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AI capex drains Fed's power

Sunday, April 26, 2026 · from 2 podcasts, 3 episodes
2 SOURCESForward GuidanceBreaking Points
  • AI data center spending is siphoning capital from markets, weakening the Fed’s control over liquidity.
  • Rural resistance in Ohio and Virginia reveals the political cost of Big Tech’s energy grab.
  • Treasury now manages bond volatility, not the Fed - a silent shift in monetary power.

The Federal Reserve is losing its grip - not because of policy failure, but because the economy is pulling money out of financial markets and into physical infrastructure. Michael Howell on Forward Guidance calls it the Speculation phase: real economic activity, driven by AI capex, is absorbing the cash that once inflated asset prices. Money can’t be in two places at once. When Tesla allocates $25 billion to factories and Google builds 800-acre data centers, capital leaves Wall Street for Ohio backyards.

The shift is structural. Nvidia’s Jensen Huang doesn’t need more coders - he needs plumbers. Data centers require cooling systems, power grids, and water rights that rural communities are now refusing to grant. In Franklin Furnace, Ohio, residents are fighting Google over a high-pitched mechanical whine that makes homes unlivable. Voters in Wisconsin and Virginia have blocked similar projects. The blue-collar boom is real, but so is the backlash.

"Money cannot be in two places at once. If cash is funding a factory's working capital, it isn't buying call options."

- Michael Howell, Forward Guidance

The Treasury, not the Fed, is now managing liquidity. By swapping long-dated debt for short-term bills, it’s shortening duration and suppressing bond volatility. When the Move index spikes, the Treasury buys back older bonds. This backdoor stimulus masks a deeper truth: the private sector can no longer absorb the debt load. The interbank market has vanished. The state fills the void.

Kevin Warsh’s Senate hearing confirmed the Fed’s irrelevance. He called for abolishing forward guidance, arguing it traps policy in outdated narratives. Yet Trump wants a loyalist to cut rates - even as oil hits $300 and inflation reignites. Warsh dodged questions about Trump’s 2020 claims, fueling fears of political capture.

"The narrative of de-dollarization is colliding with data. Swift transaction numbers show US dollar usage is surging."

- Tyler Neville, Forward Guidance

The real economy has momentum. But that momentum destroys liquidity. Howell warns the gold-to-oil ratio is breaking. When commodities spike, wealth transfers from consumers to producers - draining the very cash pool that fuels speculation. The winter bottom? Likely 2027. Until then, the Fed watches.

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Source Intelligence

- Deep dive into what was said in the episodes

Forward Guidance
Forward Guidance

The Fed Is Irrelevant While CapEx Runs The Economy | Weekly Roundup • Apr 24

  • Kevin Warsh argues the Fed's constant communication creates market traps and should be abolished.
  • Massive data center investment is reviving US industrial demand, shifting power from email workers to physical laborers.
  • USD dominance is surging via Swift transactions, but the crashing Yen threatens to blow up global carry trades.
FedMacroAI InfrastructureLaborEnergy

Markets Are Misreading A Late Cycle Liquidity Crunch | Michael Howell • Apr 22

  • Growing economic activity pulls cash out of financial markets, causing a silent late-cycle liquidity squeeze.
  • The Treasury is manipulating the yield curve by swapping long-dated debt for short-term bills to suppress volatility.
  • Rising commodity prices act as the ultimate liquidity destroyer, signaling the end of the current market cycle.
MacroBankingFedMarketsEnergy
Breaking Points with Krystal and Saagar
Breaking Points with Krystal and Saagar

4/22/26: Fed Chair Nominee Grilled, Data Center Revolt, CIA Officers Die In Mexico, VA Redistricting • Apr 22

  • Kevin Worsh, Trump's pick for Fed chair, faced Senate grilling over his independence from presidential influence and his failure to disclose over $100 million in assets, which he promised to convert into 'vanilla' assets if confirmed.
  • Saagar noted that US consumer confidence is at a 'record low,' a trend that preceded the recent war in Iran and reflects a different public perception of the current presidency compared to the first Trump presidency.
  • A proposed Google data center in rural Ohio, planned for 800 acres, faces local opposition due to concerns over its high water consumption, potential power bill increases, and noise, despite promises of tax revenue and 50 permanent jobs.
  • Polling on tech companies has shifted dramatically, with Saagar observing that Trump's early support for AI data center build-outs now leaves Republicans on the ballot facing a potentially unpopular part of the GOP agenda.
Also from this episode: (6)

Politics (4)

  • Wandavid Rojas reports that two CIA officers died in a suspicious car accident in Chihuahua, Mexico, while allegedly training Mexican officials on drone use for methamphetamine lab destruction, with evidence reportedly destroyed by fire.
  • The CIA's counter-narcotics role in Mexico expanded after Trump designated Mexican cartels as foreign terrorist organizations, granting the agency more leeway to operate there, though its involvement in this specific operation is contested by Mexican officials.
  • Wandavid Rojas noted that Shinbaum's administration in Mexico has seen a 15% drop in homicides in its first year, an unprecedented achievement since the 2006 drug war, alongside significant decreases in fentanyl flows and record seizures.
  • Hakeem Jeffries celebrated Democratic success in a 'jerrymandering war' against Republican efforts, citing wins in California (Prop 50) and Utah, while criticizing Ron DeSantis's special session to redraw maps in Florida.

Elections (2)

  • Virginia voters narrowly approved a redistricting measure (51.5% to 48.5%) that is expected to redraw the state's congressional delegation from six Democrats and five Republicans to a heavily skewed ten Democrats and one Republican.
  • Ryan reports that Philadelphia congressional candidate Alice Stanford is receiving money from APAC, with nearly $30,000 tracked through Democracy Engine, despite her public denials and controversial comments about accusing Israel of genocide.
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