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James Lavish warns Fed will hide debt by redefining inflation

Friday, July 10, 2026 · from 2 podcasts
What Bitcoin DidBTC Sessions
  • The Fed will likely pivot to measuring inflation with a trimmed metric that excludes spikes in costs like energy and rent.
  • Treasury must roll $12 trillion in debt this year while consumer credit card delinquencies match 2008 levels.
  • Central bankers are gambling AI's efficiency will offset deficits, but Lavish says the math doesn't work.

The Federal Reserve is planning to change the scoreboard. Economist James Lavish argued on What Bitcoin Did that incoming leadership will likely adopt the trimmed mean PCE to measure inflation, filtering out volatile costs like energy and rent. This allows the central bank to claim victory on inflation while the real cost of living remains high.

Lavish sees this as part of a broader credibility crisis. He noted that the Fed's sacred 2% inflation target originated from a random comment by a New Zealand central banker, not rigorous science. The new goal, he argued, is to condition the public to accept 3% or 4% inflation through technical obfuscation.

"They’ll probably pivot to trimmed metrics to ignore price spikes."

- James Lavish, What Bitcoin Did

The move coincides with a fiscal emergency. Treasury Secretary Scott Bessant faces rolling $12 trillion of debt within a single year, Lavish said. Simultaneously, New York Fed data shows credit card delinquencies at 90 days matching the depths of the 2008 crisis. Consumers are defaulting on cards to preserve car and house payments.

On BTC Sessions, Larry Lepard framed the Fed's dilemma as a political performance. He argued Chair Kevin Warsh talks like a hawk but is actually looking for an excuse to slash rates before the November election, using AI productivity arguments as cover. Lepard said the Fed's entire existence is a lie, tasked with getting citizens to accept inflation to keep the system running.

Peter St. Onge, also on BTC Sessions, agreed that Warsh is a balance sheet hawk who will cave when markets pressure him. Both analysts see the Fed’s primary mandate as maintaining confidence in the dollar, not controlling inflation or employment.

Lavish believes policymakers are now betting on an AI-driven productivity miracle to bail them out of insolvency. If AI can drive costs down fast enough, the government can keep printing money to service debt without triggering hyperinflation. Lavish contends this bet ignores the human cost and the sheer scale of deficits, arguing the math for a clean exit simply doesn’t add up.

"Policymakers are praying for a productivity miracle to backdoor their way out of insolvency."

- James Lavish, What Bitcoin Did

The consensus across both shows is that the central bank is trapped. It must manage perceptions to preserve dollar credibility while actual economic stress mounts from debt and delinquencies. The likely path forward, according to Lavish, is another round of quiet debasement through balance sheet expansion, not overt rate cuts.

#Fed#Macro#Markets
Federal Reserve

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- Deep dive into what was said in the episodes

What Bitcoin Did
What Bitcoin Did

Danny Knowles

Is The Fed Lying About Inflation? | James Lavish • Jul 8

  • James Lavish argues the Federal Reserve will likely change how it measures inflation, possibly shifting to a trimmed mean PCE metric that excludes volatile outliers like energy and rent.
  • Lavish notes credit card delinquencies at 90 days have matched 2008 levels, per first-quarter New York Fed data. He links this to people fully embracing a debt-based economy.
  • Lavish sees the Fed's primary mandate as instilling confidence in the US dollar, not just managing inflation and employment. He views its 2% inflation target as a politically tolerable level the public won't notice.
  • James Lavish believes AI could be disinflationary, but fiscal dominance - government spending and debt issuance - overrides this effect. He cites multi-trillion dollar deficits on nearly $40 trillion of existing debt.
  • Lavish warns that an AI-driven productivity miracle would still require universal basic income and cause a spike in unemployment benefits, worsening deficits. He questions how a handful of companies could fund the government.
  • Lavish predicts the Fed will act on its balance sheet before adjusting rates, quietly expanding through treasury buybacks and T-bill purchases rather than overt QE. He calls this 'QE Lite'.
  • James Lavish states Treasury Secretary Bessent faces rolling $12 trillion of debt annually, creating pressure on Fed Chair Warsh to lower rates. He says bond traders rejected Powell's 2024 cuts, pushing 10-year yields up 100 basis points.
  • Lavish links a market crash to rising credit card and student loan delinquencies. He argues the financialized US economy cannot decouple from stock market health.
Also from this episode: (4)

Markets (1)

  • James Lavish argues the US economy is being propped up by asset holders - older demographics with wealth - driving 80% of spending. He observes restaurants are filled with older, silver-haired customers.

BTC Markets (2)

  • James Lavish explains the 2025 Bitcoin price decline stemmed from a hot money ball moving into AI and energy trades, plus OG holders selling at the $100K psychological level.
  • Lavish expects Bitcoin to recover over the next 12 months, citing models like the power law that point toward $180K-$200K by end of 2027. He notes this cycle lacked a dramatic blow-off top.

