Will Trump's New Fed Chair Crash Markets? | Joseph Wang

I kind of get the sense that the Federal Reserve is kind of the last bastion of the resistance. The President is basically quoted as joking that if you don't cut rates, I'm going to sue you. So we can say that we're going to get recuts, right? What washes different is that he wants to have a smaller balance sheet. By itself, shrinking the balance sheet would be risk negative. My base case is it's not easy to shrink this without having an impact on risk markets, but there is a path towards this. Central bank independence is really a new thing. It seems like we're just going back to an older system that has actually prevailed for, I'd say, most of history. And so accountability for inflation is going to have to be through the ballot blocks. Before we get started, a quick reminder that Blockworks's premier institutional conference, the Digital Assets Summit is returning to New York City this March 24th to 26th. This year represents more than $4.2 trillion in assets under management with 150 speakers and 750 institutions attending. Speakers include SEC chair Paul Atkins, CFTC chair Michael Selleig, Fed Governor Stephen Moran, and Tedder CEO Paulo Ardonio. Alongside countless other executives, asset managers, regulators, and the core crypto infrastructure builders shaping the industry. If you want serious institutional grade view of Digital Assets in 2026, Digital Assets Summit is where it happens. Use code forward 200 for $200 off and head to blockworks.co/events for more detail. This episode is brought to you by Grace Kale. Your trusted gateway to more than 30 different crypto investment products. You'll hear more about them later in the episode. Nothing said on four guidance is a recommendation to buy or sell any investments for products. This podcast is for informational purposes only, and the views expressed by anyone on the show are solely their opinions, not financial advice, or necessarily the views of Blockworks. Our hosts, guests, and the Blockworks team may hold positions in the company's funds or projects discussed. As always, investments in blockchain technology involve risk, terms, and condition supply. Do your own research. All right, everybody. Welcome back to another episode of Forward Guidance. And joining me this week is Joseph Wang of FedGuide.com. And could not have asked for a better guest for this week. We had a lot of action on the Fed late last week. We finally got the formal announcement of the new Fed chair that Trump has decided on. And it's Kevin Warsh. So Joseph, great to have you on the show. Thanks for inviting me. It's great to be back. As always, as always. And before we get into things, I do want to give a little shout out that if you do enjoy this conversation over the next hour, we're going to be doing it again live in person at the Digital Assets Summit in New York. March 24th to 26. Going to be a ton of fun. We'll be doing a Forward Guidance Roundup live and a whole bunch of different specific Forward Guidance panels of which Joseph will be a part of one of those. So we'll have the link in the description. Check it out, get your tickets, get to be a ton of fun. Joseph, all right. Kevin Warsh, that is our nominee for the Fed. What's your take? Wow, wow, it was kind of surprising. Because of all the potential nominees, Kevin Warsh was obviously the most hawkish, right? So we know a lot about Kevin Warsh because he used to be a Fed governor. And in retrospect, all those meeting minutes were declassified. And we also have a really long public record of him commenting on monetary policy, giving presentations, writing op-eds, and so forth. And he's really just kind of been seeing the same tune for a Forward Decade. Now, just for some context, like heading into the great financial crisis, Kevin Warsh was all about the financial system was great. By the way, we should be worried about inflation. After the financial crisis in 2008, unemployment rate around 10 percent, Kevin Warsh was like, yeah, that's not good. But hey, we should be worried about inflation. And so he, someone has consistently exhibited not very good judgment on monetary policy, but also consistently been quite hawkish. From his perspective, he seems to have more of a monetarist view of the world. And so when he sees the Fed expanding their balance sheet, increasing the money supply and so forth, he's been afraid of inflation. And that was totally reasonable back after the great financial crisis. Many people were concerned about that. You saw the price of gold, surge, and many prominent commentators come and say, whoa, the US is basically monetizing the debt. We're going to have hyperinflation or things are going to go really bad and so forth. That was a reasonable mental model, but that just didn't happen. And year after year after year, the Fed actually had trouble meeting its inflation target. So we know that's not a correct mental model, but Kevin Warsh seems to still have that anyway. So what we've seen is that the nomination of Kevin is basically from a policy standpoint. His finally has the opportunity to realize his career long quest of shrinking the Fed's balance sheet. Now, Warsh is also promising rate cuts. I think there's an article from the Wall Street Journal where the president is basically quoted as joking that if you don't cut rates, I'm going to sue you. So we can say that we can get rate cuts, right? The argument is obviously not because the president said so, but because, and this is a standard dovish argument today, is that the labor market, you know, not doing that great. And also we have this huge productivity boom, which based on official data, it does look like we do have an increase in productivity. And that is going to allow us to cut rates because that's this inflationary, okay? All the Fed nominees would have given the president that. What Warsh is different is that he