Warsh throws his hat into the ring with lavish praise of Trump.
Warsh Lavishes Praise on Trump in WSJ Op-Ed
Please consider The Federal Reserve’s Broken Leadership by Kevin Warsh.
The cost of curiosity is approaching zero, owing to a new age of American innovation. And the rewards for curiosity are surging, thanks in large part to pro-growth policies championed by President Trump. That’s why the U.S. is poised to grow faster than any other major economy. Americans would benefit from higher take-home pay and greater purchasing power if only the Federal Reserve’s leadership stopped defending its mistakes and started correcting them.
The common explanation for the economic leap is artificial intelligence. The U.S. technology stack is impressive: new large language models built atop cutting-edge chip design. But a more fitting name for this feat of AI is American ingenuity, which includes a mix of human agency, nimble capital and a culture of dynamism. AI is profoundly changing both the method of invention and the speed of innovation.
The administration’s new regulatory and tax policies are well-timed. The deregulatory agenda, the most significant since President Ronald Reagan’s, has begun to liberate households and businesses from the dictates of Washington’s bureaucracy. Meanwhile, the new tax bill, which the president signed in July, has already spurred massive new capital investments, including in high-value manufacturing and data centers. The president’s policies have resulted in more than $5.4 trillion of private capital investment in the U.S. this year, accelerating quarter-over-quarter going into 2026. Capital expenditures on equipment, a leading indicator of aggregate future investment, are growing at an annual rate of around 8%, more than twice the rate during the Biden years.
Perhaps the most underappreciated characteristic of the Trump administration is its admiration for individual achievement. Treating people based on their merits rather than their status or sensibilities is the renewed American credo. The affinity group that matters most is that of our fellow Americans.
Wall Street and Silicon Valley are booming, and U.S. workers are finally getting a step-up in their real take-home pay. Even so, the benefits of the American juggernaut are yet to be realized fully. Among the chief obstacles is the Fed. The world is moving faster, yet the Fed’s leaders are moving slower. They appear stuck in what Milton Friedman called “the tyranny of the status quo.”
What’s to be done? Four things. First, the Fed should discard its forecast of stagflation in the next couple of years, as if subpar growth and inflation 40% above target is the best that can be done. AI will be a significant disinflationary force, increasing productivity and bolstering American competitiveness. Productivity improvements should drive significant increases in real take-home wages. A 1-percentage-point increase in annual productivity growth would double standards of living within a single generation.
Second, inflation is a choice, and the Fed’s track record under Chairman Jerome Powell is one of unwise choices. The Fed should re-examine its great mistakes that led to the great inflation. It should abandon the dogma that inflation is caused when the economy grows too much and workers get paid too much. Inflation is caused when government spends too much and prints too much. Money on Wall Street is too easy, and credit on Main Street is too tight. The Fed’s bloated balance sheet, designed to support the biggest firms in a bygone crisis era, can be reduced significantly. That largesse can be redeployed in the form of lower interest rates to support households and small and medium-size businesses.
Third, the Fed should take responsibility for its regulatory failures, including a deposit run on banks in late 2022 and early 2023. The Fed’s rules and regulations have systematically disadvantaged small and medium-size banks, which has slowed the flow of credit to the real economy. Fed leadership should support rather than undermine the good early work of the new vice chairman for supervision, Michelle Bowman, who is crafting a new regulatory framework.
Fourth, the Fed under Janet Yellen and Mr. Powell has spent more than a decade negotiating bank regulatory and supervisory standards with its global counterparts in Basel, Switzerland. Fed leaders have tried to bind U.S. banks to a complicated, vaunted set of rules in the name of global regulatory convergence. In my view, the Basel endgame isn’t America’s endgame. A new, reformed American regulatory regime should make the U.S. the best place for the world’s banks to do business. That would spur new lending here at home.
