Who can you rely on?

August 17, 2010
Krakow, Poland

I opened up the papers a few days ago, and the top story really surprised me. The Russian government announced that it was banning grain and flour exports through the rest of the year. Belarus and Kazakhstan may do the same.

Russia is dealing with record drought and heat; crop production is down, and this has caused a recent surge in domestic prices. In an attempt to curtail this inflation, the government has decided to impose an export ban, effectively preventing Russian farmers from generating the highest profits for their produce.

This sort of thing has been tried time and time again, most notably with Argentina’s recent beef export ban. It always ends badly– producers go bankrupt as a result, people lose their jobs, the economy suffers, and long-term food production actually falls… but the politicians never learn.

At a minimum, Russia will suffer significant damage to its reputation as a place to do business. You see, the export ban even applies to existing contracts… so if a Russian farmer already has a deal to export X tons of grain overseas in October, that contract has now been forcibly canceled by the government.

Ironically, Russian President Dmitry Medvedev has been practically begging foreign business leaders to invest in Russia, recently. He is particularly focusing on investment in his country’s version of Silicon Valley.

While the government may consider allowing some contracts to be fulfilled, the message that Russia is sending to the world with this ban is that contracts mean nothing.  This is not exactly good for business confidence.

Wheat futures in Chicago jumped on the news of the ban, flirting with their 2008 highs. I find it coincidental, perhaps, that we just recently had a discussion about the benefits of farmland.

I’m not in the least a doom and gloom survivalist who thinks that the end of the world is coming; frankly, I’m quite optimistic and see progress and opportunity everywhere.

To me, though, a small investment in arable land outside of your home country makes a lot of sense, both as a speculation as well as a hedge against risk.

For starters, buying property outside of your home country is a really effective way to move money. It is not reportable to any government authority in most cases, and it cannot be forcibly repatriated.

Second, if you believe that the unprecedented printing of fiat currency around the world will eventually lead to substantial price inflation, then property (and especially productive land) is a great hedge against inflation.

Third, owning some property outside of your home country gives you a places to go at some point in the future should you decide that, finally, it’s time to hit the escape button and get the hell out of dodge.

Finally, I think we should all consider a bit of productive land to ensure the safety and security of our families.

At the end of the day, we only have ourselves to rely on. The governments and institutions that we have become so dependent on might be there for us at the moment… but this relationship is rather ephemeral.

All it takes is one little monkey wrench– heat wave, drought, storm, strike, ban, embargo, riot, war, coup, blackout, brownout, bankruptcy, bugs, disease, fuel shortage, etc. and the whole system can fall apart… or at least be pressed to its limits, causing serious discomfort for consumers everywhere.

Most people take it for granted that when they get in their cars and drive to the grocery store, there will be an entire aisle of bread waiting for them. They don’t give much thought to the complex logistical system for how the bread actually arrived to that point, starting with the farmers in Russia and ending with the truck drivers in Bristol.

If any of these monkey wrenches gets thrown into the machine, a small bit of productive land goes a long way in establishing peace of mind that you will always have a place to sleep and way to put food on the table for your family.

A lot of people don’t buy the argument; their skepticism kicks in and they immediately assume that there’s ‘something wrong.’ Fine by me.

Devoid of all facts, skeptics come up with insipid excuses that keep them out of the best opportunities. You know the sorts of people I’m talking about– the ones who always find a reason to NOT do something…

Do yourself a favor… ignore the naysayers. In this, the age of turmoil, focusing on self-reliance is critical.