wants to have a smaller balance sheet. Now, there's a lot of discussion in the market as to whether he can actually do this because we all know the president loves the stock market. He also likes low rates and so forth. So, you know, stringing the Fed's balance sheet, that doesn't seem to jive with that. But I will also point out that having a smaller Fed balance sheet is actually a consensus position in the Trump administration. Now, secretary Bessent, like the the top official when it comes to economic policy, had a very memorable column last year about the gain and function monetary policy and so forth conducted at the Fed. Really lambasting a large Fed balance sheet and then you also had governor Bowman, governor of Myron and also recently Kevin Hassett come out and just all indoors to a smaller Fed balance sheet. So, I think this is something that they do want to do. It's not going to be one of those things that they, you know, save the campaign and then change their mind. So, I think this is going to be the most interesting topic from a Warsh nominee perspective. If you're thinking about buying crypto but don't want the headache of setting up wallets or new accounts, Grayscale makes it simple. For over 10 years, Grayscale has helped investors gain secure, regulated exposure to crypto without the hassle of self-custody or opening new wallets. With over 30 investment products from Bitcoin and Ethereum to diversified and thematic crypto baskets, Grayscale makes it easy to build a crypto allocation that fits your portfolio. Whether you're using a regular brokerage account or investing through an IRA, many of Grayscale's products are available right where you already invest. Investing evolves risk, including possible loss of principle. For more information and important disclosures, visit Grayscale.com. Yeah, that's a great overview. Tons of different points, so I want to deep dive into over the next hour, but I actually want to start with, you know, sorting out basically this proposition that Warshad back in '08 onwards about how Huey was in inflationary, basically. And that was really the baseline foundation of a lot of his perspective. So, you've written a lot about the mechanics between how Huey actually works in your book, Central Bank in 101. And I think it's a really important book to read, especially as we're going to get into the discussions of there to move back 101. New version coming out soon. There we go. You heard it here first. Maybe not even here at first, but you heard it here anyway. Okay, so walk us through your perspective on how to think about quantitative easing in terms of its impact on the economy. In terms of, do you agree that it could be inflationary? Because obviously, we had a lot of QE happening in the 2010s and we had zero inflation. And that's really the bedrock of why Kevin Warshad's thesis was so incorrect in the late 2000s. So, yeah, walk me through how to think about that. So, I wouldn't even go earlier than 2008. So, there's a school of thought in macro called monetarism, where they place huge emphasis on the money supply in determining a level of prices in the economy. This was popularized by a lot of people in the 1980s, '70s and so forth. Notably, Milton Friedman is quoted as saying inflation is always in everywhere a monetary phenomenon. And that was, you know, a very, very compelling mental model. Obviously, right? You print a whole lot of money. Prices are going to go up, right? So, everyone really kind of bought into it because it was just made so much sense. In fact, in the 1980s, the Fed actually went to targeting the money supply as one of its policy implementation measures rather than controlling interest rates. And in order to track all this money supply, suddenly embedded, you know, MT, M2, M3, even M4. And that stuff was later discontinued. And the Fed also discontinued targeting the money supply because they realized that it doesn't work. From what we think about it is that the velocity of money was something that was time-bearing. And so just changing the quantity of money just didn't really get them the economic outcomes. Now, fast forward to 2008. Again, when the Fed is doing quantitative easing, you also have this very seductive mental model come out and saying, "Gosh, the Fed is printing a lot of money." Obviously, we're going to have high inflation. But again, that did not happen. It didn't happen when the Bank of Japan did it. And it did not happen when the ECB doing, did it. I think what people are misunderstanding when it comes to quantitative easing is that, yes, the Fed absolutely prints a lot of money. But it's also important to realize what they do with that money. So they print out a whole lot of money. And then they take that and they go and they buy a whole bunch of treasuries, right? So they're not buying goods and services. They're buying treasure securities. It's like a huge swap with very liquid assets, cash-like assets. And in exchange, taking out treasuries from the financial system. Now, you flip it around and you look at this from a private investor standpoint. Let's say that Felix, you have a million dollars in treasuries in your trading account. And then you sell that and you get a million dollars in deposits. You don't have any more purchasing power at all, right? Fed prints a lot of money. But, you know, and you don't really, it doesn't increase the purchasing power of the private sector. It just increases, it just changes the composition of their assets, fewer treasuries, more liquid cash-like assets. And so what are you going to do with those, that million dollars in cash you have? You know, maybe you go and you buy corporate debt, maybe you go and you buy equities, or maybe you just leave it there. So what Kiwi really did was exactly what Bernanke intended it to do. Push up the prices of treasuries. And that is to say lower, longer-dead interest rates and maybe