Road Warrior

How Long Will Federal Reserve Continue "Easy Money" Policy?

RSS

 

The stock market recently bounced to a record high of 15,000. Central banks around the world are opening up the floodgates of stimulus. In my road warrior travels, I have noticed numerous people are concerned about how long the Federal Reserve will continue their “easy money” policy. What are some of the signals to watch for in anticipation of a pullback by the central banks, which could result in not only a correction in the equity markets, but also in farmland values?

Concerning central bank stimulus, pick your poison: inflation or deflation. Ben Bernanke, the Fed chairman, and his predecessor, Alan Greenspan, are more concerned about deflation given the government debt levels here and abroad in developed or rich nations. The Federal Reserve’s aggressive strategies of buying back bonds and previous stimulus packages were to induce the wealth effect. Simply put, every time a stock increases by $1 in value, consumers tend to spend 4¢ more. The wealth effect is more dramatic with real estate. Spending increases 9¢ with every dollar real estate values appreciate. With 71% of the U.S. economy driven by consumption and services, record stock prices, rebounding housing prices and farm real estate values spiraling upward, the wealth effect is in full bloom. Similar strategies are being carried out Japan and other areas of the world.

When will the Federal Reserve attempt to pull back stimulus? Carefully watch the language of the Fed’s distributed comments. Comments suggesting less accommodative action will usually precede the action by three to four months. Watch three metrics that the Fed has identified in an attempt to become more transparent.

  • The target is 6.5% reported unemployment. Remember, the real unemployment rate trends tend to be approximately twice as high when discouraged and dislocated workers are included.
  • The next metric is inflation, which includes core inflation – without food and energy included – and headline inflation, which includes food and energy. Rates of core or headline inflation above 2.5% would suggest possibly tightening of stimulus packages.
  • A metric not officially identified but closely watched is gross domestic product (GDP). The current rate of growth in the U.S. as of the first quarter of 2013 was 2.5%. A rate in the 3-4% range would be indicative of a possible rate increase.

It appears that the typical May correction of the equity and stock markets may find the bears in hibernation. Do not discount a correction in mid- to late summer if the economy and unemployment improve and the Federal Reserve decides to reduce stimulus to the economy. The question then becomes, how will this impact farm real estate markets?

 

Editor’s note: Dave Kohl, Corn & Soybean Digest trends editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at sullylab@vt.edu.

Discuss this Blog Entry 122

on Mar 11, 2014

Interesting article!! The Federal Reserve will pull back the “Easy money” policy in a short time. The fed officials will be hoping to improve the economy in the months in order to justify their policy. Thanks a lot for sharing.
outlook 2010 problems

on Sep 13, 2014

I don’t have time to go through it all at the minute but I have saved it and also added in your RSS feeds, so when I have time I will be back to read more, Please do keep up the awesome job. Forskolin

on Sep 17, 2014

Do you mind if I quote a couple of your posts as long as I provide credit and sources back to your blog? My blog is in the exact same niche as yours and my users would really benefit from some of the information you provide here. Please let me know if this ok with you FORUM DU gd ouest

on Sep 19, 2014

Hello! Someone in my Facebook group shared this website with us so I came to give it a look. I’m definitely enjoying the information. I’m bookmarking and will be tweeting this to my followers! Wonderful blog and amazing design and style.
Leveling Up Affiliates

on Sep 21, 2014

My spouse and I absolutely love your blog and find almost all of your post’s to be just what I’m looking for. can you offer guest writers to write content for you? I wouldn’t mind producing a post or elaborating on a number of the subjects you write concerning here. Again, awesome weblog! städ

on Sep 22, 2014

When I initially commented I clicked the “Notify me when new comments are added” checkbox and now each time a comment is added I get several emails with the same comment. Is there any way you can remove people from that service? Thanks! maillot foot

on Sep 22, 2014

Greetings from Florida! I’m bored at work so I decided to browse your site on my iphone during lunch break. I love the information you provide here and can’t wait to take a look when I get home. I’m surprised at how fast your blog loaded on my cell phone .. I’m not even using WIFI, just 3G. Anyways, awesome blog! rank tracker

on Sep 25, 2014

My spouse and I absolutely love your blog and find almost all of your post’s to be just what I’m looking for. can you offer guest writers to write content for you? I wouldn’t mind producing a post or elaborating on a number of the subjects you write concerning here. Again, awesome weblog! Invisalign® review

on Sep 27, 2014

Hey there! I know this is kinda off topic but I’d figured I’d ask. Would you be interested in exchanging links or maybe guest authoring a blog post or vice-versa? My blog goes over a lot of the same topics as yours and I believe we could greatly benefit from each other. If you happen to be interested feel free to shoot me an e-mail. I look forward to hearing from you! Great blog by the way! paternity test

on Sep 27, 2014

Hmm it seems like your site ate my first comment (it was extremely long) so I guess I’ll just sum it up what I had written and say, I’m thoroughly enjoying your blog. I as well am an aspiring blog writer but I’m still new to the whole thing. Do you have any recommendations for newbie blog writers? I’d really appreciate it. DPF Cleaning

