Financial FAQs
“Warsh would chart a new course that de-emphasizes the inflationary impact of factors such as supply chains and tariffs in favor of a views of inflation driven by government spending and the money supply.” Barron’s
The Federal Reserve is about to go through a regime change. Though President Trump initially appointed current Fed Chairman Jerome Powell, he hasn’t been happy with Powell’s leadership in his second presidential term because he wants easier credit conditions.
The Fed Governors had been resisting Trump’s pressure to lower interest rates until their rate cut in September, fearing the inflationary effects of Trump’s ongoing tariff wars, which have been boosting inflation.
So what does President Trump want to do? Move the goalposts, so that higher inflation is no longer the danger that the current Fed Board of Governors believe in maintaining their 2% inflation target. This is despite Trump’s promise to bring down inflation on “Day One”.
And Kevin Warsh, a bright young conservative economist who was just interviewed in Barron’s might be the next Fed President to do just that, along with other recently-appointed Fed Governors that are more Trump-friendly.
Do what? The fact that he is the husband of an Estee Lauder heiress worth $billions should tell us all we need to know. He, or someone as conservative, is being groomed as the new Fed Chair to protect great wealth.
A summary of Warsh interview in Barron’s above quote tells us how. He is following the Republican line that most inflation comes from government overspending, for which government must print money. The cure is to cut the size of government in every way rather than raise taxes to pay for it.
So they would blame President Biden and Chairman Powell for the skyrocketing inflation that happened when the Fed printed $2.9 trillion in less than three months, bought roughly $543 billion worth of debt in a week, and reduced interest rates to nearly zero, according to Powell’s Britannica bio.
It caused the Fed’s extensive intervention in the U.S. economy after the COVID-19 crisis of 2020 because consumer inflation then skyrocketed to a high of 9% so that the Fed began to raise short term rates to bring down inflation.
Republicans then made it a cause celebre even though it’s now obvious Trump never intended to bring down inflation on “Day One” or any other day.
In fact, most of the government largesse (with Republicans’ bipartisan support) was meant to be spent on the pandemic recovery and modernization of the American economy, which would take at least a decade. And it would largely pay for itself over the longer term with higher economic growth.
The result was that the American economy recovered from the pandemic faster than the rest of the world and resulted in several quarters of +3% GDP growth.
But now Trump has raised tariffs back to 1934 levels that prevailed during the Great Depression without congressional approval, per Nobel Laureate Paul Krugman, which is raising the cost of everything for ordinary Americans.
And it was a major cause of the Great Depression because it restricted the flow of goods and services from other countries that were badly needed to recover from the Great Depression, just as the COVID-19 pandemic shut down the whole world’s economy and resulted in a brief recession.
So we know what a new Federal Reserve regime will look like with Kevin Warsh, or another such conservative at its helm. Less interference in private sector business, which means combatting inflation isn’t its only priority (therefore allowing higher inflation). And a smaller government paid for with lower taxes and fewer regulations, which means slashing federal government jobs as DOGE is still doing and cutting more public services that benefit all Americans.
It is following a frighteningly similar trajectory to the economy of the 1930s, the last time tariffs were this high, that led to the Great Depression. The question will be how long Americans will tolerate the corruption and favor-seeking that goes with protecting the wealthy, before looking for another Roosevelt and a New Deal.
Harlan Green © 2025
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
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