have a bit of a wealth effect, the goose financial markets. So that really, I think it was just a misunderstanding about Kiwi, that kind of led to a lot of people concerned about inflation. But in the end, it worked exactly as Bernanke intended it to do. So to that end, I think together, it's this important distinction between, you know, I've heard Michael Howe's described this before as like financial inflation and Main Street inflation is as separate things. And Kiwi worked really well at financial asset inflation. And you know, during this era of Kiwi, we've just seen all financial assets head higher. But we never really saw that the Main Street inflation followed through. And I'm curious, it's interesting about, you mentioned earlier about how most of the Trump administration is, has this perspective on wanting to get out of the game of Kiwi and balance sheet manipulation effectively, or as Secretary Besson called it in his op ed, gain a function of fed policy. I'm just curious, how much of that perspective do you think is valid? And why do you think they're pushing it so hard? Because in the same vein, you also have Trump talking about, he really anchors his success as a president to the stock market going up. So you would imagine that, okay, well, Kiwi is really great because it's probably going to make financial assets going to go up, which is going to make him happy because the stock market is going up. So by itself, treating the balance sheet would be risk negative, but there are tools that the administration can do to make it less impactful, or maybe not even that impactful at all. So there's a lot of moving parts to how shrinking the balance sheet can be done. My best guess is that the administration is distrustful of the Federal Reserve. And so seeing its enormous power through its balance sheet and so forth makes it uneasy. Again, looking just more broadly at the United States government, I kind of get the sense that the Federal Reserve is kind of the last bastion of the resistance, quote unquote, whereas all the other government agencies kind of bent the knee, but you have deep how they're kind of being somewhat defined of the president. And so I think that makes the administration less comfortable with the Fed and would prefer that they have less influence. You've actually mentioned in the piece you put out this morning about how the balance sheet as a percentage of GDP these days, basically, like since Postal A&S, especially lately, you know, we're somewhere around the world of 25% of GDP, I think is what you mentioned. And, you know, we did live in an era of like a 5% of GDP as will you mention in the piece there, like pre-08 pre-QE, the more scarce reserve regime that the Fed operated in, it worked. We have example, we have empirical evidence of it actually working, but now in this world of ample reserve regimes, and I'm just curious if you could walk through to the audience like, what would it look like? Because right now, you know, we went through QT, we got to a point where it's, it would be really difficult for us to really decrease the amount of reserves in the system without us entering that potential scarce reserve regime. So I'm just curious if you could walk through what that would look like to get to that point of where we were pre-08 and how feasible it is to actually get there. So like you mentioned, pre-08 for like 50 years, pre-08, we were in a scarce reserve regime where the Fed's balance sheet was about 5% of GDP. So the way that I look at it is that at the end of the central bank and the commercial banking system have elastic balance sheets. What that means is they could create credit out of thin air and go and provide liquidity to the non-banks sectors. Now pre-Grey financial crisis, it was largely the commercial banks that were expanding their balance sheet, so creating credit, providing liquidity, making loans to the private sector, to the more private markets. During 2008 though, the regulators began to think that, okay, after the 2008 financial crisis, the regulators realized that that was not a good idea because when the banks extend credit and lend to each other and so forth, there's a lot of potential contagion risk where you have counterparty risk where let's say you lend to a bank and then the bank fails and then there's a day just saying the fact, whereas the bank that lent that money also maybe we'll have some credit problems and so forth and then since everything is so interconnected, you could have a huge run on the banking sector and have that bleed into other financial sectors, which is exactly what happened. So the decision was that instead of banks holding liquidity now within the banking system, so let's say that if you were banking, you had liquidity, you would store it, say in the federal funds market where you lend it to another bank, you would instead store all your liquidity as a deposit at the federal reserve, we call that reserves. So instead the official sector, the Fed expanded its balance sheet and began to provide the liquidity that the private sector needed and the banks in turn, because of regulation, leverage ratio for example, but also much higher risk-based metrics, became much more constrained in its ability to expand their balance sheet and so basically it was a handoff from the private banking sector having the flexibility to meet the liquidity needs of the economy to more of the Fed and now they're trying to reverse that by first reducing a little bit of the regulations that have been binding the commercial banks, for example, the SLR and then, hopefully, smoothly transitioning from a small Fed and back to a private, more private bank-centered way of having offering liquidity to the private sector. Similar to how it was pre-2009. Do you, do you have an opinion on which system is better? Obviously, you know, it feels like the recency bias makes us think that the ample