Will the Kevin Warsh Fed be friend or foe in the years to come?

**Darius Dale** (0:00)
Happy Thursday out there, team 42 It's your skipper here, Darius Dale, present our Macro Minute for Thursday, July 16th, 2026 As always, we'll start with the executive summary from today's late afternoon. Nope, so let's dive right in. Today's key macro question is, will the Kevin Warsh Fed be friend or foe in the years to come?
The short answer is, it depends on who or what you are. Winners likely include any person or entity on board with quashing the case-shaped monetary policy drivers of the socially destabilizing wall pump, which is the category-defining term that Dr. Peter Turchin and his colleagues at CrisisDB used to describe the case-shaped fiscal policy, case-shaped monetary policy, and case-shaped regulatory policy that elites have increasingly used over the past 50 years to siphon income and wealth from the bottom 80 to 90 percent of the population to the top 10 to 20 percent.
Losers likely include any person or entity whose sources of income and wealth demand resistance to any policy that attempts to pivot the U.S.'s case-shaped economy to an E-shaped economy. Refer to our June 12th bleed-off morning note for more details, which we published broadly. You can check that out. I think I published it to Twitter and LinkedIn as well. So hopefully, everyone gets their hands on that and passes it around because I think we're doing the Lord's work here. So anyway, getting back to the research in terms of analytical nuance, here are the most important signals that we acquired or had confirmed regarding the evolving structural outlook for US monetary policy in Chair Warsh's two hours of testimony yesterday to the Senate Banking Committee. Number one, consistent with our Bayesian prior, the historically unaccountable group think that caused the Fed to quote look through and outright blame supply shocks for persistent failure to achieve its price stability mandate is likely in the rearview mirror. In the context of the inflationary structural disintegration of the geopolitical world order, this dynamic represents structural right-tail risk for the US dollar and treasury bonds. Conversely, it represents structural left-tail risk for risk assets and gold. Number two, consistent with our Bayesian prior, the Fed will likely pivot its reaction function to focusing on more real-time measures of inflation, which have lagged realized inflation in recent years. This outcome has dovish policy implications. Number three, Chair Warsh's view that the positive demand shock from AI CapEx is not inflationary, even if it causes temporary increase in prices. Sorry, my apologies. Chair Warsh's view is that the positive demand shock from AI CapEx is not inflationary, even if it causes a temporary increase in prices, because all of the investment will likely lead to a positive supply shock down the road. This view has dovish policy implications. We'll skip ahead of here. Just jumping to number eight, and we'll conclude with number 11 Number eight, consistent with our Bayesian prior, Chair Warsh is not on board with Paradigm D, which is the print phase of the cut, grow, print menu of treatment options designed to treat the US's sovereign's debt disease and the market disequilibrium that it causes, which is Paradigm A. We call it Paradigm B is the cut phase, Paradigm C, the current phase is the grow phase, and Paradigm D, which is the print phase.
Him not being on board with Paradigm D in the print phase, all the guarantees will be right on our Bayesian prior that the Fed will seek to deregulate US commercial banks in a way that passes the hot potato of marketable treasury supply exclusively to large banks, which typically and overwhelmingly serve large customers. This will allow the Fed to focus incremental deregulation efforts on small banks, which would accelerate the credit impulse in the real economy according to the similar research of Dr. Richard Warner. And then, finally, shifting to number 11, Chair Warsh is not a fan of case-shaped monetary policy, which is ultimately what paradigm D, the print phase, represents. While it is highly unlikely that he'll ever communicate this with such blunt terminology, he is saying all the right things to those of us who are listening. Thus, it is likely that he will seek to delay the advent of paradigm D by doing everything in his power to perpetuate paradigm C, the growth phase.
Those of us who assume this automatically translates to dovish monetary policy may be disappointed. Why? Because play action passing, i.e. tightening cyclically to set up the run, i.e. easing structurally, creates the maximum amount of scope to prolong the business cycle for a central bank that is currently projecting to miss its own inflation target for seven consecutive years.
As always, a wrap up with a question from our community. This one's titled KISS Future Treasury Bonds, Treasury Bonds for International Users. It says, Hi, based on the recent lead off morning note, it seems the view is Treasury Bonds may be coming back to KISS, is a newest subscriber of only known equity gold and Bitcoin, that version of KISS. As an international UK investor, can I ask so that I can be prepared to what expected Treasury Bonds may look like, i.e. duration? Would one expect long, intermediate, or short-term bonds, or an ag-type, so that I can look for UK-based ETFs that track US bonds, albeit with currency exchange risk? Alternatively, I could buy UK-guilts to remove FX risk, but again, the duration or blend would be helpful to know. Any thoughts to get prepared, please? So great question. This is a question I've been thinking about internally for months now, ever since the first big drawdown we saw on gold going back to January 30th, when the Kevin Warsh announcement was made for, when the Kevin Warsh was officially nominated for Fed Chair, recall that gold was down over 10 percent that day, silver was down over 20 percent that day. I think those were two of the more sizable declines that we'd ever seen in those asset classes day-over-day. I'll never forget it because it was the day that I lost the maximum amount of money in my portfolio as an investor having been doing this for two decades.