Touch the Soil News #162
In part 1, we saw how big future events cast big shadows in the present. Again, this is not trying to predict the future, but look at the shadows on the paths humanity has elected to travel upon. If we don’t like the shadows, humanity can choose a different path, if it so chooses. Let’s now look at Ominous Shadows part 2, which is the least understood of the three big shadows.
Wall Street at night - the symbolic center of the nation's financial machinations
Ominous Shadow 2 – The Financial System
The effects of what we are going to explain are pretty much known by everyone – dangerous loss of farmland to urbanization. The American Farmland Trust reports that every hour 50 acres of prime farm and pasture land are urbanized. However, it is the financial mechanisms that organize commerce to urbanize farmland that are less obvious.
We start with what may seem as an unrelated issue: The issue of what collateralizes what folks use as money. Centuries ago, the use of gold to collateralize dollars became popular. However, gold’s scarcity did not allow an emerging industrial revolution to finance the activities of industry and labor to serve growing billions of people. The amount of gold available that is not already in jewelry, private holdings and industry is but a drop in the bucket relative to the dollars represented in all of the paychecks that sustain most families today.
Starting in 1694, with the chartering of the Bank of England, other forms of collateral/security were accepted that were not gold. More and more, a whole symphony of collateral was used to back the dollars that the banking system created. There was land, equipment, inventories of every conceivable type of goods – industrial and consumer and on and on.
The Bank of England in the 1700s, underpinned a new banking order in which real estate collateral became the new gold that collateralized the money banks invoked.
If you take a look at the financial statements of banks, you will see most of their assets – debts receivable – are categorized by the collateral taken. The most prominent form of collateral – that stands behind deposit dollars created by banks – is land or real estate. As of 6/30/15, over 60 percent of bank loans were collateralized by real estate, which in turn stood behind all the deposits. This preferred form of collateral not only typifies banks, but cuts a wide swath in other financial markets including bonds secured by home mortgages.
So what does this have to do with the future of food? Emerging civilizations all coalesced around areas of fertile farmland. Taking farmland and adding improvements (houses, factories, roads, malls, etc.) became the preferred collateral for the dollars created by banks that circulated in commerce.
In short, in order to create the dollars necessary to buy food (and other necessities), society was obliged to pave the land that produced food – a practice embraced around the world. The American Farmland Trust further reveals that 91 percent of fruits and 77 percent of vegetables are grown on farmland situated in the paths of real estate development.
Urban sprawl, the nemisis of food and farming
The financial shadow goes further – money is not plentiful. Even though there are many banks, the dollars banks invoke must be used to repay debts owed to banks (extinguishing those dollars). In addition, many dollars are locked in savings accounts and not circulating. This limitation means we are pre-disposed not to spend money to urbanize and industrialize in areas that are not farmland. The cost of excavating rock and building on areas that are not farmland requires a higher price structure than the financial system can accommodate. Paving the best farmland next to the world’s emerging mega-cities is the cheapest option and finance obliges humanity to take the cheapest financial option.
So, here is the question we face: Will humanity save farmland through existing planning and zoning approaches – or, will some bigger plan have to be hatched?
Following is a short video clip that illustrates urban sprawl and the resulting loss of farmland