reserve regime we've been in where commercial private banks have just refused to issue loans and take on a risk-based group over the last 10 years either because of, you know, risk-based ratios, like you just mentioned, stopping them from too, but also just the hang-ups associated with '08 and what happened there and Dodd-Frank and Basel III regulations, all that stuff. Like, if, do you have an opinion on which system is, is, quote unquote, better for however you want to define what better even looks like? I mean, you could just shift to the definition to make it whatever better. So I think that either could work. It's just that, I mean, so there are a lot of moving parts to any kind of system and how you design it and you could always design either system to make it so that it could work well. I guess what, looking back over the past decade of just having a large-fed balance sheet, I think what we've, what I've come to realize, and I think many people as well, there just doesn't seem to be any downside in having a large-fed balance sheet. What happens is that the banks basically have a ton of cash and so there's really no liquidity problems for the banking sector and that's a really good thing, right? So it's possible that you could overdo it, but at the end of the day, it does make the banking system safer. You can probably have the same kind of safety in a small, fed, bigger banking system scenario, but you'd also need more regulation so you won't have a repeat of what happened in 2008. And maybe you need to have more emergency fed facilities where as banks can more easily access in an unstigmatized way, facilities like the discount window or others like it, like the repo facility or something like that. So either it could work, you just have to add enough parameters to make them optimal. If you're thinking about buying crypto, but don't want the headache of setting up wallets or new accounts, Grayscale makes it simple. For over 10 years, Grayscale has helped investors gain secure, regulated exposure to crypto, without the hassle of self-custody or opening new wallets. This episode is brought to you by Coinbase. If you're a long term crypto holder, but don't want to sell your Bitcoin or Ethereum, Coinbase now offers crypto back loans powered by Morpho. You can borrow up to $5 million using Bitcoin or $1 million using ETH as collateral, all at competitive rates typically between 4 and 8%. There are no credit checks, loans originating seconds, and you can repay anytime with no fixed deadlines. The USDC liquidity can be used for things like a down payment, refinancing high interest debt, unexpected expenses, or anything else life throws at you. Importantly, Coinbase does not treat borrow transactions as taxable events, and over $1 billion in loans have already been opened through the platform. If you want liquidity without selling your crypto, click the link in the show notes to learn more and get started today. I guess that brings up the question of what will actually happen once Worshes in the charity confirmed about what's real estate, because it's quite easy to be on the outside and criticize these ideas of excessive balance sheet use. But once you're actually in the chair, and you have to make these decisions, and I'm sure Kevin Worshes is an exceptionally smart person, intelligent person. I'm sure he has the cognitive ability to reflect on the last decade and see that some of his views in 2010 didn't really pan out. We didn't get the hyperinflation from Kiwi, and I'm sure he's self-aware of that. I would be very surprised if he wasn't. So I'm curious, the way I've been thinking about it is once he gets in the chair, I'm doubtful for us to see much more unwind of the balance sheet, maybe a little bit. There is some levers that can be pulled. But to me, the tail that's getting cut here is the possibility for the Fed put or further Kiwi, if the threshold that would need to be met before the Fed chair decides to go guns blazing with Kiwi again, feels like it's going to be a lot higher now. Do you agree with that framework? You're saying that we could have a higher probability of expanding the balance sheet, because of some hiccups in the financial markets, and that's not appreciated? Well, I'm saying that the threshold we would need to meet is much higher before we get that. During Powell, probably if whatever happened in the markets went down 10%, much higher odds of Kiwi occurring underwashed, that probability is probably a lot lower now. The threshold that needs to be met to turn on the tax and get Kiwi going feels like that threshold is much larger now. Maybe that's why. Yeah, I think so. One thing to note is that Kiwi has always been, and this is a consensus position, something you roll out would interest rates are at zero. No interest rates today are far above zero, and so before we get proper Kiwi, like the Fed buying longer-dated bonds, moderation, it's going to, you're going to have to cut the policy rate down towards zero first. At the moment, that seems like it's a bit of a stretch, but that also gives a wash. Should he want to shrink the Fed's balance sheet, a lot of leeway to counteract any of the financial tightening that could arrive if he continues to shrink the balance sheet. So there is a lot of cushion for him to do that. One thing I'll note is that, so the Fed, we all know gelously guards its independence, right? But for that, though, it's really just its interest rate policy, whether or not the high-cut rates, you can see that they willing to go to court to protect that. But that's not all the Fed does, and the consensus has been that, for example, when it comes to regulatory policy, the executive gets to decide that. So the custom has been that when you have a new president, the vice chair of supervision at the Fed steps down, and so the Fed, so the new president can appoint someone else. And that person right now is Mickey