Secondary Sources: Farmland Bubble? Food and Energy, Small Business

A roundup of economic news from around the Web.

–Farmland Bubble?: Robert Shiller looks at candidates for potential bubbles. “My favorite dark-horse bubble candidate for the next decade or so is farmland — and not just because there have been stories in recent months of booming farmland prices in the US and the United Kingdom. Of course, farmland is much less important than other speculative assets. For example, U.S. farmland had a total value of $1.9 trillion in 2010, compared with $16.5 trillion for the US stock market and $16.6 trillion for the US housing market. And large-scale farmland bubbles are quite rare: there was only one in the US in the entire twentieth century, during the great population scare of the 1970’s. But, farmland, at least in certain places, seems to have the most contagious “new era” story right now. It was recently booming, up 74% in real terms in the US in the decade ending with its price peak, in 2008. And the highly contagious global-warming story paints a scenario of food shortages and shifts in land values in different parts of the world, which might boost investor interest further.”

–Food and Energy: Mark Thoma notes the problem for low-income households in food and energy inflation. “Recently, there’s been quite a bit of concern about rising food and energy costs, and worry that recent increases are signs of a coming outburst of inflation. While there’s not much evidence that food and energy costs lead to higher inflation in the long-run, and hence no reason for the Fed to raise its target interest rate to prevent this from happening, that’s not to say that increases in food and energy costs are inconsequential. For households in the lowest 20 percent of the income distribution, spending on food and energy is 44.1% of after-tax income.”

–Small Business: John Shipman is curious about Treasury Secretary Tim Geithner’s call for more access to capital for small business. The National Federation of Independent Businesses “said a net 11% reported loans “harder to get” compared to their last attempt — asked of regular borrowers only — up from 10% in January. The organization also says 28% of owners said weak sales continues to be their top problem, and “the historically high percent of owners who cite weak sales means that, for many owners, investments in new equipment or new workers are not likely to ‘pay back’.” Seems pretty simple, but it’s really more business that small businesses need, not more capital, right now. And demand spurs innovation (remember necessity is the mother of invention?), not capital. Sounds like Geithner, and the White House, doesn’t get that.”

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