I listened to an interesting radio show the other day. The guest on the program was the head of the National Organization for Raw Materials. Evidently they've been around for a while, even though they don't seem like a very large organization.
I'm not sure that I agree with their conclusions, but he said some intriguing stuff and I thought that I'd start a discussion of it here. One of the things he said was that paying a fair price for raw materials (steel, fish, corn, or whatever) creates wealth throughout the economy. That is, paying the cheapest price for those things actually reduces the consumer's income and buying power. He says that they have the numbers on their website to back that premise up. I don't know, because I haven't had enough time to review the website yet. But, at least on some levels, what he says makes sense. If the farmer gets paid a good price for his produce, then he can afford to employ Jason by buying farm equipment, and Jason in turn can afford more martial arts lessons, and the martial arts instructor can afford a new car, which gives an auto worker a job and he can afford stuff, etc. Sure, higher prices for raw goods would result in higher end prices, but the postulate of this NORM representative was that buying power would increase more quickly than prices.
His conclusion was that we need to have the government step in (almost never my favorite solution) and help, not by subsidizing, but by providing loans (government loans are another thing I don't agree with). The reason they would do this is because the government, and Congress specifically, is tasked with setting the value of money. It was this guy's contention that the best way for the government to set the price of money is to tie it to the price of raw materials. So, for instance, if farmer John takes his bushel of wheat to the mill to sell it, the government would have a guy there offering to loan him $9 for that bushel of wheat, with the wheat as the collateral on the loan. This would then set the price of money, a dollar being worth 1/9th of a bushel of wheat. The operator of the mill would then have a choice. He could offer to beat the price that the government is offering to ensure that he gets the wheat he needs to make flour. Or he could offer a lower price and hope for the best.
This is vastly different from subsidies. With a subsidy, the government is offering the farmer free money, basically. You have to meet certain conditions, but the government gets nothing back, basically. It's giving something without getting something in return. With a loan on the value of the commodity, the government gets the commodity if the person defaults. So they get something back for their money. Most people would match or beat the government's price, because most people are inclined to sell for the highest price that they could get. So the government's $9 bushel of wheat would actually be worth at least $9 on the open market.
I think I've summarized what he was saying accurately, but at first I was having trouble understanding it, so maybe not. And I'm also really hesitant about the idea of government lending money to farmers. But it was still interesting, and it got me thinking.