Bowman. And so regulatory policy is not something that the Fed has independence in. And something else, and this, of course, this is a new thing, is that we can consider whether or not the Fed has independence in how it implements monetary policy. Because at the moment, you're implementing it in an abundant reserve framework, sounds like washed, relaxed, you implement it with the scarce reserve framework, you're not really impinging upon its independence, you're really just changing how it implements. Now, if you have a treasury who at once to do this, and you have enough Bedford board members, I suspect that this is something that can be done without anybody crying about Fender Dependent, but it's so forth. Should they decide to do this? Yeah, I think that's the next big theme to discuss here is something that that Worsh was written on, which is this idea of a new treasury Fed accord. And we've also seen a lot of commentary across the board from from Trump nominees. You know, we had Fed Governor Steven Moran as mentioned this too, which is that hey, look, like we're in this era where there's less independence in the Fed, and more cooperation between the treasury and the Fed. Let's just call this spade a spade and actually create a regulatory framework around that and move forward instead of just pretending that doesn't exist. And I'm just curious about your perspective of what does that Fed treasury accord actually potentially look like if if Worsh can get through what he wants to to do at the Fed. So at the moment, just based on what they're saying is that now treasury will be the will be the organization that manages the duration of public sector liabilities. So for example, let's say that the treasury issued a whole bunch of 10 years. So that means the private sector has to absorb those 10 year treasury securities. But if the Fed were just independently to decide to just buy all those, then what that means is that the private sector doesn't have anymore and said the private sector is holding reserves, which are, you know, zero duration public sector liabilities. So in effect, the Fed was controlling just how much interest rate risk the private sector was holding. And now they now if we have a small if it balance sheet, they're not doing that anymore. But to your broader point, though, I do agree that their ultimate plan is to have more of an industrial policy kind of coordinated setting where the central bank basically finances the government. This is actually super common throughout history. So for example, in Japan, during the 1980s, when they were industrializing and booming, the Bank of Japan was not independent. They basically, you know, just kind of implemented industrial policy, maybe offering loans industries that were favorite, for example, to try to spur growth. It was only after 1998, I believe, until the Bank of Japan was independent. And it's actually pretty common to Western European countries as well. The Bank of England, Bank of France were not independent until the 1990s. So central bank independence is really a new thing. It seems like we're just going back to an older system that has actually prevailed for I'd say most of most of history where the central bank is kind of the junior partner to the to the to the rest of the government. And so accountability for inflation is going to have to be through the ballot box. So maybe you could kind of see this happening. Let's say in Argentina or even just 2024 right inflation was not popular and the incumbent political party lost. That's a wild idea that yeah, inflation to see the ballot box. And I'm curious about how you think the market would digest that. And specifically either long-term interest rates as well as swap spreads, term premiums, these metrics that would reflect a bit more of this long-term perspective on the impact of offend independence. Like if we move toward this world of less fed independence, how would you see that be impacted in those in those market rates? First off, I want to say sit the obvious. Obviously the market is not going to implode. Like I just said, like central bank independence is a relatively new thing. So think about France, think about the UK, think about Japan in the 1980s and 1990s. All that time for all those centuries, you don't have their own markets implode because your 100 bank is not dependent. Okay, so that's obviously nonsense. So I think of longer data rates as largely the expected path of fed policy, but you also have uncertainty as to that policy so you have some term premium. But you also just basic balance you cost in holding that and that would be swap spreads, right? So if we have a central bank that is less independent, I think first off obviously the path of policy is going to be lower, right? Because the government always wants to have a lower interest rates, at least this government in the US does. That's kind of crystal clear. So you have to have a lower path of policy. However, you're doing something new now. You will have people who are afraid that maybe lower rates implies higher inflation. And so you're going to have them also try to guess whether or not they really is the political willingness to keep rates this low. So you have higher term premium. And I also think as regulation skin to effect, you will have wider swap spreads. So swap spreads become less negative. So the balance you cost of holding tragedy declines, put that all together. I still think that a lower policy rate outweighs all of this other stuff and we'll get a lower lower longer data interest rates. Just another side because I hear this so often it kind of surprises me. So oftentimes I hear that the fed is going to keep rates to low and that's going to cause inflation to accelerate. And so that's why it's about for the bond market. Aside from the fact that that's not necessarily how long a term rates are determined. But there's kind of no reason