The nomination of Kevin Warsh
I don’t have too much to say about Trump’s nomination of Kevin Warsh for Federal Reserve Chairman. But many of you probably do, so here’s a thread for discussing it.
Gold and silver prices plummeted early Friday morning following news that President Trump planned to nominate Kevin Warsh as the next chair of the Federal Reserve.
Investors started selling off precious metals with gold falling by as much as 10%, dropping from $5,500 an ounce to around $5,136 per ounce. …
Precious metals have been a safe have for investors concerned that the next Fed chair would cede to Trump’s demands to cut interest rates sharply.
News of the Warsh pick appeared to mollify those concerns.
The Fed has only limited influence on long-term interest rates. Longer-term rates (10,20, and 30 years) are affected by the short-term rates which the Fed controls to some degree, but are largely a factor of market supply and demand for these securities.
The connection between the change in gold and silver prices and the Warsh announcement is pure storytelling, as far as I can tell. Media Narrative Creation 101, put two unrelated facts next to each other to imply cause and effect.
There has been a hell of a lot going on with gold and silver the past few months, not just physical gold and silver but all their paper derivatives. Too much to sum up, and you can’t stick it on Powell vs Warsh.
I’d like to unpack what I said a little bit about “Media Narrative Creation 101”.
First half of the sentence: “Gold and silver prices plummeted early Friday morning following news that…”
Now consider the following possible alternatives:
“… President Trump planned to nominate Kevin Warsh as the next chair of the Federal Reserve.”
“…a precious metal exchange in China was unable to meet $1.4 billion in payments.”
“…the Abraham Lincoln Carrier Strike Group has taken position in the Arabian Sea near Iran.”
“… the Department of Justice released several million more pages from the Epstein files”.
All true factually, all false narratives. Note they THEY don’t say one caused the other, they let you assume it and deceive yourself.
Sen. Thom Tillis:
https://x.com/i/status/2017221633287590355
yeesh
When in England there was a chance of I could buy a Kugerrand. I didn’t and could kick myself for not doing it.
Was around $350 if I remember correctly in 1979
Gold, silver, and platinum have all been on a wild ride for some time. A decline like this was inevitable but it’s still somewhat shocking to see. I invested a little in metal stocks a while back and they’ve all done very well. Lost a lot of money on paper today. Oh well easy come easy go.
The WSJ, no big cheerleaders for Trump, had a very positive take on the nomination. I presume it’s behind a paywall, but they basically said that he’s been critical of the Fed’s expansive policies, going beyond just a focus on controlling inflation, and getting involved in essentially fiscal policy (buying up the government’s debt, buying up mortgage-backed securities, all the huge programs during the Covid lockdowns, etc.), not to mention wandering into climate change and the “racial impact of monetary policy,” whatever that is. They describe Warsh as “Trump’s best second-term appointment.”
Larry Kudlow, on Fox business had a section of his show on Warsh. It seems he was on the Fed board back during the 2006-07 monetary crisis. He apparently believes that Bernanke went too far with QE. Hindsight is always 20/20 ya know. 🙂
He’s experienced, has many contacts in the foreign markets, and will not be rattled by the other Fed members. Apparently, Powell has been pushed around a bit by his colleagues.
Steve Forbes, whose advice I believe is sound, says that Warsh will get rid of our excess monetary reserves and concentrate on keeping a sound dollar. With China and the other BRIC countries attacking the dollar, I hope he can deliver on that.
He will be very hard to confirm because Trump nominated him. The eventual Ferd Chair may well be someone else.
@ sdferr, quoting Tom Tillis:
“Protecting the independence of the Federal Reserve from political interference or legal intimidation is non-negotiable.”
Well, if the Fed is responsible for monetary policy, but the Congress is responsible for fiscal policy, then perhaps “Protecting the independence of the Congress from political interference or legal intimidation is also non-negotiable.” Our past and current Congresses certainly seem to act independent of political interference, at least from the more MEGA and populist population in general, vs. lobbyists and donors, et al.
Alex Pollock suggests the Fed’s practices need to be audited as violating GAAP rules or norms:
https://lawliberty.org/duplicity-at-the-fed Duplicity at the Fed: The Federal Reserve is losing billions of taxpayer dollars, and concealing this through dubious accounting practices.
by Paul H. Kupiec & Alex J. Pollock July 2, 2025
This would seem to merit greater political and legal attention than any concerns about a building project going over budget.
@R2L:Alex Pollock suggests the Fed’s practices need to be audited
The Fed is audited annually. Since they can create money at will I’m not sure what another audit is supposed to reveal anyway.
violating GAAP rules or norms
Linked article didn’t have enough detail to tell if GAAP is or isn’t being followed. There’s nothing inherently sinister about deferred assets though the article tries to make us think so by putting it in sneer quotes and the Fed didn’t invent accounting of deferred assets despite the article’s implication that they did. I’m not sure if GAAP is even the best accounting standard for an entity like the Fed.
