The optimism felt by many in the agricultural sector during the 1970s would be short-lived.
Neil Harl: October the 6th, 1979, they slammed on the monetary brakes under new Chairman Paul Volcker, who had been in office only since August of that year. And the consequence was it threw a lot of farmers into the windshield when they slammed on the monetary brakes. We had not had an aggressive Fed for some time and no one, I think, really seriously thought about the possibility that the Federal Reserve could cause such a change in monetary policy so quickly.
While the Federal Reserve's new policy managed to hold the line on inflation, it pushed real interest rates to levels not seen since the Civil War. Interest rates soared from single to double digits, hitting a record 21.5 percent in 1981. The Fed's actions made the cost of borrowing money prohibitive for all Americans. But the effect on farm families and rural bankers was especially severe.
Tom Huston: We could see coming in through the examination reports trouble starting to build. And you could see that loans were getting larger and as interest rates started moving up people got so they couldn't pay their interest let alone make a principal payment, and more and more loans just had to be extended and things started to not look so good.
Alan Tubbs: I think individuals always believe that what happens in the short run is going to happen in the long run. And so when we had this inflation going on for the late 60s all through the decade of the 70s, why, producers believed that that was what was going to happen. And at the same time we had a Federal Reserve policy that was holding interest rates in single digits while agricultural land was increasing at double digits. So the signals that were sent by policy and by the inflation that was in the economy turned out to be bad signals.
Then to make a bad situation even worse, in late 1979, the Soviet Union invaded Afghanistan.
Jimmy Carter: I have decided to halt or to reduce exports to the Soviet Union in three areas that are particularly important to them.
In protest, President Jimmy Carter stopped the shipment of farm products to the Soviet Union, costing the American farmer a crucial overseas market.
Wendell Tuttle: When President Carter put the grain embargo on, I had several hundred bushels of grain in bins. And, like I say, my net worth dropped $20,000 overnight. About that time I had to refinance the farming operation and he said, well you can't do that. You lost $20,000. I said, I didn't lose it, Carter lost it for me. Well then I had to refinance the farm and I was paying seven percent interest, had to refinance through John Hancock at sixteen percent. Two years of that and I couldn't pay anymore.