Reviewing Warsh…

I have taken the time to review what I posted on June 15th, “Understanding Warsh” which can be seen from our front-page listing. I have found the rereading to be enlightening.

That posting was based around using AI to analyze how Warsh would operate as head of the FED. One of my questions to AI was if Warsh, as a monetarist somewhat in the Milton Friedman mold, would view Iran based oil price increases. In essence how would they affect the monetarist view that excess liquidity is the base case for inflation.

To me it seems that a monetarist view would be that in effect persistent inflation resulting from the Iran excursion will if it occurs be primarily based on more liquidity being added to pay for the rising prices. So far Warsh seems to be unwilling to start a fight with Trump and thus follow his beliefs by doing nothing, thus requiring the Trump administration to pay for the higher costs through fiscal means. That has forced Treasury Secretary Bessent to mess with the yield curve.

My take is that raising or lowering Fed Funds rates is not part of this equation, so Warsh will devote most of his Jackson Hole speech to talk around the situation. The real answer for the economy is squarely in the hands of Trump and how he and Hegseth back out of a dumb situation.