to think that would actually be have cause inflation to war back. Because if you think back the past two decades, right? So after the great financial crisis, interest rates are at zero. In some countries, zero are negative. You had social banks. All of the world buying trillions in bonds and you had no inflation ever anywhere. People were desperately trying to get inflation up. They could not do it. Then you fast forward to 2020. Now you raise the federal funds rate up to 5% multi-decade highs. You didn't even get our recession, right? The inflation today is still like 3%. So the obvious observation that I make is that the link between interest rates and inflation is not very strong. So just even based on the economic argument saying that, oh no, the wash is going to keep interest to low. We'll have the researchers in inflation. That's not founded in the experience of the past 20 years. I guess the devil's advocate to that framework would be a critic would say that the neutral rate is much higher than it was 10 years ago. That a 5% in 2015 is very different from a 5% today because the neutral rate is X amount higher. How do you think about that? First of all, the neutral rate is something that's obviously made up. But let's go with that idea. Well, back then, they were thinking, oh, the neutral rate is actually really low. So low, in fact, let's have negative interest rates. And they did that for many years. In some countries, they didn't get you anywhere. So I think the fact is that inflation is dependent on many things, no fiscal spending, technology, demographics, sentiment and so forth. And when you sum that all up, the portion of it due to interest rate policy at least today is just not very large. There are some theories as to why that's the case. A really good one that was proposed by a recruiter. And also, you could see this in some academic writing as well is that we're just more of a service to the sovereignty of the economy, right? Let's say, Felix, you're, let's say, block works, for example, a lot of media probably doesn't need to borrow a lot of money. If you're a newsletter writer, you definitely don't need to borrow a lot of money. And so whether or not interest rates are higher low, it just doesn't impact your business that much. Now, rewind back, maybe to the 80s, 70s or 50s, when you have a more industrial economy, where a lot of to build a factory or do anything like that, you need to borrow a lot more money. You probably have more of a, your interest expense is something that you care more about. But when your services, like, which is what the Western economies larger are today, be it a barbershop, being a lawyer, practicing medicine, and so forth, it's just not that capsule intensive. And so interest rates are not as impactful. Super impactful for the financial markets to be clear, but not so much it seems to the real economy. Yeah, I think this is just my personal opinion. But that's what makes me kind of disappointed in the choice of the Fed chair here is somebody like Reader, I felt like he had a framework that was really on point with how the economy is working in this modern day and age. He wrote about this, I think last week, where his notion of just how the economy is not nearly as sensitive anymore to changes in the Fed funds rate seems really accurate to me. And I was pretty compelled by just having somebody that really understood that versus now where we have somebody that thinks that that QE is hyperinflationary. And maybe he's revised his perspective and I'm just curious like does that? I agree with you. For me to be a good central banker or even a financial market participant is someone that has good judgment and that involves being able to update your mental model when things change. So in the markets in the economy, macro economy, things are always changing. Relationships between variables are always changing. So Jay Powell actually explicitly said this at his last meeting and I like that. So and that's why you, for example, like an interest rate sensitive people mentioned in the past, with that type of economy, with that type of banking system, maybe interest rate policy was really influential, but it's obviously not today. And people are able to update their models. So in a sense, because things are always changing, you have to be humble and nimble as I try to follow what I would say and maybe it's also why you sometimes see that people with a lot of experience in markets, eventually that becomes a liability. But what Rick Reader saying is obviously unconventional. And so that tells me that he can update his models and not just that, something else that I thought was super interesting is that he noted that higher interest rates can even be similar to in some ways. Now that's something that's very common to know when you see smart people like Warren Moser make that point often. But I think that is really salient. Now, Rick Reader managed a huge bond fund. So obviously he saw that, whoa, interest rates are up. All this interesting come money pouring into my funds. My clients are making so much money. And if you have the stock of federal debt very large right now, you're seeing federal interest expense in the US to be over a trillion dollars. So obviously interest rates are having a similar impact to some parts of the public. And I believe Rick Reader thinks that the well off who have a lot of cash assets, higher rates actually were helping them on net. But it was actually hurting people who are on the lower part of the income spectrum because those guys don't have a lot of cash, but they want to borrow to buy cars to buy houses and so forth. So it was having a not it wasn't having the intended effect in slowing down the economy. And it was also have a very poor distributive impact by hurting the lower income people more. So that's an interesting thing to think about as the debt load grows and has the financial