A Troubling Sign of What’s Next for Our Dollars

Andy Snyder|October 4, 2022

This shows just how twisted and warped things have become.

A couple of our friends own a small record label. They invited us to join them for a day of music and camaraderie at their studio up in the mountains.

The rain came down at its leisure, adding to the robust natural acoustics of a stage built into a forest of rocks. It was a wonderful day with some great artists.

But with rain comes mud.

At one point, our friend grabbed a shovel and tossed a pile of stones onto the top of the steep drive. The mud was making a mess.

“Where’s your tractor?” we asked, having heard him talk about it previously. “It’d fix this right up.”

“I got an offer I couldn’t refuse,” he said, with a half-cocked mobster accent.

Indeed, he did.

The machine was nearly a decade old and looked like a record producer had owned it – it was lightly used and had clean paint.

“I got more for it today than I paid for it new.”

Imagine that. Using a piece of equipment for 10 years… and getting paid to do it.

It shows just how screwed up our economy is today.

Our money is worth less. Supply is low. And newer isn’t better.

This wasn’t just some one-off deal, either. We first heard of such economic atrocities two years ago. Rumor had it a few folks were breaking the laws of physics with this economic perpetual motion machine.

It’s proof of how dire things have become.

A tractor that cost $15,000 in 2012 is selling for $20,000 today. And it comes with more wear on the body and less tread on the tires.

The reason this is happening should make every student of economics cry.

For one thing, our money is worth less.

That’s quite clear.

The loaf of bread we bought in the morning for $3 is selling for $6 later in the day. The bread is not any more useful or valuable. It’s just that our money is worth that much less.

Eight percent inflation compounds quite quickly. (Just watch.)

But there’s something else going on here. It’s a problem we will surely see across the broad economy… not just in the weird little world of tractors.

Less for More

You’ve probably heard of shrinkflation. We've written about it before.

It’s when you get less of something… but pay just as much or more for it. Instead of 24 ounces in a can, you get 20.

The price remains the same, but the value falls.

It’s no different with tractors. We might still pay $30K for a new unit. But that $30K today doesn’t get us a tractor with dual remotes, a hydrostatic transmission or a quick-attach bucket.

Worse, the quality isn’t what it used to be. Instead of getting 2,000 hours from a unit… we get just 1,000.

It means the old stuff… is just as good as the new. With light use, it’s better than new.

That’s why prices of used equipment are setting record after record. The new stuff is too expensive… and isn’t worth the price.

But here’s an idea for all you old-school folks – the folks who wonder why cars no longer have window cranks and manual seats…

Many “good” tractors today aren’t available without high-end electronics. They’ve got autosteer, yield monitoring, traction control… and thousands of dollars’ worth of EPA-mandated pollution controls. They’re great ideas and engineering marvels… but none of that stuff is necessary.

Worse, they make new units unaffordable to the masses. When the farm note is hard enough to pay… a tractor that counts corn kernels is a bit of a luxury.

Of course, this column hasn’t turned into “Tractor Time With Andy.”

We bring up the subject only because it’s a reflection of what’s happening and, more importantly, what’s coming.

A Foreboding Sign

Farmers want the old stuff because it’s good, it’s simple… and it’s affordable.

We’re seeing the same idea play out in cars and houses.

For decades, used vehicles fell in value. Newer was better. But not anymore.

At first, folks blamed supply chain issues. That’s part of it. But used-car inventories are up on the year (in some cases significantly). Most folks in the industry say we’re back to 2019 levels.

It means something bigger is happening.

New cars have become too expensive. They have features that few folks need. And they have safety and emissions mandates that create a baseline price that’s unaffordable to many in a sluggish economy.

Plus, of course, our dollars are worth less.

The average used car price these days is $28,000. In 2019, it was just $19,000.

That’s not good.

None of this bodes well.

These are two good examples of how things have broken down in recent months… but they’re not the only examples.

There’s trouble all over the place. The economy is rotating in a big way.

And with no single cause, there’s no easy solution.

Things will work themselves out… especially if we have the guts to let the free market do its job.

In the meantime, we might as well relax and listen to the music.