on Sep 27, 2014

I am commenting to let you know what a terrific experience my daughter enjoyed reading through your web page. She noticed a wide variety of pieces, with the inclusion of what it is like to have an awesome helping style to have the rest without hassle grasp some grueling matters. Auto entrepreneur

on Sep 27, 2014

It’s great to come across a blog every once in a while that isn’t the same out of date rehashed material. Fantastic read!
wedding video

on Oct 1, 2014

How dy would you mind letting me know which web host you’re utilizing? I’ve loaded your blog in 3 completely different web browsers and I must say this blog loads a lot quicker then most. Can you suggest a good internet hosting provider at a reasonable price? Private Proxies

on Oct 1, 2014

My developer is trying to convince me to move to .net from PHP. I have always disliked the idea because of the expenses. But he’s tryiong none the less. I’ve been using Movable-type on several websites for about a year and am anxious about switching to another platform. I have heard great things about blogengine.net. Is there a way I can transfer all my wordpress posts into it? Any help would be really appreciated! santa ana bail bonds

on Oct 2, 2014

A number of us know all relating to the compelling medium you present powerful steps on this blog and therefore strongly encourage contribution from other ones on this subject while our own child is truly discovering a great deal. Have fun with the remaining portion of the year. buy trees online

on Oct 2, 2014

Woah! I’m really enjoying the template/theme of this website. It’s simple, yet effective. A lot of times it’s very hard to get that perfect balance between superb usability and visual appeal. I must say you’ve done a very good job with this. usługi koparką wieliczka

on Oct 15, 2014

How dy would you mind letting me know which web host you’re utilizing? I’ve loaded your blog in 3 completely different web browsers and I must say this blog loads a lot quicker then most. Can you suggest a good internet hosting provider at a reasonable price? maillot foot

on Oct 21, 2014

My spouse and I absolutely love your blog and find almost all of your post’s to be just what I’m looking for. can you offer guest writers to write content for you? I wouldn’t mind producing a post or elaborating on a number of the subjects you write concerning here. Again, awesome weblog! Kenneth Stephenson

on Oct 1, 2014

Woah! I’m really enjoying the template/theme of this website. It’s simple, yet effective. A lot of times it’s very hard to get that perfect balance between superb usability and visual appeal. I must say you’ve done a very good job with this. chrysler dealership

on Oct 5, 2014

Good blog post i enjoyed it thanks for this post - perfect money hosting / cheap web hosting

on Sep 17, 2014

I don’t have time to go through it all at the minute but I have saved it and also added in your RSS feeds, so when I have time I will be back to read more, Please do keep up the awesome job. Best Plumbers in Baltimore Md

on Sep 21, 2014

Do you mind if I quote a couple of your posts as long as I provide credit and sources back to your blog? My blog is in the exact same niche as yours and my users would really benefit from some of the information you provide here. Please let me know if this ok with you Removals to France

on Sep 22, 2014

Hello! This is my first visit to your blog! We are a team of volunteers and starting a new initiative in a community in the same niche. Your blog provided us useful information to work on. You have done a outstanding job! global economy

on Oct 1, 2014

I enjoy what you guys are usually up too. This sort of clever work and coverage! Keep up the wonderful works guys I’ve added you guys to my blogroll. Thermorollen mit hoher Qualität bei Rollenland

on Oct 14, 2014

Hmm it seems like your site ate my first comment (it was extremely long) so I guess I’ll just sum it up what I had written and say, I’m thoroughly enjoying your blog. I as well am an aspiring blog writer but I’m still new to the whole thing. Do you have any recommendations for newbie blog writers? I’d really appreciate it. taking on an apprentice

on Sep 30, 2014

I wish to show thanks to you just for bailing me out of this particular trouble.As a result of checking through the the net and meeting techniques that were not productive, I was thinking my life was done.
Luxury Real Estate Agent Miami
http://www.luxuryrealtysouthflorida.com/luxury-real-estate-miami

on Oct 24, 2014

A number of us know all relating to the compelling medium you present powerful steps on this blog and therefore strongly encourage contribution from other ones on this subject while our own child is truly discovering a great deal. Have fun with the remaining portion of the year. dryer vent cleaning

on Aug 19, 2014

Hi there I am so thrilled I found your website, I really found you by mistake, while I was browsing on Yahoo for something else, Anyhow I am here now and would just like to say thanks a lot for a tremendous post and a all round exciting blog v

on Aug 19, 2014

It’s great to come across a blog every once in a while that isn’t the same out of date rehashed material. Fantastic read! wholesale clothes

on Aug 23, 2014

Hmm it seems like your site ate my first comment (it was extremely long) so I guess I’ll just sum it up what I had written and say, I’m thoroughly enjoying your blog. I as well am an aspiring blog writer but I’m still new to the whole thing. Do you have any recommendations for newbie blog writers? I’d really appreciate it. Removals to Belgium

