Most people look at the stock market as a sign of the health of the economy. If the stock market is moving higher in value, things must be good. The truth of the matter is the stock market isn’t as important as the debt market, specifically the interbank debt market.
What goes on in the interbank market has a direct effect on what happens in the stock market. A healthy interbank market gives the stock market the footings it needs to sustain a rally. When it breaks, as we saw during 2008 and in March 2020 during COVID, the stock market drops precipitously.
The interbank debt market is the market for money and loans between banks, and between those same banks and the Federal Reserve. It’s called the overnight repo market. The Federal Reserve uses open-market actions like customer repos and reverse repos to add or take liquidity out of the market. Banks make overnight loans to each other. Big institutions that have excess cash on their balance sheets also execute trades in the overnight repo market to grab a little more yield overnight. The market valuation is in the trillions of dollars.
When we have huge drops in the stock market value, it’s usually because there is some sort of ripple tearing through the interbank debt market. In 2008, banks didn’t trust each other’s balance sheets, and the market froze, drying up all liquidity with the corresponding drop in stocks.
If the interbank market is any guide, we look to be for some rough and volatile sledding in the stock market. The increase in the debt ceiling means that the Federal Reserve is going to issue $1.4 trillion in new debt between now and the end of the year. Who is going to buy that debt?
This has always been a conundrum for the market. But today, some of the largest potential foreign buyers of our debt aren’t being as accommodating. U.S. pension funds and other U.S. funds hold the lion’s share of U.S. debt, but it is unclear if they want to buy a lot more at current prices. There is uncertainty, and that creates volatility.
The cash that is currently flowing into the reverse repo market will flow into some of those Treasurys, but the problem is that market is an overnight program. Treasurys are longer denominated instruments. Liquidity is going to flow out of the system at a rate we have not seen for a long, long time, if ever.
When this happened before, we didn’t have the inflationary pressure created by massive government overreach and spending during COVID and post-COVID with the first Biden budget that we have today. Coming into an election cycle, it will be impossible for the government legislative bodies to solve for the lack of liquidity. The Fed will be in a very tough spot to try and solve it since it is the inflation fighter now. Creating more liquidity will spur higher rates of inflation.
Not only that, but the Fed has to be worried about unemployment. Data show that in places like Costco, customers are buying more chicken and pork than they are beef. Is that a change in consumer preferences or is it a sign of recession? States like California have seen tax revenues plummet. Is that a sign of recession, or that startups have laid off people and people have fled the state? All this creates more risk in the stock market, but currently we are witnessing a relief rally after the manufactured debt-ceiling drama. Right now, the VIX, a measure of risk in the stock marke,t is collapsing to year lows.
It is anyone’s guess to where you might see the crack forming. Some people think we will see it in the listed options market. If there is a larger than normal activity of put buying, we ought to see it in prices. Others speculate that a collapse in the cryptocurrency market will be the first sign, because cryptocurrency is a highly risky and fickle asset class. Another place to watch is the secured overnight financing rate (SOFR) contract at the CME Group. If the near-term SOFR contract starts to aggressively get bid up in value and seems disjointed with the rest of the debt market, it’s a sign that banks don’t want to lend to each other and that there is a lot of fear in the market.
The problem for anyone is that you cannot time when something might happen. I am not the only person who has seen this, and I credit RJR Capital for broadcasting it on Twitter. Economists such as David Rosenberg have said there is a tidal wave forming and it looks like it will hit the beach.
Buckle up, then, and don’t listen to the mainstream media when it comes to happy or sad talk about the stock market. They don’t see it coming. But it looks like it is coming.
Article cross-posted from our premium news partners at The Epoch Times.
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.
