Bluegrass country is on the skids. Stud fees are down as much as 90%, gambling revenue has plunged, and the horse racing industry switched its stance from fighting casino gambling to embracing it.

The New York Times tells the story in Gamble Sours for Many Kentucky Horse Breeders

The for-sale signs on horse farms are as common as the bluegrass and the limestone fences here, and breeders have grown accustomed to sending horses through the auction ring and feeling fortunate when they fetch half of their asking price — or anything at all.

“The rails are quiet,” said Mike Meuser, a Lexington lawyer who is usually in the forefront of such deals. “Collecting, or trying to collect money, is the bulk of my business these days.”

The bankers have disappeared here as well. Lending to buy horses, the grease in the deal-making machine for many years, has dropped 60 percent to about $400 million from an estimated $1 billion in 2007, according to the Kentucky Thoroughbred Association.

Money bet on horse races, known as the handle, is off nearly 30 percent, to $12 billion in 2009, a major decline for a once-reliable source of revenue for local governments.

The economic decline of racing, however, will be on full display during this year’s Triple Crown season. Eskendereya, who would have been the favorite for the Kentucky Derby but was pulled out with an injury, is owned by a bankrupt stable. The owners of Pimlico Race Course, the historic racetrack in Baltimore that hosts the Preakness Stakes, are going through bankruptcy. And the New York Racing Association said it might not have enough money to hold the Belmont Stakes this year; it is trying to get a loan from the state government.

Breeders pay up to $150,000 to mate a mare to these studs in the hope they can land a sales topper in the auction ring.

Lately, however, horsemen have been betting their farms and losing. There are 265 farms of more than 20 acres for sale here in the four counties of horse country — up from 199 listed last year — and that is not counting the more than 60 “pocket listings”.

Smarty Jones, who nearly swept the Triple Crown in 2004, once stood for $100,000, but today he can be had for $10,000.

When it comes to prices, this story is more of the same: Things people already own, depend on for a private-sector livelihood, or do not really need, are falling in price. Things people need to buy, such as health care, are not.

This is neither inflation nor a symptom of inflation, but rather a symptom of an overwhelming deflationary trend coupled with foolhardy government regulation in a completely unbalanced economy.

Mike “Mish” Shedlock
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