changes. So yeah, I do think having that I guess more thoughtful perspective was helpful. Yeah, I think so this contrasts between with some reader basically, you know, you can you can make the argument. He had some NMT light themes going on. Yeah, for sure. Versus somebody like Warsh was was full on traditional monetaris thinking. I think this brings up a question now of the big job for this Fed Chair who's going to assuming he gets confirmed as we Warsh is to build consensus at the OFMC. And so I'm just curious how do you think about that? Obviously, somebody coming in with with NMT light themes, I imagine that be a very difficult thing to sell to traditional Keynesian PhD economists, but I'm curious that this more monetaris approach that Warsh has like, how do you think he's going to do in terms of building consensus? Because it's going to become very, it's going to be the ultimate question, May onwards, is what's going to happen there in terms of can he actually get his perspective sold into the rest of the OFMC committee? I think one of the moving parts is what chair Powell will do after his term ends. So chair Powell, after his term ends in May, can still stay at the Fed as a regular governor for a couple years. Historically speaking, Fed Chair, when his chair term ends, just goes in, resigns from the board and the president appoints someone else, but the relationship between Trump and Powell, not the best right now, and it's possible Powell could just stay there and fight for his perceived independence of the Fed. Now, if he doesn't do that, though, if he just leaves, because Kevin Warsh, super hawkish, I don't, I'm okay with that. If he just leaves, then Trump will get to have another member on the FOMC, and that's going to increase his influence, and I think that's going to make everything easier to build consensus. Now, one thing I'll note is that President Trump has been, you know, feels comfortable squeezing Fed governors. We see his lawsuit with Lisa Cook, feels comfortable squeezing Fed presence, you know, with the criminal investigations about the Fed. And chair Powell is an emergency, emergency broadcast couple weeks ago. So, the rest of the people on the FOMC who are voting, these are just Fed presidents. I don't think they're very influential when it comes to US politics, so I think they can also easily be squeezed, so I'm not really worried about building consensus. It's there. Easiest path, of course, is for politics to resign, and you'd have that, but, but otherwise, I think that they've shown enough determination, and I guess willingness to use pressure that I think they could just steam roll the FOMC. It's interesting, because when I look at the, when I look at the sofa market curve right now, it feels like it's, it's, the market is not as advanced as you are, being able to steamroll those, those, those cuts in. I think it's like maybe two cuts priced in for the rest of the year, so definitely not what is, what could happen if they can actually dominate the FOMC. And so, I'm just curious, like, yeah, how do you think this plays out the playbook of what Worsh was trying to sell, at least, that we know of up until this recent announcement was AI productivity boom, leaning to much higher growth without inflation, therefore, we can meaningfully cut rates, and it won't be inflationary, because we're also going to be hawkish on the balance sheet, that, that combination, like, how much, how likely is it do you think that that's going to actually play out, and why do you think the sofa market isn't as convinced about the ability to sell that idea to the rest of the committee? You're absolutely right. The sofa market really has been pricing in a status quo. So, I think the expected path of Fed policy is two things. One is what the market thinks data will be, and second, how the Fed will react to that data. Now, we are having a Fed that is obviously changing, right? So, the market is just not going to be right in understanding the Fed's reaction function. My sense is that market is always going to be, have a recency bias, it's going to be way towards a status quo. And so, if you really do have this kind of political revolution, which I think is actually happening in the US across many dimensions, I don't think it's appreciating that. I think I personally think that it's significantly mispriced. I would think that we'd have four cuts this year. Yeah, that really brings up also what's going to be a very important theme is the midterms coming up. Polling numbers are just very tough for Republicans in Trump right now, and it feels like a lot has to do with this playbook that they've been running for 2025 of just running the K-shaped economy and letting stocks go higher and not being too worried about affordability is does this seem to be really working for them right now? And it's interesting to contrast that with what Worsh is saying here, which is that we need to cut the Fed funds right because that is still going to be much better for the average person and not be as worried about public markets as much. It feels like what they're saying here with this domination is that we don't mind taking a 10% correction in markets if it means that we can get a lot more cuts, which will be better for people that don't own assets. So, how do you think about that heading into the midterms this year? So, okay, I'm going to put on my political strategist hat, which obviously I don't know. Same. I wouldn't say I know much about it. I do watch a lot of the people who do this. So if we I think that if we had a 10% drop in markets, I do think the market would price in a lot more Fed cuts. From what I observe, the so-for rates traders are really keen to what happens in the equity markets and the moment that you have declines in equity markets, you'll have the market price in more rate cuts. If I think we have a 10% drawdown, I think we would get more