In my 22 years writing this column, I’ve seen a lot.  However, today I saw an old friend fall from grace, someone I had deep respect for.  When former federal reserve Chairman Alan Greenspan testified before the US House Committee on Oversight and Government Reform, I figured it would be more of the same.  In the past when Greenspan twitched or scratched his ear, both financial markets and commodity markets were sure to listen.
As I drove my tractor across soybean stubble I heard his words.  He said that in light of a crisis, which was “a once in a century financial tsunami”, he was all wrong to think that financial markets would police themselves.  Greenspan’s free market philosophies suddenly seem so flawed.  Chairman Henry Waxman, a Democrat from Los Angeles chortled, “In other word, you found that your view of the world, your ideology was not right?  Greenspan answered by saying “Absolutely, precisely, That’s precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence it was working exceptionally well.”
As I’ve said many times over the last few weeks, how do you like the free market now?  It is one thing for me to muse about how the market works and this way or that way, but when you have the most powerful economist in the name of Alan Greenspan exclaim, “THAT I WAS WRONG!” one should take notice.  I think this should all be a lesson to us that free markets are a very good thing but left to their own devices, is not a good thing either.  For grain that wasn’t hedged during this “once in a lifetime tsunami”, that little fact alone has cost billions.
However, as I’ve said maybe too many times, everybody is a smart guy now.  The only problem now is this liquidity problem has had the effect of contracting almost every facet of our world’s economy.  Whether it’s a Ford F-150 or a bushel of corn, there is less demand for both of them.  Not only do we have demand destruction, but also we’ll surely see a contraction in overall global production in 2009.
In Canada it’s a bit different, but whoa boy, how about that loonie.  A year ago your loyal scribe was holding onto his combine steering wheel with two hands as our loonie bolted to $1.1009 on November 7, 2007.  This year I’m looking on with quiet satisfaction as the loonie has slipped under 80 cents, actually getting down to 78 cents earlier today.  It’s back to more traditional basis values, which may be a silver lining in this financial mess.
Nonetheless, the economic tsunami our old friend Alan Greenspan is referring to has been unleashed on Canadian shores.  Bank of Canada governor Mark Carney has chimed in with their view on the Canadian economy.  Although our financial sector is quite different than our American friends, according to Carney we might be able to ride out this storm a bit better than our American friends.
In a news conference on October 23rd two days after the Bank of Canada cut interest rates by one quarter percent, Carney said we’re not headed for recession.  He maintained that Canada would avoid that fate by posting anemic growth rates of 0.6% this year and next but rebounding in 2010 to 3.4%.  I have a hard time believing those numbers, but then of course why am I sitting here instead of where he is.  With our strong financial sector, huge energy reserves and a lower loonie, the Bank of Canada must see some hope.  Meanwhile they are injecting capital into Canadian banks to make sure they will keep lending.
In the interim, I’m out in the field spreading “expensive fertilizer” and tiling some new land.  In fact its been brought up a couple of times in the past few days about me spreading some “expensive fertilizer.”  It’s like I’m taking a flyer on the future.  Needless to say I know its exorbitantly expensive but I’m working within some agronomic limits and a Canadian winter.  It has to go on now regardless of the “financial tsunami” swirling around me.  Ditto for much of Canadian farm country this fall.  The big decisions will surely come next spring.
It’ll be that way because the US and much of the world will likely be in recession.  Who knows where the loonie will be, maybe 75 cents US?  Fertilizer prices will be cheaper.  Crop prices may not be much better than they are now and in fact they may be worse.  So what do we do?  Hopefully, I’ll be just like my old friend Alan Greenspan.  I’ll be wrong just like he was and we’ll be back to those heady days pre-financial tsunami called the “Ethanol Gold Rush.”  Don’t ever say never.  Alan Greenspan thought that and we’re all paying for it now.