AI & Tech (1)

  • James Lavish describes his son pivoting from cybersecurity to advising an industrial company on AI hardware, illustrating how embracing technology creates new jobs.
#Macro#Fed#Inflation#Labor#BTC Markets
BTC Sessions
BTC Sessions

Warsh's Bluff, AI Bailout Risk & Bitcoin's Next Leg | Lepard & St. Onge • Jul 7

  • Peter Schiff says Fed Chair Kevin Warsh is only slightly more hawkish than Powell, Yellen, and Bernanke, ranking him a '2' on a 1-10 scale where the others are a '1'. He argues Warsh's 'regime change' rhetoric is just rearranging the Fed's silverware.
  • Larry Lepard argues Warsh is secretly dovish and will cut rates before the November election to boost the economy, citing Trump's supportive comments as evidence that 'the fix is in'. He predicts cuts in July or September, leveraging AI productivity arguments.
  • Lepard claims the Fed's entire existence is a lie, tasked with getting citizens to accept inflation and money printing to keep the system running. He views Warsh's tough talk on inflation as a script and gaslighting.
  • Lepard states the Fed will likely cut rates or keep them flat, contrary to market expectations of hikes. He points to the CME FedWatch tool showing 70% odds of a rate increase this year, which he believes is wrong.
  • Peter Schiff argues the Fed has an institutional bias towards lower rates to create inflation and disarm political opposition. He says Warsh has been seeking excuses to cut for years, including 'Robin Hood' monetary policy and AI-driven deflation theories.
  • Larry Lepard compares the AI boom to the dot-com and railroad eras, noting massive capital misallocation and a frothy bubble. He aligns with Jeremy Grantham on this point, despite disagreeing with Grantham on other issues.
  • Peter Schiff cites a 2013 Oxford study predicting one in three jobs lost by 2030 due to AI, but notes 13 years into that forecast have shown no such impact - job numbers are up. He attributes layoffs to COVID-era labor hoarding, not AI displacement.
  • Peter Schiff hypothesizes that globalist institutions like the World Economic Forum have pivoted from a failing climate change narrative to promoting AI as a new catastrophic crisis to justify a government takeover of the economy.
  • Larry Lepard cites a legitimate public complaint against AI: rising electricity bills from data center construction strain local power grids, hitting households in a K-shaped economy. He notes Trump's rule requiring data centers to provide their own power.
  • Michael Saylor told Lepard that AI will force the entire country to adopt nuclear power due to massive energy demand that fossil fuels cannot meet. Lepard views this as a positive trend toward a more efficient power source.
  • Peter Schiff argues Europe, Canada, and Japan are in dire straits with near-zero growth, crippled by regulation, government spending, and COVID-era debt expansion. He says the US is on a knife's edge, temporarily insulated by Trump but facing long-term trouble.
  • Lepard watches yen weakness and M2 growth as signals for monetary debasement. He believes the administration will run the economy hot with lower rates and credit growth to boost their odds in the November midterms, prioritizing short-term political gain over inflation lag.
  • Peter Schiff notes the out-party wins midterms 90% of the time, putting Republicans at a disadvantage. Current odds suggest Democrats will likely win the House, leading to two years of Congressional paralysis focused on partisan hearings rather than legislation.
  • Larry Lepard defends MicroStrategy's evolution, including its leveraged Bitcoin strategy and recent liquidity issues. He sees treasury companies and ETFs as necessary intermediaries for Bitcoin to infiltrate Wall Street and become a widely adopted monetary standard.
  • Peter Schiff analogizes Bitcoin's boom-bust volatility to gold's post-1971 price swings, arguing both are features of a non-dominant currency gaining market share. He says financial innovations like leverage products are natural during boom phases but will tank in busts.
  • Larry Lepard predicts the next leg up will drive gold to $7,000, silver to $200, and Bitcoin to $180,000-$200,000 within a year or two. He believes the monetary debasement trade is just warming up, not dead, and the Fed's mask is starting to slip.
Also from this episode: (4)

AI & Tech (3)

  • Lepard and Schiff both see AI companies seeking government stakes as straight crony capitalism, mirroring defense contractor tactics to gain regulatory armor and sweetheart deals in a politically hostile environment.
  • Peter Schiff argues AI technology itself is commoditized, with competitors copying breakthroughs like 'God' within three weeks, citing the Chinese Z.AI matching Mythos performance. He says value will accrue to infrastructure providers, not consumer-facing AI companies.
  • Schiff says GitHub shows a 7x to 10x year-over-year increase in software commits, contradicting predictions of AI decimating programmer jobs. He calls this the 'Excel moment' where tools increase output, not reduce jobs.

Protocol (1)

  • Lepard notes Bitcoin's corrections are decreasing in severity from 90% to 55%, signaling it is becoming less volatile. He sees this as a positive directional trend for the asset's maturation.
#Fed#Macro#BTC Markets#Startups#Regulation

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