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BUSINESS
Warsh faces Fed credibility trap as Powell blocks Trump
Saturday, May 16, 2026 · from 3 podcasts
- Jerome Powell broke Fed tradition to stay on the board, denying Trump a governor seat.
- Kevin Warsh must choose between being a political puppet or a hawk who cuts rates.
- The Fed's impending credibility crisis hinges on flawed labor data and Warsh's legacy.
Source Intelligence
- Deep dive into what was said in the episodes
MacroVoices #532 Mike Green: Record Mechanical Flows • May 14
- Mike Green attributes the S&P 500's recent record gains to systematic flows from passive investment vehicles and rebalancing strategies, not macro analysis or investor sentiment.
- Green notes a record one-month inflow into equity markets coincided with a record monthly performance, driven by CTAs covering shorts, vol control strategies scaling up, and risk parity leveraging.
- Green argues the 1970s oil shock differs from today because the US was the marginal consumer then, whereas emerging markets are now, and global labor force growth is shrinking versus booming.
- Green forecasts Fed Chair Kevin Warsh may cut rates aggressively by September or October due to weaker inflation data and companies absorbing tariff costs rather than passing them on.
- Green's book argues passive investing and the shift to defined contribution plans have destroyed price discovery, inflating financial assets and outsourcing pricing to algorithms.
- Johnston says restarting shut-in Gulf production will take weeks for Saudi Arabia and UAE but months for Kuwait and Iraq, likely scaling back over three months.
- Johnston warns if Hormuz stays closed through June, draining over a billion barrels from global stocks will force prices higher, with the entire futures curve already re-rating to crisis levels.
- Patrick Ceresna outlines a trade positioning for a reversal in the Fed rate path using a bull call spread on December 2027 SOFR futures, targeting a repricing of aggressive easing.
Also from this episode: (6)
Energy (2)
- Green believes the current energy crisis will not cause persistent secular inflation because potential demand destruction and reduced mobility, enabled by remote work, could offset supply shocks.
- Johnston argues observed demand reduction, like falling Chinese crude imports, is not true demand destruction but drawdowns from strategic stocks, as mobility indicators remain robust.
Inflation (1)
- Green highlights flawed inflation data, citing residual seasonality from COVID and Ukraine war adjustments and an overestimating birth-death model adding roughly 100,000 jobs to reports.
Business (1)
- Green observes a hiring bifurcation: rates for workers 55 and up are up 84% year-over-year, while rates for those under 29 are down 25%, mirroring a breakdown of the apprenticeship system.
Politics (2)
- Rory Johnston reports the Strait of Hormuz remains effectively closed, with ship transits falling to single digits recently, leaving roughly 13 million barrels per day of non-Iranian crude shut in.
- Johnston estimates total Gulf shut-in production, including Iran's, will reach about 15 million barrels per day once Iran exhausts tank storage and begins shutting wells.
A New Leader — and a New Showdown — at the Fed • May 14
- Jerome Powell broke Fed tradition by staying as a governor after his chair term ended; the last precedent was in 1947 under President Truman's request.
- An investigation by U.S. Attorney Janine Piro into Fed HQ renovations was spurious but created a political blockade; Senator Tom Tillis refused to advance Fed nominations until it closed.
- Powell stated he stayed because threats risked politicizing the Fed's monetary policy; his leverage was blocking Trump from appointing another governor.
- Kevin Warsh served as Fed governor during the 2008 crisis and left in 2011 over disagreements on interventionism.
- Warsh criticizes the Fed's expanded balance sheet from under $1T pre-2008 to nearly $9T post-pandemic; he argues it exacerbates inequality and threatens independence.
- Colby Smith notes high inflation post-pandemic stemmed from Biden's stimulus, supply chain constraints, and Fed overstimulus.
- Warsh, historically an inflation hawk, shifted tone toward supporting rate cuts during his nomination, raising concerns about political motivation.
- Warsh's first June meeting as chair faces a credibility crisis: cutting rates appears political, while holding them maintains Powell's stance.
- Powell's continued presence as a governor politicizes Fed succession, mirroring Supreme Court dynamics and altering future policymakers' exit calculus.
Also from this episode: (1)
War (1)
- Current inflation risks from war and high oil prices make rate cuts economically disastrous, putting Warsh in conflict with Trump's demands.
CLARITY Under Attack | Bitcoin News • May 13
- The Senate confirmed Bitcoin-friendly Kevin Warsh to the Federal Reserve Board in a 51-45 vote, with Senator John Fetterman joining Republicans, clearing his path to potentially replace Chair Jerome Powell.
- Kevin Warsh has described Bitcoin as an important asset and a monetary policy signal, holds an equity stake in Lightning payment startup FlashNet, and maintains advisory ties to Bitwise and stablecoin project Basis.
- Square has automatically enabled Bitcoin payments via Lightning for roughly 1 million eligible U.S. merchants, with merchants receiving dollar settlements by default to remove currency risk.
- Charles Schwab launched spot Bitcoin trading for retail clients with a 75 basis point fee, integrating it directly into brokerage accounts that hold over $11 trillion in client assets.
- Franklin Templeton and Kraken parent Payward partnered to tokenize traditional financial products like money market funds, aiming to make them usable as on-chain collateral or cash management tools.
- The Producer Price Index (PPI) printed at 1.7%, nearly three times higher than the 0.5% economists expected, signaling coming consumer inflation and pressuring Bitcoin's price lower.
- David Bennett argues Bitcoin price action now correlates more strongly with traditional economic news like CPI and PPI due to increased ownership by mainstream finance, a shift from its first decade.
- Kyle Olney argues the Blockchain Regulatory Certainty Act (BRCA), Section 604, is the existential provision of crypto market structure legislation, as it protects non-custodial software developers from being prosecuted as money transmitters.
- Olney warns that without BRCA protections, developers like those behind Tornado Cash and Samourai Wallet face criminal prosecution for publishing code, which would drive innovation offshore to jurisdictions like Singapore or the UAE.
- CFTC Chairman Mike Selig filed amicus briefs backing prediction market Kalshi against Ohio and other states, asserting the CFTC's exclusive jurisdiction over event contracts traded on designated contract markets.
- The CFTC has sued five states - Wisconsin, New York, Arizona, Connecticut, and Illinois - for interfering with CFTC-regulated prediction markets like Kalshi, Polymarket, and Coinbase.
Also from this episode: (2)
AI & Tech (1)
- Anthropic and OpenAI explicitly warned that tokenized versions of their company stock sold without board approval are void and carry no economic value or shareholder rights.
Corruption (1)
- The Fraternal Order of Police (FOP) is lobbying against BRCA Section 604, arguing it would enable money laundering, aligning with banking lobby opposition to other parts of the Clarity Act.