Inflation takes a bite out of Idaho farms

Inflation will inflict even more pain on Idaho. US Senator Mike Crapo explains that producer price inflation is raging at just under 10%. Last week, the consumer price index (CPI) reached 7.5% nationwide in January. Idaho was at 7.7%. The Producer Index is a sign of things to come. These costs have not yet been passed on to buyers. Crapo and his fellow Republicans issued the warning at a press conference on Capitol Hill. Crapo blames excessive government spending squarely.

The more dollars printed and injected into the economy, the greater the impact. There are too many dollars for too few goods. And the value of the dollar is falling.

Your dollar loses value

Consider fuel costs. In real dollars, the price of gasoline rose in the summer of 2008. The price per barrel was high and driven by demand. There are some similarities today, but another factor in rising prices is that more dollars are needed to cover the cost. In other words, your dollar is worth much less. An analogy is a bartender who washes down his whisky. Eventually it loses much of its proof i.e. its alcohol content decreases.

A Pyrrhic victory for the Republicans

Expect this to be one of many issues on which Republicans will claim victory in November.

Interest rates should rise in an attempt to control inflation. It will also increase the size of the national debt and debt service. Public borrowing is also likely to be dampened by rate hikes. Expectations of a robust or stable economy will weaken as we may well be heading into a deep recession.

Farming has become more difficult

Southern Idaho’s agriculture sector can generally handle economic downturns, but farms are already shelling out more money for fuel, fertilizer and hay. Borrowing money for new equipment will also become more difficult. Add to that the drought and there are some scary worst-case scenarios.

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