The Fed is an institution whose reach has extended far beyond its grasp. Fundamental reform of monetary and regulatory policy would unlock the benefits of AI to all Americans. The economy would be stronger. Living standards would be higher. Inflation would fall further. And the Fed will have contributed to a new golden age.
What a Rant
I agree with much of it. Basel rules are complex and some are stupid. The Fed has never admitted its mistakes.
Heck, the Fed does not understand inflation at all.
However, there’s more than a bit of irony in Warsh’s statement “Inflation is caused when government spends too much and prints too much.”
Government is spending to much. But what has Trump done but increase that?
Deficit Spending
Trump’s TCJA II, AKA (One Big Beautiful Bill) hugely added to the deficit.
On top of that, Trump is proposing big increases in military spending with a “Golden Dome” missile shield.
Recently, Trump proposed a “Golden Fleet”.
And Now Trump wants to rebate $2,000 to everyone from tariffs collected in a massive $3 trillion (alleged) wealth redistribution scheme.
Warsh Pledges to Be a Trump Parrot
Warsh ignores the possibility that all of this may cause stagflation. Well, maybe he’s right. But he doesn’t know, nor does Powell.
And he ignores the huge possibility that AI spending is in a massive bubble.
The most galling thing is Warsh’s lavish praise of Trump while ignoring the massive deficit spending of this administration, while moaning inflation is caused by too much government spending.
If the market agreed with Warsh, long-term yields would be crashing. Instead, the 30-year long-bond yield is near a 15-year high.
Does Warsh not understand market forces? Does he not understand the Fed does not control long-term rates. Or is Warsh proposing more QE to control long-term rates?
The only logical answers are: 1) Warsh is too stupid to be Fed chair or 2) Warsh is too much a Trump parrot to be Fed chair.
Related Posts
November 14, 2025: Long-Term Treasury Yields Rise Again, Gold Sinks. What’s Going On?
In the past month, yield on the long bond bounced 23 basis points. Why?
November 13, 2025: The Fed’s Balance Sheet Is $6.5 Trillion, the New York Fed Wants More
Believe it or not, more QE is coming right up. But why?
November 9, 2025: Trump Labels Those Against Tariffs as “Fools”, Proposes $2,000 to Everyone
Trump proposes another massive wealth redistribution scheme.
Gold Surges to New Record High
Most importantly, I would like to see Warsh address this: Gold Surges $100 to New Record High Above $4,300 as Bond Yields Dive
Gold reiterates its message: Spending is out of control with no faith in the Fed.
AI Bubble?
Warsh’s AI dream machine may be nothing more than a dot-com style investment bubble.
- Is Nvidia Worth More than the Entire GDP of Germany, India, or Japan?
- Circular Investment Deals in AI Look Similar to the Dot-Com Bubble
A Word About Faith
Gold does not believe the Fed is under control, Congress is under control, budget deficits are under control, or Trump is under control.
And neither do I.
Addendum
The main candidates for the next Fed Chair include National Economic Council Director Kevin Hassett, former Fed governor Kevin Warsh, current Fed governors Christopher Waller and Michelle Bowman, and BlackRock executive Rick Rieder. Other names, like Stephen Miran, have also been mentioned, particularly in the context of confirmation hearings for the Federal Reserve Board of Governors.
I missed a possibility on Warsh. He is lying on purpose to get the job and intends to be independent.
Under this scenario, Warsh wants the job to prevent a truer Trump parrot from getting in.
Warsh cannot say anything bad about Trump or disagree on anything if he wants the job.
This is possible. I leave it to the reader to assess the probability. But I will say, the other candidates are likely to be worse, especially Hassett and Miran.
Warsh may be the best we can hope for.
The only way to find out is if he is nominated, approved, and makes independent decisions.
Mish: I agree with much of it -> u agree with what I said for 5 years.
Wall street and silicon valley are booming. Sure with less employees. People need jobs to spent money and pay taxes.
