Given my lifelong involvement in the financial markets since being an undergrad at CAL and watching Fed Chairman Paul Volcker stamp out inflation by jacking interest rates to a peak of 20% in June of 1981, I have always felt that the Chairman of the Federal Reserve is the most powerful man in the United States, if not the world.

Trump's pick of Kevin Warsh is very curious to me.
It literally sent Gold down 9% and Silver down 30% in one day.

Rather strange for a guy that is supposed to be Trump's stooge to lower interest rates.



"That profile will make it hard for Warsh to build credibility. If he lowers interest rates, markets will perceive him as a Trump lackey who has abandoned his principles. If he holds rates high for too long, he'll be at loggerheads with the president in no time and that will generate volatility of its own. Until his term ends in May, Chair Jerome Powell will now have a shadow, creating mixed messages for markets to parse and potentially leading to misunderstandings."


Free Link to Bloomberg:

https://www.bloomberg.com/opinion/articles/2026-01-30/fed-chair-trump-demanded-a-dove-then-picked-warsh?accessToken=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJzb3VyY2UiOiJTdWJzY3JpYmVyR2lmdGVkQXJ0aWNsZSIsImlhdCI6MTc2OTgyNzg4OCwiZXhwIjoxNzcwNDMyNjg4LCJhcnRpY2xlSWQiOiJUOU9KWDZLSVVQU0YwMCIsImJjb25uZWN0SWQiOiI0QTE0NjgyRTVEQjI0RDgyOEVGOTIxMzA1M0U4NzhDMiJ9.ZheFh9hcuQBiCNBh1yp_ATBfx_UQqT8mnHTA2V-7zK0

Warsh is anti-QE.

But endorsed by the likes of Jaime Dimon, Stanley Druckenmiller, Rob Arnott, Dan IIvascyn, and my former boss Paul Tudor Jones.

Hassett was merely seen as a "cherrleader" and Trump "yes" man with no relationships or references by Captains of Finance. So Trump picked the other Kevin and even boasted of his good looks.

With debt over 100% of GDP and a budget deficit of 6%, Jones says Warsh is the perfect candidate to navigate a most challenging environment.

But its going to be most interesting to see how Warsh shrinks the balance sheet of the Fed (which he has long been critical of) while supporting the Treasury's T-Bill issuance to finance budget deficits running at 6% if GDP.

Interestingly enough, shifting debt issuance from longer dated treasuries to T-Bills was a Biden policy, and one highly criticized by Scott Bessent. And yet that's EXACTLY what Bessent has been doing at the Treasury.. In fact, $77 billion in Bills was issued from Dec. 10th to Jan. 28th.

Either way, I see higher bond yields.
And that won't be good for stocks.

Holy crap!
I hadn't looked at a chart in a week.
Silver was at 120, not the 100 I had seen, but now at 77.

Gold went past 5000 to 5500, but now down to 4500.

Damn!!!! Those are crazy moves!!!!

I didn't know the half of it!!!

Thx for your commentary.

DiabloWags said:

---

Either way, I see higher bond yields.
And that won't be good for stocks.

---

Is someone honestly going to come in and clean things up?

Hell no. Congress is going to continue to spend like crazy.

Does it matter what interest rates are if Congress and the executive branch which seems to be equally motivated by the immediate economy are going to spend way beyond our means?

I haven't thought about this.

Seems to me that if the US is going to stave off default, all 3 parties need to work in unison.

concordtom said:

---

I haven't thought about this.

Seems to me that if the US is going to stave off default, all 3 parties need to work in unison.

---

The Federal Reserve does not get involved in the fiscal side of things.
As you know, that's the job of Congress.

On another note, Warsh is interesting because he is a "hard-money" guy that believes that the Fed should be watching the Money Supply and has been terribly critical of Jerome Powell for doing nothing other than being data dependent, which he believes has caused Powell and Company to be wrong often.

Warsh believes that Powell has been so bad, that rates are actually higher than they need be if Powell wasn't Chairman.

I look forward to your continued commentary on this topic. Thx.

The reason I said things can't get cleaned up simply by the Fed is that the budget deficits and ever increasing accumulated debt will overwhelm everything else.

I'm heartened to hear that he isn't Hasset. That guy is a kiss ass.

Reading this, Warsh is going to be attacked by Trump one way or another.

Why the hell would he want to put himself in such a position??

Trump probably already knows how he can blackmail or otherwise own Warsh.

https://www.foxnews.com/media/trump-advisor-rips-powell-out-control-interest-rates-feud-over-warsh-nomination-heats-up

Fed pick Kevin Warsh block still on: Thom Tillis

Powell said at today's Press Conference that he will not leave the Fed Board until Trump removes his investigation/lawsuit.

Powell can be on the Fed Board (but not as Chairman) for another 2-years.

If the nomination of Warsh gets held up, Powell says he would remain Chairman pro-tem.

That's called LEVERAGE!

Dow -700 points.

A huge surge in rates late in the day after the Fed Meeting sent the markets down hard.

Whatever happened to all of those Truflation posts from Trump supporters from Twitter?