Iran is certainly not an eternal war, as President Trump has often said. Mr. Trump is indeed “ending” Iran’s eternal war against the United States. Yet it now appears that Fed Chairman Jay Powell wants to be the Fed’s first permanent board member. He said at a news conference that he will remain on the Federal Reserve’s board of governors until the investigation is “well and truly over.” Whatever that means.
This is unwelcome news for the stock markets, as the Dow Jones fell more than 700 points to a new low in 2026. It fell about 300 points after Mr. Powell made his forever board member comment. All indexes fell today. Bond yields went up. Just like oil prices.
In fact, the scatter plot of the Fed’s economic projections suggested only one rate cut this year, down from three before the start of the war. They also suggested higher inflation and a slight increase in growth.
What you really want is for the Fed to keep the powder dry as the war in Iran comes to an end and oil prices return to normal pre-war levels. Yet it appears that the Fed is already signaling a higher interest rate policy, which would do some damage to the US economy.
That’s one reason why it’s crucial that Kevin Warsh, Mr. Trump’s nominee for Fed chairman, is released as soon as possible to take the helm of the central bank and get rid of Fed models that say stronger growth leads to higher inflation. I call it #FreeKevin.
And make sure you have someone who understands the benefits to economic growth of lower tax rates, deregulation, and drill baby drill, which is a welfare prescription that would increase growth and reduce inflation. And protect King Dollar.
But to free Mr. Warsh, it appears the Justice Department will have to settle its disagreement with the Federal Reserve. Otherwise, Mr. Warsh will never get through the Senate Banking Committee, even if they love him, and Mr. Powell will stay at the Fed forever.
He may even be somehow chosen to stay on as chairman by the Fed’s policy-setting body, the Open Market Committee, which has always been leaning against Mr. Trump. Or Steven Miran would have to give up his seat on the board of directors to make room for Mr. Warsh to be appointed to the board of directors, but not necessarily as chairman. If you’re thinking this is a confusing and bizarre scenario, you’re right.
I believe the post-war American growth potential is about 5 percent. And as energy prices normalize, inflation will fall below 2 percent. As for inflation, a measure of the money supply, M2, is growing at 3.5 percent, not President Biden’s 30 percent.
Government spending has slowed. And the dollar has risen. These are all counter-inflationary movements. The Jay Powell Fed sees only a paltry 2 percent economic growth. That’s what their models say, but it’s rubbish in, rubbish out. Will someone please free Mr. Kevin Warsh? #FreeKevin.
