Authored by Jeffrey Tucker via The Epoch Times,

The choice of Kevin Warsh as the new chairman of the Federal Reserve has received mixed reviews, as can be expected. His professional connections lean establishment in every way, which is perhaps not what Trump’s base expected.

More interesting is that Warsh is on record as an inflation hawk, a critic of zero-interest rate policies, and a critic of the war on cryptocurrency. All of this strikes me as a good sign, even if he has since hinted in the direction of favoring lower rates.

In 2023, he wrote the following:

“History will give a full accounting of the grave errors committed in recent years in economic policy. A central lesson is already clear: Nothing is as expensive as free money. The costs of the Federal Reserve’s zero-interest policy are multiplying: The misallocation of capital—goosing the price of the riskiest and least-productive of assets—set the conditions for boom and bust. The financing of the ‘big state’ set the country on an unsustainable fiscal trajectory. The extraordinarily loose financial conditions created herd behavior among market participants and firms and complacency among policy makers, including regulators. The surge in inflation substantially raised the cost of living for citizens and undermined business planning.”

Every word of that is true. Having someone at the Fed who believes that way should come as a great relief.

The surprising part is that Trump himself has spent years denouncing the Fed for having raised interest rates faster than ever before in Fed history. He has also called for a dramatic lowering of rates to make the United States more competitive, thoughts that have people like me worried that such a policy would kick off a second wave of inflation.

Former Federal Reserve board member Kevin Warsh speaks during a monetary policy conference at Stanford University’s Hoover Institution in Palo Alto, Calif., on May 9, 2025. Ann Saphir/Reuters

Warsh seems to have his doubts about such a policy:

“The Fed seeks to fix interest rates and control foreign-exchange rates simultaneously—an impossible task with the free flow of capital. Its ‘forward guidance,’ promising low interest rates well into the future, offers ambiguity in the name of clarity. It licenses a cacophony of communications in the name of transparency. And it expresses grave concern about income inequality while refusing to acknowledge that its policies unfairly increased asset inequality.”

In the backdrop of all of this is what has been a disastrous policy at the Fed from 2020 onward, creating some $6 trillion in new money in service of a congressional plan to shower the country with money directly into people’s bank accounts. That this would lead to a devastating inflation is hardly a surprise. No student of money and finance could possibly doubt that this would be the result.

Why did this not happen with a similar quantitative easing back in 2008? Because in those days, the policy of then-Chairman Ben Bernanke was to pay more than the market rate for bank deposits, thus keeping hot money off the streets and safely in the bank vaults.

Warsh identifies the underlying problems with such a policy:

“The misallocation of capital—goosing the price of the riskiest and least-productive of assets—set the conditions for boom and bust.”

What he has identified here is a pattern known since the 1930s. John Maynard Keynes imagined that the central bank could drive rates to zero and generate prosperity as if by magic. The American and Austrian critics of that policy drew attention to deeper complexities. Interest rates serve a crucial role as a signaling system for investment. Artificially low rates essentially send false signals that set up conditions for a subsequent bust.

In other words, the policy of discretion designed to blow countervailing winds toward business cycle trends actually ends up creating and worsening the thing it was designed to fix. When that happens, the only possible way out is to let the recession happen, rebalance the capital structure, and clear the table to enable a new round of prosperity and growth.

To be sure, it’s been 40 years since the Fed has permitted a recession to happen without wild interventions designed to prevent them.

The layers upon layers of interventions keep piling up higher and higher, all built on a false foundation of debt. This is not only a national problem; the entire world economy is now addicted to debt finance, with no end in sight.

Let’s please take a step back and understand how this whole system is supposed to work in a genuine free market with sound money and no central bank.

In a state of nature, you consume what you produce: You catch a fish and eat it. If you want to grow more prosperous, you have to spend your time making a capital good such as a net that enables you to catch more fish. That little story illustrates the central point: All prosperity grows out of deferred consumption.