The Fed has been losing money recently, costing the taxpayers billions. While this is mainly because the trillions in bonds they’ve purchased lost value when interest rates went up, they also fork over billions in interest payments to banks for the banks’ deposits with the Fed, something they only started doing in 2008. This helped them build up their balance sheet by a factor of ten. “Free” taxpayer money for the banks, while the banks’ deposits get used to buy government debt, facilitating the deficit spending. We’ll see if this gets turned around under Walsh.
Warsh has written a few editorials for the WSJ. Here are excerpts:
https://archive.fo/afofN
And speaking of the WSJ, he’s OK by the Editorial Board.
Warsh Is the Right Fed Choice
https://archive.fo/lXG4E
the Fed under Powell, focused on all sorts of extraneous considerations,
the nominees like Lisa Cook, were at best substandard, at worst corrupt
also it’s funny, how the Minneapolis Fed governor, Kashkari seems to have gone Basenghi, alot of many seems to have slipped his scrutiny,
Central Bankers, here and across the pond, have been rather mediocre, or worse, when they get promoted like Carney, who is well above his level of confidence,
circling back, greenspan tenure was more uneven then we think, he kept rates low, then the spike in 1999-2001, collapsed the tech bubble, and had ruinous effects in South American debt portfolio,
in 2004-2006, he did a similar thing, upset the precarious house of cards, that the subprime bubble, rested on, when the
ARMs reset, Apres the Deluge,
we know Tillis face card, why didn’t he bring this conecern up sooner,
About 98% of the time the Fed has one job: to promote price stability. The other 2% of the time its job is to contain a financial crisis.
==
It would be agreeable if our federal legislature could manage to balance the budget over the course of a business cycle. It is wholly unnecessary for the country to be borrowing gargantuan sums every year.
The reason Gold prices have gone sky high over the couple of years or so is because foreign Central banks are buying up gold.
They are doing this in lieu of buying US Treasury notes and bonds, or, in other words, they are hedging their bets on the safety of US debt..
Presently foreign nations own about 9 TRILLION $$$ of US debt and in total, the US debt is about 38 TRILLION $$$$$.
There does not appear – so far – any policies to begin reducing this massive debt.
As best as I can discern, Trump believes an expanding economy can bring in enough revenue to begin dealing with this really serious problem.
It’s safe to say that aside from someone like Rand Paul, there is no one in the entire US Congress that believes cutting spending should be considered.
By the way, the FED does not have any money at all. They press a key on a computer screen, and voila, they “buy” or “pay” whatever they believe needs to be bought or sold.
They do make interest/dividend income on the paper they own (e.g. US Treasuries, mortgage bonds, etc) , – but if they need more money, they simply create it out of thin air.
In the 1930s, the USA did in fact default on the Treasuries they had sold. Back then, it was normal that dividends paid to bond holders of US debt, would be paid in gold. FDR, unilaterally and with no warning ended that, which caused a massive decline in the value of the dollar. In effect, this was a default.
Of course an easier way to default is to print money like crazy resulting in the debasement of the currency; i.e., inflation.
@ Niketas > “All true factually, all false narratives. Note they THEY don’t say one caused the other, they let you assume it and deceive yourself.”
This is a standard practice of media and con men.
Statistically, anything can be used to “prove” anything else if there is some kind of correlation – which, as my stats profs never tired of saying, is not the same as causation.
And a correlation is several steps in significance above the statement “following news that…” as you noted.
Remember the classic: Women’s skirt lengths determine the rise and fall of the stock market.
It even has a name!
https://en.wikipedia.org/wiki/Hemline_index
The article mentions another favorite misused statistic: lead (and lag) times.
The proof that these are often (but not always!) bogus is left as an exercise for the reader.
John Tyler:Of course an easier way to default is to print money like crazy resulting in the debasement of the currency; i.e., inflation.
Interesting that you use the word “debasement” about paper money. The word literally means to add base metal to precious metal currency. There are many ways to manipulate the currency and metal currencies are not immune.
About 60 years before Niketas Choniates was born, Emperor Alexios I Komnenos reformed the gold currency, which contained practically zero gold by that time, and minted the hyperpyron, literally named “highly refined” but only 20.5 K in our measure (for context American Gold Eagles are 22 K, American Gold Buffalos are 0.9999). By the time Niketas Choniates was old they were being debased again.
@Aesop Fan:And a correlation is several steps in significance above the statement “following news that…” as you noted.
It’s the post hoc ergo propter hoc fallacy. Once you see them doing it, you see them doing it all the time, especially in financial news when it’s very difficult to assign one event as THE cause.
Taking their statement at face value, there is no way they could possibly have known that holders of precious metals in general didn’t like the Warsh appointment and decided on that basis to sell, before they rushed to print the narrative. There wasn’t time to poll anyone.
There’s not enough people buying gold and silver at retail to move the market much, but they’ve been reporting that it has been increasingly difficult to sell physical gold and silver as the price has been going up. Dealers are reluctant to pay when the prices move so much in one day, and refiners are backlogged and can’t pay dealers on time. But the market is moving on derivatives and transfers of large amounts of physical gold and silver between large holders of gold and silver like central banks. There’s been some glitches in payments and fulfillments and one Chinese exchange has failed scandalously. I imagine it’s a combination of these things.
But even following this news in detail I can’t attribute it to any one thing. I know for a fact the legacy media can’t.