rate cuts. If it price in the market, I think the tenure would come down. I think a 10 year, I think a 10% drop in equity market would not be fatal to anyone really, but having lower mortgage rates, for example, lower car loan rates, that would be helpful in the midterms for sure. Now, I don't know if that's what they're thinking, but I think from an electoral strategy perspective, that tradeoff makes a lot of sense. One thing I also noticed that you do see the present pivoting towards kind of an election vote. You had that sudden tweet about capping credit card interest rates, right? That basically caps profits for some banks, the financials directed poorly to that. You had the president basically ordering the GSEs to buy 200 billion in mortgages. That's going to put someone down on pressure on mortgage rates, and you also have today trade deal with India, and maybe you can have further easing and tariffs going forward. Everything is moving towards that more populist affordability concerns for the midterms. Now, that's not necessarily good for the markets, because one way to get affordability is just to redistribute corporate profits, which is what credit card interest rates, credit card interest rates caps are. I think Director Politi, I think I believe someone is quoting him as saying that home builders please build more, starting with the carrot, maybe then the stick, something like that. One way to get affordability is to just use your executive power and redistribute profits to the consumers. That might not be good for the market. That makes sense to me. Last phase of the discussion here is just taking a bit of what's been happening in markets since the war's nominations. As soon as that came out that evening, late last week, we saw the metals market especially start to take a pretty significant haircut. We actually, the Friday, we saw one of the largest drawdowns in history in the silver market, that goes down 30% in one day. I'm curious how you can tease out any sort of signal from that, because obviously we had a huge run up in metals over the last couple of months, positioning was just exceptionally stretched. I'm trying to figure out what kind of signal I can take from some of the market impact and how much of it was just positioning. Because obviously, you know, you nominate somebody who's traditionally a bit hawkish, a monetarist who just wants to get out of the QE game intuitively. That makes sense for metals to sell off, but then I think about some of these other dynamics of what we mentioned in terms of more rate cuts and that sort of thing, and just curious, how did you take the market impact of late last week, especially with the metals perspective? I think it's just silver being silver. When I look at a chart of silver prices over the past few decades, for whatever reason, sometimes it just goes to the moon, and that is always always followed by a precision decline. So I think of silver as something that attracts a lot of retail investors, a lot of momentum chasers, and we are in a really speculative market since the pandemic, we've had people buying bankrupt companies, buying meme coins, buying NFTs, buying dog coins, and so forth. All these guys are still there. They just move from on assets to the next. And over the past, I'd say a few months, they've moved to silver, and not just in the US, but globally as well, you can read and Bloomberg a lot of investors in China, for example, are nursing heavy losses from this. So silver just kind of went up and up and up. You can see that classic classic run and leverage, and it just kind of went to the moon. And then when you have so much leverage, so much that makes it fragile. And so just a small, small change in financial conditions could lead it all tumbling down. And it seems like a wash-aslam nation. You got a discreet string of the dollar. I got a little bit of a curve steepening, and that seemed to be enough to just top everything over. And then now you have these cascading impact where I've levered people off the cell, and maybe that triggers other margin liquidation. So it's just kind of a mess. So all I take from that is just we have a lot of speculation, and now we have less. Yeah, that was kind of my retuse. It felt like 80% of it was just speculative on lines and positioning, and it just needed something to trigger it. I'll make a note of this. So because I was actually in silver when it first went to 50, like a decade ago, and I wrote it, I felt really good, and then solid implode, and didn't feel as good. So the guys who are buying civil, like a lot of people on Twitter, they would say like, "Yeah, don't you know, there's a debatement trade, right? Dollar's going to zero. How can you hold Fiat?" Or maybe the banks are short, or maybe Chinese are buying so forth. Back in the 2010s, like when silver was going to $50, like on social media on YouTube, the guys were saying the same thing, like literally the exact same thing, right? You're doing QE, you're doing QE, don't you get it? The dollar's going to zero, you got to buy silver, right? Don't you get it? Big banks are short, they're going to implode, we can squeeze them. So it's such the same story over and over again. It's a compelling narrative, it has some basis in fact. Those are always the best narratives, and then you just add a whole bunch of leverage into it. So even in the 1980s, when the Huntsbrothers squeezed silver to $50, inflation was very high back then, deficit was high, and people were concerned, it was your debatement trade. So those things come to go, it's not going to be the last one, but if I had to guess, I would say the highs are in for silver for this year. I agree with that. All right, cool. I think we can leave it there, Joseph, really great deep dive in explanation into how to think about the new Fed share. Perfect guess for that, really appreciate you coming on. Thanks so much for having me.