(Advancing Time)—The recent rally in the stock market flowing from what almost appeared to be a victory lap on the part of Fed Chair Jerome Powell gives the impression inflation has been vanquished. Many market pundits have taken this to mean upward momentum is not ready to abate. Still, market crosscurrents pose massive danger, in short, things could go several different ways.
Adding to the recent confusion of why the markets are moving up is whether liquidity is, or is not being added to the financial system. It appears bank lending is contracting but other things are happening behind the scenes in swap rates and yield curves. While some of us point to the Fed saying it is tightening and reducing its balance sheet some economists point to a back channel inflow of liquidity juicing the system.
A case can be made that recent market action remains more about liquidity than interest rates. A lack of liquidity can be poisonous. When you need money, whether the amount is small or large, not being able to get it can lead to a life-changing or grave outcome. Interestingly, as noted above, the liquidity issue remains unresolved. Central banks are well aware that contagion from one area can spill over into other sectors of the economy and markets. This is why China continues to inject liquidity into its market. How much of that money is getting out of China is an issue.
So, here we sit, new market highs at a time when many economy watchers are voicing concerns the economy is rapidly slowing and the Fed is already behind the curve in dropping rates. The counterargument being floated is that all is well and we are in the midst of a soft landing or no landing. The latter is the optimistic view that we have entered a Goldilocks moment and the markets are set to go ever higher.
Those taking the stand a quick reversal of Fed policy and looking at rapidly falling rates may be failing to consider trees don’t grow to the sky. It could be argued a major pullback is necessary to avoid a much more severe problem or bigger disaster in the future. Inflation is a key component in assessing where things go from here. Again, I point to The Hard Asset Inflation / Paper Asset Deflation Theory
Much of the current market danger stems from the fact the fluid financial and economic situation is highly leveraged. If something breaks, the amount of money needed to backstop and halt a collapse of the system will be far larger than anything we have seen in the past. Remember a massive drop in asset prices and the value of bonds directly impacts pension funds and many other aspects of our financial structure.
A great deal of what we call growth has been, or is now financially engineered by companies buying back their own shares and other companies rather than growing organically. This risk is constantly being downplayed as more and more of the concentration of wealth pushes takes place, into just a few companies. A case and point often raised is the huge market capitalization of what is known as the “magnificent seven.”
As usual or maybe even more than usual, we should continue to factor in the idea things could be shaken by another pandemic, massive war including the use of nuclear weapons. The whole idea that stocks climb a wall of worry and fall like a stone underlines the fact that markets are non-linear and do not move in a straight line. People tend to slip into a generally optimistic feeling of complacency and discount this reality.
Lower inflation figures strongly into the euphoria we see in the market. Much of this has been driven by lower gasoline prices which are likely to prove temporary and the idea the costs of “shelter” or keeping a roof over your head will soon decline. These notions brush aside several important facts such as the rising cost of labor and other factors feeding into housing. These include insurance, soaring maintenance costs, and rising taxes. All of these are expected to move higher in the future.
A bond fella recently recently made the case that yields would drop as inflation falls. Several pundits have speculated the Fed must “know something, or be spooked” to have changed course. Pulling on this thread could lead us back to the notion China’s economy is in free-fall and it is the main reason rates will be falling everywhere. This has resulted in the notion we will see super strong demand for bonds during a recession even if the supply is huge.
Still, buying long-term bonds to hold is far different than buying them to hold. Long term we have to look at the future of fiat money and inflation from currency debasement. I’m not convinced it is wise for investors to lock themselves into any fiat currency long-term as things could change rapidly.
Consider the possibility that the Fed is yielding to pressure rather than making a policy change based on choice. By prematurely declaring inflation as no longer an issue it takes pressure off government bonds and banks. When we look back at how this plays out it is likely the importance of liquidity and the money supply will prove far more important than minor changes in interest rates.
In a recent video delving into inflation in commodities, Daniel Lacalle claimed there are only three ways to halt inflation and inflation is fueled by monetary conditions. Lacalle says the only way to stop inflation is raise interest rates, reduce the amount of money in the system, or to create an aggregate demand reduction of credit.
The public sector, or to qualify, governments are busy thwarting all these factors. As long as governments and central banks continue to overspend and print money the inflation beast will remain a ferocious creature.
Bypass Big Tech Censors
Two Storms, One Harvest
Every food crisis in living memory has been a one-shock event. The 2008 price spike was a commodity bubble. The 2020 shortages were a logistics failure. The 2022 grain scare was a war on one exporter’s ports. Each time, the system bent, adjusted, and recovered, and each time the experts assured us afterward that global markets are simply too big and too diversified to fail.
What nobody in Washington seems eager to discuss is that 2026 is shaping up to be something the modern food system has never actually faced. Two independent shocks, one climatic and one geopolitical, are converging on the same harvest cycle at the same time. Not sequentially. Simultaneously.