on Aug 23, 2014

Hello there! I know this is kind of off topic but I was wondering which blog platform are you using for this site? I’m getting fed up of WordPress because I’ve had problems with hackers and I’m looking at options for another platform. I would be fantastic if you could point me in the direction of a good platform.
electronic cigarette UK
http://cigelectric.co.uk

on Aug 25, 2014

I’d really love to be a part of group where I can get advice from other experienced people that share the same interest. If you have any recommendations, please let me know. Thank you! Calgary Realtor

on Aug 28, 2014

I like this web site very much, Its a rattling nice place to read and obtain info . "Anyone can stop a man's life, but no one his death a thousand doors open on to it. – Phoenissae" by Lucius Annaeus Seneca.
Amazana Serpong Residence | cream pemutih muka | Grosir Baju Korea | Rumah Di Alam Sutera

on Sep 3, 2014

My developer is trying to convince me to move to .net from PHP. I have always disliked the idea because of the expenses. But he’s tryiong none the less. I’ve been using Movable-type on several websites for about a year and am anxious about switching to another platform. I have heard great things about blogengine.net. Is there a way I can transfer all my wordpress posts into it? Any help would be really appreciated! elektrische sigaret

on Sep 6, 2014

I am really loving the theme/design of your web site. Do you ever run into any browser compatibility problems? A small number of my blog audience have complained about my site not working correctly in Explorer but looks great in Safari. Do you have any ideas to help fix this problem? häusliche Pflege

on Sep 6, 2014

I don’t have time to go through it all at the minute but I have saved it and also added in your RSS feeds, so when I have time I will be back to read more, Please do keep up the awesome job. Wholesale clothing UK

on Sep 7, 2014

Please let me know if you’re looking for a author for your site. You have some really great posts and I think I would be a good asset. If you ever want to take some of the load off, I’d really like to write some material for your blog in exchange for a link back to mine. Please shoot me an email if interested. Auto entrepreneur

on Sep 8, 2014

I’m planning to start my own blog soon but I’m a little lost on everything. Would you suggest starting with a free platform like WordPress or go for a paid option? There are so many choices out there that I’m completely confused .. Any suggestions? Thanks a lot! recipes

on Sep 8, 2014

Woah! I’m really enjoying the template/theme of this website. It’s simple, yet effective. A lot of times it’s very hard to get that perfect balance between superb usability and visual appeal. I must say you’ve done a very good job with this. Filter Cleaning

on Sep 9, 2014

I’d really love to be a part of group where I can get advice from other experienced people that share the same interest. If you have any recommendations, please let me know. Thank you! Las Vegas laser show

on Sep 9, 2014

Please let me know if you’re looking for a author for your site. You have some really great posts and I think I would be a good asset. If you ever want to take some of the load off, I’d really like to write some material for your blog in exchange for a link back to mine. Please shoot me an email if interested. paternity testing

on Sep 9, 2014

A number of us know all relating to the compelling medium you present powerful steps on this blog and therefore strongly encourage contribution from other ones on this subject while our own child is truly discovering a great deal. Have fun with the remaining portion of the year. kids bedroom set

on Sep 10, 2014

It’s great to come across a blog every once in a while that isn’t the same out of date rehashed material. Fantastic read! Love or Above

on Sep 10, 2014

Hello! Someone in my Facebook group shared this website with us so I came to give it a look. I’m definitely enjoying the information. I’m bookmarking and will be tweeting this to my followers! Wonderful blog and amazing design and style.
gold bullion

on Sep 12, 2014

Hello! Someone in my Facebook group shared this website with us so I came to give it a look. I’m definitely enjoying the information. I’m bookmarking and will be tweeting this to my followers! Wonderful blog and amazing design and style.
http://www.yellowpages.com/chandler-az/mip/self-defense-simplified-481908495

on Sep 19, 2014

At this time it seems like WordPress is the preferred blogging platform available right now. (from what I’ve read) Is that what you’re using on your blog? Great post however I was wondering if you could write a litte more on this subject? romania tours

on Sep 22, 2014

Greetings! I know this is somewhat off topic but I was wondering if you knew where I could get a captcha plugin for my comment form? I’m using the same blog platform as yours and I’m having difficulty finding one? Thanks a lot! rank tracker

on Sep 7, 2014

My partner and I stumbled over here different website and thought I might as well check things out. I like what I see so now i’m following you. Look forward to checking out your web page repeatedly. orange county bail bonds

on Sep 5, 2014

Needed to compose you a very little word to thank you yet again regarding the nice suggestions you’ve contributed here. Daftar Harga HP BlackBerry Passport

on Sep 6, 2014

I enjoy what you guys are usually up too. This sort of clever work and coverage! Keep up the wonderful works guys I’ve added you guys to my blogroll. Chiropractor Exeter

Post new comment
or to use your Corn and Soybean Digest ID
What's Road Warrior?

Dave Kohl is an ag economist specializing in business management and ag finance. He can be reached at sullylab@vt.edu.

Blog Archive

Sponsored Introduction Continue on to (or wait seconds) ×