(Mises)—There’s a growing palpable sense of optimism among many economists and journalists that the United States economy is heading toward a growth phase while avoiding recession. They are in turn lauding the Federal Reserve for its strategic handling of inflation—with economic growth and low unemployment rates—as well as praising the efficacy of the Biden administration in reining in prices through social pressure on profit-making and through increases in production via large subsidy grants, along with the stimulus checks that have been distributed generously through various legislative acts.
This optimism and belief in the ability of the government to deal with economic problems come right after experiencing a severe inflationary crisis over the last three years, starting in late 2020. The turbulent inflationary experience faced by the average American was largely due to the expansionary monetary and fiscal policies pursued by both the Fed and the US government as countercyclical policy measures to deal with the covid shock and the emanating effects of the work stoppages, which was accomplished via strictly enforced lockdowns that regulated economic lives to hitherto unforeseen levels.
The combination of a decline in the rate of price inflation with unemployment remaining under 4 percent has bolstered a sense of elation and euphoria widespread amongst these economists, journalists, and the broader audience. They believe that the Fed has effectively employed the tools to control inflation and growth, so we should count it as another win for the central banking era where industrial policy overcomes the errors of capitalism.
However, before we applaud institutions and policies whose track records for over a century haven’t always aligned with their stated goals, it’s essential to dig deeper. The reasons behind seemingly stable unemployment figures merit a closer examination, with the “immaculate disinflation” narrative—which is gaining ground amongst the wider audience—needing to be demystified.
The Myth of “Immaculate Disinflation”
For more than six months, headlines have declared that inflation has dropped sharply to 3 percent, achieving the lowest point it’s been in more than two years. The purported claim intends to signal to the public that the fight against the inflation menace has been won and that economic stability is being achieved. Notwithstanding such claims, the actual users—the consumers of the US dollar—have been on the receiving end of policies under which the purchasing power of their nominal dollars has continued to fall due to inflation, and the personal savings rate has been steadily falling as well, from a prepandemic 9.1 percent to the current 3.9 percent.
The gradual eroding away of people’s purchasing power has led to a situation where the goods that people use to maintain their living standards are more expensive. This is the experience of average consumers despite their having received stimulus checks, having moratoriums placed on their debt payments, and experiencing nominal wage increases from the monetary expansion in the economy.
The persistence of the painful experience of consumers becomes a siren call. In light of changing economic conditions when prices are still increasing from one month to the next, previous debt moratoriums are being lifted, and unemployment in the labor market that earlier seemed to be stable is now ticking up. The unemployment rate rose to 3.8 percent in August, the highest it’s been in over a year, which otherwise had been falling from 14 percent at the beginning of the pandemic before stabilizing around 3.4–3.6 percent.
These events, however, are only manifestations of a deeper problem involving investment and the intertemporal coordination of economic activities, which are in a much graver situation. Prices in a market economy act as a coordinating communication language that allows market participants to adjust their own plans with those of others. The money market rate of interest or the loanable funds rate, as understood by Ludwig von Mises and Friedrich Hayek, facilitates the coordination of intertemporal economic activities or activities where coordination amongst different individuals’ production and consumption plans needs to be established.
If the market rate of interest is allowed to emerge without intervention, it will reflect the current needs of money holders and the demand for loanable funds by borrowers for investment opportunities. High demand for money is reflected through saving periods by consumers whereby by forgoing consumption, these consumers make crucial intermediate goods available to be used in long-term investments rather than final-stage consumer goods.
However, if consumers do not hold money as savings and interest rates are artificially lowered below market levels, it sends false signals to producers regarding the production of capital versus consumer goods. This situation, in turn, gives rise to inflationary pressures, capable of spreading throughout the economy, while simultaneously creating false expectations about future demand for capital goods based on an artificially created scenario.
The tightening cycle of the Fed started in March 2022 with price inflation running at 8.5 percent, marking the official end of the low-interest policy that started in early February 2020. As the Fed’s rates have gone from nearly 0 percent to 5.5 percent in only over a year, price inflation has declined from 9 percent to 4 percent. However, it has remained above 3 percent for the past four months and is beginning to show signs of further upward increases in the inflation cycle as producers’ costs increase. While inflation has refused to budge in the past few months, the unemployment rate has steadily climbed uphill, edging toward 4 percent.
The year 2023 marked significant financial turbulence in the US, as high costs of borrowing have met overexpanded businesses. More than 230 companies have declared bankruptcy due to macroeconomic stressors like decelerated growth, rapid interest rate hikes, and persistent inflation. High-profile bankruptcies included Vice Media, impacted by operational and financial challenges; Bed Bath & Beyond, struggling with debt and market shifts; and retailers like Party City and David’s Bridal. The Federal Reserve’s aggressive interest rate increases have led to a “credit crunch” that is affecting overexpanded and vulnerable companies.
This paradoxical economic landscape includes escalating bankruptcies and bank failures coexisting with a seemingly stable unemployment rate. The resilience in employment figures—in the face of financial disarray—can largely be attributed to the government’s audacious adventures into industrial policy experiments, where trillions of dollars have been funneled into specific sectors through incentives such as tax breaks for investment.
The rise in unemployment in the private and the general sectors of the economy—including manufacturing, construction, information, financial, and technological sectors—has been met by ever-increasing levels of government employment. Government employment increased by seventy-three thousand in September, representing about a quarter of the total jobs added that month, coming in above the average monthly gain of forty-seven thousand jobs over the prior twelve months. Employment and spending in the public sector of the economy have overshadowed the private sector in recent times, creating a bloated public sector with heavy fiscal burdens.
In this grand charade of economic stability, we find ourselves spectators to a precarious illusion, a spectacle that vaunts the triumph of “immaculate disinflation” while blatantly disregarding the eroding purchasing power of the average American. This is not stability; it’s a meticulously crafted mirage, obscuring a landscape littered with the casualties of fiscal and monetary recklessness—savings plummeting, consumer baskets shrinking, and a private sector gasping for breath under the weight of bloated government.
The narrative of victory over inflation and unemployment is a dangerous diversion, pulling the wool over our eyes as market signals are distorted and economic principles sacrificed at the altar of political expediency. The surge in government employment—far from a sign of health—signifies a troubling imbalance, a steroid boost offering a temporary high while the body politic weakens.
About the Author
An economics and a libertarian scholar with research interests in capital theory, monetary theory, and business cycles, I write about events in the economy from a legal and economic standpoint with a proliberty outlook and believe that safeguarding the liberty and rights of each individual is the most important act toward peace, prosperity and growth. My other works can be found at the Austrian Economics Center, the Libertarian Institute, and beinglibetarian.com. I can be reached at [email protected] and on Twitter (@vibhu3333).
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.
