All You Need To Know About Warsh

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Hi, this is Alf - welcome back to The Macro Compass!Warsh is the new Fed Chair.I find it hilarious that people are calling him a hawk based on what he did 10-15 years ago. This is like looking at old pics of me with a head full of hair (still have one of these on LinkedIn!). These times are long gone.Jokes aside, I spent hours listening to the most recent interviews Warsh did (here and here, for example).Here are the most consequential thoughts he shared:1) Inflation is a choice, money creation drives it (as per Friedman, and that’s true in most cases);2) Fed is backstop for banking system, but needs to get out when job is done (fair);3) He believes inflationary money is created equally by Fed and the government (absolutely false: fiscal deficits create inflationary money, Fed monetary operations such as QE only create bank reserves);4) He believes the Fed balance sheet being so big ‘’crowds out the private sector’‘ (absolutely false: the private sector uses another form of money i.e. bank deposits, there is no ‘’crowding out’’ of anything);5) Need to get out of the ‘’fiscal and monetary’‘ mess inherited: a lot of talk about interest expense > defense spending (ok, so hear the plan now...);6) ‘’If we would run the printing press a little quieter, we would have lower interest rates’’;7) The plan is to shrink the Fed balance sheet, so we get lower rates, so private sector can thrive = higher economic growth (he is looking at the wrong printing press – Bessent has the key one, not the Fed);8) Rates should also be lower because we are on the verge of a productivity boom (his op…