Executive Summary:
Today, Dr Ed examines the world according to Kevin Warsh, President Trump’s pick for the next Fed chair. Warsh believes that the US is undergoing a productivity-led growth boom, as our Roaring 2020s thesis maintains, which should be supported by supply-side, pro-growth policymaking. He thinks fiscal policy’s role is to spur economic activity by keeping taxes low and regulations light, while monetary policy’s role is to spur investment by keeping interest rates low. He rejects the Phillips Curve model that views inflation as a byproduct of low unemployment and too much economic growth; Warsh views inflation as a “choice,” a byproduct of unsound fiscal and monetary policy decisions. And he envisions a new approach to Fed policymaking that’s less reactive to the latest economic data.
The Fed I: Direct From Central Casting
I spent the weekend reading up on Kevin Warsh, who will replace Jerome Powell as Fed chair in May. My friends at the Financial Times asked me to write an 800-word op-ed on him. Sharing those thoughts with readers here leaves me with plenty of additional space to elaborate on what I have learned about the next Fed chair.
Warsh was nominated for the position by President Donald Trump on Friday. He must be confirmed by the Senate. That should be easy once the President calls off his judicial attack on Powell. Trump has made clear that he doesn’t like Powell, especially because the Fed lowered the federal funds rate (FFR) by 50 bps before the November 2024 presidential election, presumably boosting the Democrats’ chances of holding onto the White House. Powell continued to drop it further after Trump was elected, but the moves didn’t come fast enough or go low enough for Trump.
Trump likes Warsh partly because he looks the part of a Fed chair. In his typical style, Trump used the phrase “central casting” to describe Warsh, emphasizing that he possesses both the professional pedigree and the physical presence that Trump values in high-ranking officials. On Friday, Trump told reporters, “He’s very smart, very good, strong, young, pretty young. He was the central casting guy that people wanted.”
Now I know why I wasn’t a candidate: I’m too old, though I think I look the part. I’ve often offered to have Yardeni Research do what the Fed does for half the price. We would do it...
Big Tech earnings week is here! Stay ahead with MacroMicro’s Economic Calendar — track CPI, GDP, and key earnings like Apple & Google all in one place. Check it out »