Start with the weather. The Pacific Ocean is currently building toward what forecasters now openly call a record event. NOAA’s Climate Prediction Center puts the odds of at least a strong El Niño near 88 percent, with roughly two in three odds it reaches “very strong” status, the tier reserved for perhaps three or four events in the entire satellite era. Every major global model now projects a median peak in Super El Niño territory, and most of them project it exceeding the 2015-16 event, which until now held the modern record. Sea surface anomalies were already brushing the super threshold in mid-July, months before these events normally peak. The atmosphere has already shifted into El Niño mode, and the event is forecast to crest in late fall and early winter.
This is not about “climate change.” It’s about the standard cycles of weather, and the cycle we’re currently in is one that has likely devastated societies in the past. We’re better prepared as a society today, but not all Americans are equally prepared.
Serious households have started doing the quiet math on their own. Grocery bills tell part of the story, and the forecast maps tell the rest, which is why long-term food storage has moved from fringe hobby to mainstream line item in the family budget, with established suppliers like Heaven’s Harvest seeing demand from people who five years ago would have rolled their eyes at the idea. That instinct is not paranoia. It is pattern recognition, and the pattern is worth walking through carefully.
Editor’s Note: Heaven’s Harvest IS a sponsor, but the warnings of this article are real and would be written even if we didn’t have a survival food sponsor. With that said, those who take advantage of what they offer can use promo code “Patriot” for 15% off.
The Fertilizer Clock Is Already Running
While the Pacific warms, the second shock has been unfolding in the Strait of Hormuz. The conflict with Iran turned the world’s most important energy chokepoint into a contested waterway, and the consequences reach far beyond the gas pump. Roughly a third of global fertilizer trade moves through Hormuz, and the disruption sent urea prices up 86 percent year over year by March, with a 53 percent jump in a single month.
The World Bank projects energy prices rising about 24 percent in 2026 and fertilizer about 31 percent. By its own accounting, fertilizer prices ran 35 percent higher in the first five months of this year than the same period last year.
Here is the mechanism the nightly news will not explain. Fertilizer is not a grocery item. It is a time-delayed input. The nitrogen a farmer in Iowa or Punjab could not afford to apply this spring does not show up as a problem this spring. It shows up as a thinner harvest six to twelve months later.
The World Bank’s own food security brief concedes that the effects of reduced applications earlier this season “are likely to become visible only later in harvest outcomes.” Translate that from institutional language into plain English and it means this. The damage is already done, it is already in the ground, and we are simply waiting for it to arrive on the shelf.
Now check the calendar. Six to twelve months from the spring planting season lands us squarely in late 2026 and early 2027. Which is precisely when the strongest El Niño in the instrumental record is forecast to peak, bringing its signature droughts to Southeast Asia, Australia, southern Africa, northern Brazil, and South Asia, the very regions that grow the world’s rice, sugar, and oilseeds.
The World Bank warns openly that a strong El Niño “could disrupt multiple crop belts simultaneously” on top of the conflict-driven input costs. Their baseline projection assumes the Middle East disruptions ease by autumn. What in the last two years of Middle East history suggests that assumption is safe?
The System Has No Slack Left
The comfortable answer is that global markets always adjust. But adjustment requires slack, and the slack is gone. Global cereal production is expected to decline from last year’s records even before El Niño does its work. The UN World Food Programme, hardly a den of right-wing preppers, is calling this the most significant disruption to its supply chains since Covid and the invasion of Ukraine, and its supply chain director put the stakes bluntly.
Today’s supply chain challenges are tomorrow’s hunger crisis.
There is also a political dimension that markets cannot price. When food gets scarce, governments do not behave like economists. They behave like politicians. Export bans, hoarding mandates, and panic buying at the national level turned the modest rice shortfall of 2008 into a global crisis, and analysts are already warning that import-dependent nations are the first dominoes.
The 2015-16 Super El Niño, a far weaker event than what is now forecast, threw tens of millions into food stress across Africa and Asia. This one is projected to be stronger, and it arrives with fertilizer already rationed by price and shipping lanes already contested by missiles.
What Joseph Knew
Scripture does not treat preparation for lean years as faithlessness. It treats it as wisdom delivered in advance to those willing to act on it.
Behold, there come seven years of great plenty throughout all the land of Egypt: And there shall arise after them seven years of famine; and all the plenty shall be forgotten in the land of Egypt.
Joseph did not respond to that warning with a hashtag or a committee. He stored grain during the years of abundance, and when the famine came, Egypt stood while its neighbors begged. The lesson is not that famine is certain. It is that the time to prepare is precisely when preparation still looks optional.
Nobody who filled a pantry in a year of plenty has ever regretted it, and nobody standing in an empty aisle has ever been glad he waited for certainty.
None of this calls for panic, and panic is the enemy of sound judgment anyway. It calls for the same unglamorous prudence our grandparents considered ordinary. Keep some cash margin, know your local growers, and put real food in deep storage while it is cheap and available, because the entire arc of this story is that cheap and available is a closing window.
Families looking for a straightforward place to start can visit Heaven’s Harvest and use promo code Patriot for 15 percent off long-term storable food. The forecasts may yet soften, the strait may yet reopen, and we should pray they do. But hope is a fine thing to hold and a foolish thing to eat.