What about loan markets? When capital grows and the funds become available for lending, the price at which they are lent is called the interest rate. It is a measure of risk that the loan won’t be paid back and also a sign of time horizons. Longer time horizons would typically involve paying a higher rate rather than a lower rate of interest. This is what creates the yield curve, which is typically upward-sloping.

What about a base interest rate? It should be exactly what the market of supply and demand determine it should be, no higher and no lower. For example, if there is a vast amount of saved capital in the banking system—because people are really socking away funds for the future—there is a great quantity available for borrowers. This higher savings will lead to a lower rate of interest.

That’s the supply side of the equation. On the demand side, lower interest rates will intensify the desire for loaned funds from businesses and consumers. In effect, loan markets make it possible for savers to profit from lending to borrowers and be rewarded for doing so. All told, this is a beautiful system from which everyone benefits—provided it is not abused or manipulated for political purposes.

When interest rates are suppressed by the central bank or when government issues debt instruments below market rates, they are effectively gaming the system. It sends a signal that there are more savings, more capital, more loanable funds available in the loan markets than really exist. This affects capital investment in particular, as the most enterprising sector takes on liabilities with the intention of servicing them from future revenue streams.

When the plans flip in the other direction is when consumers lack the savings to justify the level of investment. That’s essentially what recession is: a reset toward reality. But if the central bank tries to ride through the recession with more and more cheap money, it risks more inflation unless there is a market for the funds. This is when the debt contagion spreads to more enterprises, more consumers, and more financial companies looking for a sure return. So long as the increase in financial outpaces the burden of debt obligations, this crazy system can create the appearance of something that works.

In case you haven’t guessed, that’s where we are right now, not just in the first stages but in very advanced stages. This is the world that the new Fed chair inherits. It makes his job even harder that the Fed’s own balance sheet is still out of whack from the 2008 rescue that saddled the Fed with mispriced debt assets that it still has not off-loaded.

People ask whether I’m optimistic or pessimistic about the new Fed chair. I’m neither. My prediction is that he will do a competent job at what he is supposed to do, which is keep the whole system of banking and finance afloat and out of crisis. All of Warsh’s editorializing at this point becomes mere theory as compared with the burdens of actually performing this job.

The Fed is not really a stabilizer of macroeconomic policy. It is a banking cartel designed to protect the financial system and government against the consequences of mismanagement.

In general, my sense is that Trump could have done better or he could have done worse. The real problem is that the job exists at all. Ideally, we would move back toward an honest system of enterprise, with a correctly priced loan market, sound money, competitive banks, and honest economic structures that are not so debt addicted. On that score, there is no reason for very high expectations.

Authored by Nick Giambruno via InternationalMan.com,

The Trump administration has made no secret of its desire to push the monetary easing pedal to the metal, even as the engine is already near the red line. They intend to push the system as hard as possible today and worry about the consequences later. One reason may be to inflate the stock market ahead of the 2026 midterm elections.

There are several indicators that the Trump administration intends to run it hot in 2026.

The first — and most important — is that Trump will likely succeed in consolidating control over the Federal Reserve.

Jerome Powell’s term as Chair of the Federal Reserve is scheduled to expire in May 2026, allowing Trump to appoint his replacement. Powell attempted — largely unsuccessfully — to resist Trump’s pressure for easier monetary conditions.

I expect Trump will get his way with the Fed in 2026, and that the central bank will bend to his demands. By replacing Powell, Trump will further stack the Fed with loyalists. The result will be money printing on a scale we’ve never seen before.

Further, Stephen Miran — another of Trump’s recent successful nominees to the Federal Reserve Board — has been pushing the idea of what he calls the Fed’s “third mandate.”

Traditionally, the Fed has two mandates: price stability and maximum employment. Miran’s proposed third mandate would be for the Fed to “moderate long-term interest rates.”

What that really means is that the Fed would openly finance the federal government by creating new dollars to buy long-term debt, keeping yields artificially low. In other words, the so-called third mandate is an explicit admission that the Fed is no longer independent. It would become a political tool used to fund government spending.

