(Mises)—The Secretary of the Treasury and the Chair of the Council of Economic Advisers are the two principal economic advisors for any president. President Biden chose Janet Yellen as Secretary of the Treasury and Jared Bernstein as the Chair of his Council of Economic Advisers.
Stephanie Kelton asked Bernstein a basic question about Biden’s monetary and fiscal policies. Bernstein responded with a shocking statement.
“The US government can’t go bankrupt because we can print our own money”
The idea that the government can print its way out of any fiscal deficit is a path to the dark side of hyperinflation. Bernstein apparently embraces Modern Monetary Theory, a crackpot theory that no serious economist embraces. Kelton then asked Bernstein to explain why any government would borrow in a currency that it can simply print; his response was either cringeworthy or hilarious, depending upon your political leanings (click link here). Bernstein had no answer, he simply babbled for a minute.
The correct answer is that governments borrow money as a supposed fiscal stimulus. Additional government spending supposedly raises aggregate demand and decreases unemployment. However, additional government borrowing raises interest rates. Higher interest rates slow private investment, decrease exports, and increase imports. Higher interest rates thus counteract fiscal stimulus. Federal Reserve officials can try hold interest rates down by printing money, but this is inflationary.
Bernstein was not educated as an economist. However, Bernstein has worked as a key economic adviser for Biden for years now. The issue which Kelton asked Bernstein about is at the center of “Bidenomics”. It seems that on the job learning doesn’t always work.
Secretary Yellen gave a speech in Kentucky recently. Yellen announced that the Biden administration will implement what she refers to as Modern Supply Side Economics. This so called modern theory is really just a rehash of what economists refer to as “industrial policy”, mixed with investment in infrastructure. The traditional industrial policy favored by the Biden administration has a dismal track record globally.
Harvard Economist Dani Rodrik has developed a more nuanced and less ambitious case for industrial policy. Rodrik admits to past failures of most industrial policies, and recommends a more limited role for government in future industrial policies. Yellen is peddling the old discredited version of industrial policy as new supply side economics. This is nonsense, and she must know it.
Yellen also claims that “trickle down tax cuts” don’t fuel economic growth and only benefit the wealthy. Yellen is attacking Supply Side Economics, which economists have embraced for centuries. Statistics prove the economists’ version of Supply Side Economics. President Obama enacted his American Recovery and Reinvestment Act (ARRA) in 2009. ARRA included spending increases (favored by Democrats) and tax cuts (favored by Republicans). Economists have performed dozens of tests on ARRA. Economist Valerie Ramey published a review article on these studies. What are the results of these tests?
According to Demand Side Economics government spending increases grow the economy and reduce total unemployment through a “multiplier effect”. What this means is that each dollar of public spending increase leads to more than a dollar of increased GDP. Studies show that the spending multiplier for ARRA was between 0.6 and 1.0. Hence the alleged spending multiplier effect is nonexistent. Each additional dollar of federal spending resulted in less than a dollar of additional GDP- a fraction not a multiple. Studies also indicate that each dollar of reduced taxes produced a two to three dollar increase in GDP. Tax cuts produce a true multiplier effect, which works at least partly through the Supply Side incentives that don’t exist according to Yellen.
All economists know that supply side effects of tax cuts really exist, we just disagree over the strength of these effects. Yellen is playing like a trick here. Some Republican politicians have exaggerated supply side effects of tax cuts, by claiming that their tax cuts will produce overnight miracles. Harvard economist Martin Feldstein pointed out the difference between statistically proven Supply Side Economics and the disproven politicized version of Supply Side Economics decades ago. Yellen surely knows all of this. Yellen is guilty of using the Strawman Fallacy to dismiss a sound alternative to Biden’s absurd industrial policies.
Jared Bernstein is the chief economic adviser to the highest elected official in the U.S., yet he doesn’t understand economics. Bernstein could be excused for his ineptitude due to his lack of education in economics. Biden’s reliance on this incompetent and uneducated man is inexcusable. Janet Yellen is highly educated in economics. Hence, there is no excuse for her peddling such nonsense to the American public. People in the political party which demands greater governmental involvement in the economy should really be concerned with this lack of competence and integrity among Biden’s key economic advisers.
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.
While in agreement with this article, does it really matter anymore????
We live in the pre–CBDC time of infinite fractionalizations of the Fractional Reserve System (Credit Derivatives, Carbon Permits/Credits, Cap–and–Trade)!
And the sinister synergy between ARPA and Yellen’s TACRE —- buckle up, one only sees far worse ahead!
(And is it really coincidental that both the election fraud process involves fractionalization of the ballot counts while the financial system involves infinite fractionalizations?)