—not because of market failures. Also, if my boss expected me to work twice as much for half the pay—I take my labor elsewhere. The market naturally finds the optimal price. Central planning not only doesn't work—it causes massive damage to the economy.

What you have studied and what you have lived through is irrelevant to the facts. Also, I could ask you the same thing about Steem. If you love the government so much, why are you here?

I have started a new post: https://steemit.com/life/@dwarrilow2002/continuing-the-discussion-about-how-governments-can-play-a-specific-role

continuing our discussion. Please resteem and continue the discussion if you like.