” … 1) Warsh is too stupid to be Fed chair or 2) Warsh is too much a Trump parrot to be Fed chair. …”
In this post-truth era, power and “value” come from having a snappy elevator pitch that pays well on social media and pleases the orange guy. It’s all sales, all the way down, and not substance.
I believe that MAGA is not bringing the touted investment and transformation that will please the Trump base in a realistic time frame. Bread and butter issues appear at the dinner table far faster than all that, while the winners with acce$$ to power become hyper-winners. Trickle down economics is the most endless recurring sales pitch, stretched too thin often enough. Hence the break-away of populist figures like Marjorie Taylor Greene. There are not enough true Trump believers to hold on to the bitter end, as independents and other groups peel away. But the vaulting sales pitches like this one, still command the airwaves. New Fed, or new sloganeering to stay in power? And now the newest old sales pitches are poised to infect the Federal reserve, whatever its manifold problems already were.
Ironically, TDS may prevent a bad chairman from running the Fed or shut it down.
Yellen should come back. She had a really good “transient” inflation theory.
If prices stay the same, then there is no inflation. Inflation is when prices move up.
But the inflation is just “transient” because once prices reach that higher level, then technically the inflation is over. (Sure, everything’s now at a higher price level, but that detail can be disregarded.)
“AI will be a significant disinflationary force, increasing productivity and bolstering American competitiveness. Productivity improvements should drive significant increases in real take-home wages.”
Warsh, you’re smoking crack! This AI productivity boondoggle is like H1-B visa lie told over & again for the past 25 years.
Warsh, et al: Trust us, we’re the Fed. We know when inflation is & isn’t transitory. We know how to keep the debt from continuing to explode by going all in on T-Bills as we yield control that S down to near ZIRP like we did back in 2020 with absolutely zero consequences. We know how to manage a $6.5T balance sheet without causing a banking system crash. We can inflate the debt away with stable coins & gold revaluations. Trust us. It’s not all smoke & mirrors, not the biggest Ponzi Scheme ever created. Our quants are PhDs. Most of our BoG are not DEI hires, so they know what the hell they’re talking about. And most importantly, trust me, I’ll be fully independent of TACO. If he says lower rates, I’ll laugh in his face.
I hope people will look back on the implementation of SOFR and Powells efforts (against a hostile Yellen) to reshore Eurodollars as one of the most important things to have happened to keep this sinking ship afloat. Powell is one of the most important figures in recent times because of this. Yes Powell messed up on the transitory argument, but he learned from that and basically shut out the fed researchers that gave him that mumbo jumbo, if you follow the narrative from people like D. Martino Booth. Because of Powell, we don’t have to be so much under the thumb of City of London anymore with their LIBOR cartel.
“Inflation is caused when government spends too much and prints too much.” I guess this Warsh fellow really has no concept of the creation of money by banks? Is he that stupid? Do we need to send him some Zoltan Poszar articles?
Finally, the cause of beef inflation revealed
Illegal immigrants bringing their cattle with them…Arguing the beef industry is in “a perfect storm” that the White House “inherited” from the Joe Biden administration, the secretary shot back that rising costs are a direct result of migrants entering the U.S. from Latin America.
“Because of the mass immigration, a disease that we’d been rid of in North America made its way up through South America as these migrants brought some of their cattle with them,” he said. “We’re not gonna let that get into our supply chain.”
I think the AI bubble is on the verge of popping. Meta has a mega flop on an AI demo and their chief AI guy quit, hedge funds selling off NVDA. And I mentioned the Blue Owl private equity capital conundrum in previous post. And that’s just AI, the economy is also deteriorating rapidly due to Trump’s tariffs.
Been reading about all of this stuff all over the place on the internets. The fear is building and when it reaches critical mass….panic…then Trump/GOP will own it 100% and right before midterms.
Let the newest round of “sucking up” to taco begin and don’t let doing the right thing stand in the way of political gain.