The Warsh Man for the Job
Why Kevin Warsh’s policies are guaranteed to fail
By Max from UNFTR.com
There are two sides of the economic house: Monetary and fiscal. Right now, all eyes are on the monetary side as we cross-examine a new potential Federal Reserve chairman. We’re all pretty familiar with the backdrop. Donald Trump wants rates in the basement. We have massive structural deficits that cost the government a trillion dollars a year to service. The government has sent trillions into the financial system on both sides of the house and it needs to be managed. And we’re not allowed to have nice things. We’re going to talk about a Warsh era at the Fed and show just how complex, interconnected and massive the problem is and how his worldview just doesn’t square with reality.
Given all the attention to the monetary side of the house, you might be inclined to think that’s where the action is. And that’s the problem. Ultimately, it’s our fiscal house that’s totally out of order.
Just to eliminate any doubt, Kevin Warsh is going to be the next chair of the Federal Reserve. Assuming the administration drops the absurd criminal referral against Jerome Powell, Warsh takes the chair. Much of the focus in his confirmation hearing centered on two things: the direction of interest rates and Fed independence. Given Trump’s bellicose stance on rates the two issues are at the moment inextricably linked. There’s also a question about Warsh’s wealth and ties to Jeffrey Epstein but that’s for another day.
Warsh is in this position for a reason. Right now, there’s not much daylight between him and Trump though I’m confident that there’s an enormous intellectual gap. Trump knows one thing - lower interest rates means more lending and refinancing. As a real estate guy, that’s pretty much all he cares about. Having served as the youngest Fed governor under Bernanke in the Bush years, Warsh on the other hand has a real pedigree along with an elite education and estimable career in finance. And because he has such an established presence, we have access to his prior writings and therefore his worldview.
