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I was eating dinner and having a quiet beer in the small town of Ladora, Iowa a while ago. The town has about 300 people living in it and has seen better days. The establishment where I dined—an old bank converted into a fine restaurant and tapas bar—was the only establishment in town not boarded up.
But the building itself was grand: stone, high ceilings, beautiful woodwork, stained glass—it was built to impress. The bank must have been something in its day. It still inspires today.
The thing that astounded me most, though, as I finished my meal and walked out the door was that one of the boarded up establishments right across the street had also once been a bank. What was going on in this sleepy little town of 300 souls last century that it could support not one but two banks?
I think the answer is found in WWI and the price of grain skyrocketing at the same time tractors were really bringing some production to the prairies. Farmers were making money hand over fist and then, like now, they all wanted the latest tractors and so they needed bankers.
I'm reading a book “The Creature from Jekyll Island” that theorizes the New York banks were getting nervous about too many deposits ending up in the west and midwest and the growing power of regional banks. Therefore, the Federal Reserve (dominated by NY bankers) eased up on the money supply to get all the farmers sucked into loans for more tractors and more land. Then they curtailed the money supply, contracting the economy and leaving the small country banks with a lot of non-performing loans. No more small country banks and the banking power remained centered in New York.
Which explains why Ladora, Iowa is the depressing little burg that it is. A more diversified and less concentrated financial sector might have done wonders for our country. All those boarded up shops that once survived in Ladora might still be open and thriving and the population might not be in a slow, steady death spiral.
Instead the money that comes in all flows out. Out to the surrounding towns where the local Ladorans now go to shop, and off to the big banks, who help finance the big tractors that run over the vast, concentrated farms.
Sometimes, as I watch the huge sprayers driving over the huge mono-culture fields, I think it wouldn't be so bad if we still had people walking the beans. Or at least driving smaller tractors and farming on a smaller scale—the scale that would allow for happy, prosperous neighbors.
But then, I'm a dreamer. Farmers will always want more land and bigger tractors and banks will always want farmers in debt.
I'm just a dreamer who would rather sell 10 bearings for ten small tractors than one bearing for a great big one.