This paper's objective is to analyze the etiology of the crisis confronting the farm sector and its creditors. It draws on data for the period 1950 to 1984 to argue that: (1) rising productivity of farm assets led to large increases in asset values during the 1950s, 1960s, and 1970s; (2) rising asset values significantly altered the incentive structure of agriculture; and (3) the resulting capital‐gains based agriculture of the postwar period motivated farmers to alter their capital structure in ways that made the current financial debacle inevitable once the income growth from assets tapered. From this basis, the paper concludes that farmers' borrowing behavior was substantially more responsible for the existing crisis than often‐cited adversities in the markets for agricultural commodities. Accordingly, a farm incomes policy cannot remedy the situation, and the current consolidation in agricultural debt—though painful—represents an unavoidable adjustment for American agri