The Federal Reserve’s higher interest rates after 12 years of zero interest rates are devaluing the asset side of banks’ balance sheets. This frightens depositors and they withdraw their deposits. Depositors also are withdrawing their money because they can get much higher interest rates on safe US Treasuries. According to some reports, $1 trillion has already been withdrawn from US banks. Bloomberg is reporting rumors that Schwab’s $7 Trillion empire based on low rates is cracking from bond losses. In the face of this vulnerability of the financial system, the Federal Reserve raised interest rates further.
There is also the problem of the currency and interest rate derivatives. No one knows the risk in these instruments. The US dollar itself is declining in use as world reserve currency. Alarmed by Washington’s weaponization of the dollar with sanctions and confiscations, much of the world is arranging to abandon the dollar’s use to settle international trade accounts, but the supply of dollars is not declining. This implies a fall in the dollar’s exchange value. The offshoring of manufacturing and food production has made the US heavily dependent on imports. A loss in the dollar’s exchange value resulting from countries settling their trade balances in other currencies means a sharp rise in US inflation.
The Federal Reserve hasn’t the intelligence to think through the consequences of its higher interest rate policy. The federal government cannot comprehend the consequences of offshoring for the US trade deficit or the consequences of continuing massive US budget deficits for the Treasury market.
Washington is too arrogant to comprehend the new way in which the US is perceived abroad. The world sees the dollar-based reserve currency system as Washington’s punishment device, and the world sees dollar-based debt expanding while demand for dollars declines. The result will be a drop in the foreign exchange value of dollar denominated financial instruments such as stocks and bonds.
The collapse of the Soviet Union gave Washington the opportunity to lead the world on a path of peace and economic development. But the neoconservatives could not resist their attempt for world hegemony and launched twenty-five years of war. Wall Street and corporate executives with eyes on bonuses could not resist deindustrializing the US by locating US manufacturing offshore, thus boosting Chinese economic growth instead of American economic growth. These major failures indicate the total failure of US policymakers.
The repeal of the Glass-Steagall Act in the closing days of the 20th century launched the US into the 21st century on a path of financial instability. Nothing has been done to correct this, and nothing has been done to correct the offshoring mistake or the failure to control the supply of government debt. As countries move away from using the dollar to settle international transactions, a dollar glut will result in US inflation and declining American living standards.
Discussing the seriousness of our country’s situation with Michael Hudson, it is difficult to find hope. To admit that mistakes are being made implies acknowledging that we are on the wrong path and that China, Russia, and those governments aligning with them are on a better course, using their banks for financing industrial wealth instead of acting as brokerage casinos and dealing in financial arbitrage and debt leveraging. No American policymaker will risk being asked “why do you support the policies of Xi and Putin?” That they, and not us, have the right policy is not a permitted thought.
Article cross-posted from Paul’s blog.
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.
Neoliberalism was just as guilty if not more so…
You lost me at neoconservatives. Bill clinton repealed Glass-Steagall. The juxtaposition of those two incomplete paragraphs may lead the uninformed that neocons are to blame for the repeal.
I really get tired of the names. The swamp does not have a party and pits one side against the other instead of unifying them. Washington was right that parties were a bad idea. But we play with what we got. The republicans of all strips better get together or one by one we get picked off and they started at the top.
Under the 14th amendment, we are guaranteed equal application of the law. When does the grand jury convene and when do the firing squads get assembled for our leaders? Never, unless “WE” do it… Otherwise, enjoy your communism, because thats what you get.
Neoliberalism and neo conservatives are the same bird. This is structured takedown of USA. The great reset. It won’t go as expected but they’re all in.
Yeah, I’m sure they are amazed at just how easy it was, and just how little “we” would do to defend ourselves.
This is what Fractional Reserve Lending gets you.