Without this support, massive federal spending would flood the market with Treasuries, pushing interest rates much higher. But with the Fed stepping in, Washington can keep borrowing while holding rates down — at least for a while. The catch is that this comes at the cost of debasing the dollar. Eventually, that debasement will force investors to demand higher yields anyway, only worsening the problem.

Remember, after Nixon severed the dollar’s last link to gold in 1971, the unspoken promise was that Washington would act as a responsible steward of its fiat currency. Central to that promise was the illusion that the Federal Reserve would remain independent of political pressure.

The idea was simple: without at least the appearance of independence, investors would see the Fed for what it is — a funding arm for spendthrift politicians — and confidence in the dollar would collapse.

That illusion is now shattering.

Let’s be clear: central banks were never truly independent. That’s why it was always an illusion — a societal myth. They exist to siphon wealth from the public through inflation and funnel it to the politically connected. The Fed’s independence was always a mirage — and now it’s disappearing fast.

Further, late last year, the Fed embarked on a new interest rate cutting cycle, even though, according to their own rigged CPI metrics, prices are rising at 2.7%, well above their 2% target.

The Fed has already cut rates by around 50 basis points in 2025 and signaled that more rate cuts are coming in 2026.

The Fed recently announced that it has ended the shrinking of its balance sheet and will now begin expanding it again, starting with the purchase of $40 billion in Treasuries in December.

The Fed insists this isn’t quantitative easing, calling it “reserve management” and pointing out that it isn’t explicitly targeting long-term Treasuries. That’s just wordplay. Buying Treasuries with newly created money is money printing, regardless of what label they attach to it. The Fed’s balance sheet is expanding again. A new printing cycle has begun.

We’ve seen this pattern repeatedly. The Fed expands its balance sheet, then tries to shrink it. Something eventually breaks in the financial system, and the Fed pivots right back to easing and money creation. Each time this happens, the balance sheet never returns to its prior level. It ratchets permanently higher with every cycle of debasement.

What makes the current situation especially telling is that the Fed is entering another balance-sheet expansion phase even though the balance sheet is still more than 50% larger than it was before the Covid mass psychosis. Before 2020, the Fed’s balance sheet was roughly $4 trillion. It exploded to nearly $9 trillion during the Covid response. Even after so-called “quantitative tightening,” it remains around $6.5 trillion — nowhere near its pre-Covid level.

This completely contradicts the Fed’s long-standing claim that programs like QE are temporary.

Remember when former Fed Chair Ben Bernanke promised the balance sheet would eventually normalize after the 2008 financial crisis? That promise was made nearly 15 years ago, when the Fed’s balance sheet was around $2.5 trillion and was supposed to shrink back toward pre-crisis levels below $1 trillion. Instead, today the balance sheet is more than double what it was when Bernanke made that pledge — and now the Fed is entering yet another expansion cycle that threatens to push it even higher.

The long-term trend is obvious. The balance sheet only goes one direction: up. And the implication is unavoidable. Every time the Fed expands its balance sheet, it debases the currency. This isn’t an accident or a temporary policy error — it’s the core feature of the system.

If you’re wondering what comes next, look at the red circle on the chart below—and note what followed the last time the Fed shifted from shrinking its balance sheet to expanding it.

We are now in the top of the first inning of what may become the most aggressive balance sheet expansion cycle in the Fed’s history.

So let’s put it all together.

The midterms are coming in 2026, and Trump wants to boost the stock market.

Trump will get to replace Fed Chair Powell with a loyalist, consolidating control over the central bank.

The Fed has embarked on a new rate-cutting cycle, despite inflation still running well above its stated targets.

The Fed has ended the shrinking of its balance sheet and has begun expanding it again, buying tens of billions of dollars’ worth of Treasuries each month.

All signs point to a continued nominal melt-up in the stock market in 2026 — and ever-accelerating currency debasement.

The trajectory is clear. When monetary policy becomes a political tool and money printing turns permanent, the risks aren’t abstract — they’re personal. Currency debasement doesn’t just distort markets; it quietly erodes savings, purchasing power, and individual freedom.

The real question isn’t whether this process continues — it’s how prepared you are when it accelerates.

That’s why I’ve put together a free PDF report: The Most Dangerous Economic Crisis in 100 Years… the Top 3 Strategies You Need Right Now. Inside, you’ll learn: How the economic, political, and cultural forces now in motion are converging into a single systemic crisis, what the coming risks really mean for your money, your security, and your personal freedom, and the three concrete strategies you can use right now to position yourself ahead of what’s coming. This isn’t about fear. It’s about clarity — and taking action before the consequences become unavoidable. Click here to download the free PDF report and get prepared while you still can.

President Putin in his Wednesday video call with Chinese President Xi Jinping underscored that the last major nuclear treaty with the United States is on the eve of collapse.

New START is set to expire on Thursday. Putin notified Xi that Washington has not yet responded. “As you know, on September 22, 2025, we proposed to the Americans to extend the key quantitative limits for one year as voluntary self-restrictions. However, we have not yet received an official response from the Americans,” Putin said, as quoted in state media.

Despite the situation with the New START Treaty, Russia remains open “to seeking negotiated ways to ensure strategic stability” – the Russian leader explained.

via Chinese state media/BBC

Putin further stated his country will act “in a measured and responsible manner, based on a thorough analysis of the overall security situation.”

Over several years going back to his first term, Trump has signaled a desire to forge a broader deal which would bring China into the agreement, which hearkens back to the Obama administration. 

Politico is meanwhile reporting that the Trump administration is preparing to “let go of arms control with Russia”:

The likely dissolution of the agreement comes at an especially fraught time. Russia and China are expanding their strategic arsenals and the Kremlin has threatened to use nuclear weapons on Ukraine. The Defense Department has held a series of internal meetings in preparation for a post-New START world, according to the two people and another person familiar — all of whom were granted anonymity to discuss internal talks — although it’s not clear what was discussed in the meetings.

“We’re looking at a very uncertain path ahead,” said Daryl Kimball, the executive director of the Arms Control Association. “Unless Trump and Putin reach some sort of understanding soon, it’s not unlikely that Russia and the U.S. will start to upload more warheads on their missiles.”

The Kremlin has made clear Russia is willing to extend it for another year, to allow more robust negotiations and for a longer deal to be finalized. But again, unless it is renewed or extended at the last minute, the landmark treaty will expire on Thursday, February 5.

Former Russian president Dmitry Medvedev, now deputy chairman of the country’s Security Council, on Monday made clear that Russia’s offer to quickly extend “remains on the table, and the treaty has not even expired yet, and if the American side wants to extend it, then this can be done.”

He also confirmed that Moscow has received no response on this offer from Washington:

Medvedev told the newspaper Kommersant that Moscow might have to wait until the expiry of the treaty on February 5 for a U.S. response to the Russian initiative.

When contacted for comment, a White House official told Newsweek Monday: “The president will decide the path forward on nuclear arms control, which he will clarify on his own timeline.”  

Indeed, the Trump White House has yet to issue anything official. Of course, President Trump is also known for making key decisions at the last moment, building suspense and leverage, based on also on his notorious unpredictable decision-making style.

The New START treaty, which has contained the risk of a nuclear standoff between America and Russia, expires soon. To make matters more dangerous, there is a new player in the game—China: https://t.co/w2LZ59AbYu pic.twitter.com/xNySz54I0V

— The Economist (@TheEconomist) February 4, 2026

According to Monica Duffy Toft, professor of international politics and director of the Center for Strategic Studies at The Fletcher School, “By providing transparency into the world’s two largest nuclear arsenals, New START has lowered the risk that either side will misinterpret normal military activity as preparation for a nuclear strike.”

It was signed in 2010 by Presidents Barack Obama and Dmitry Medvedev, and limits the number of deployed strategic warheads to 1,550 per side, and caps deployed delivery systems – including of missiles, bombers, and submarines – at 700. There’s also a mutual inspection regimen, allowing each side to monitor the other’s sites.