Thorsten Polleit’s

The U.S. central bank (the Federal Reserve, or Fed for short) is the most powerful and influential central bank in the world. The Fed issues the U.S. dollar, the world’s reserve currency. Consequently, the interest-rate and liquidity conditions it sets in the U.S. dollar market are direction-setting and decisive for virtually all other currency areas worldwide. It is It is therefore understandable that a change in the leadership of the Fed—specifically the Federal Open Market Committee (FOMC)—is of very special interest to capital market investors around the globe.

Since May 22, 2026, Kevin Maxwell Warsh has been the new Chairman of the Fed in Washington, D.C. Warsh studied at Stanford University and Harvard Law School, worked as an investment banker at Morgan Stanley, served as an economic advisor in the White House, was a member of the Federal Reserve Board of Governors, a Fellow at the Hoover Institution, and a lecturer at Stanford Business School. He is married to Jane Lauder (an Estée Lauder heiress). But it would probably be more accurate to say: Warsh is the new “high priest” of the Fed, which effectively is the “mothership of the globalists”—why and how will become clearer in the following.

The FOMC Chairman is only one of twelve decision-makers who vote on interest rates and money-supply expansion. However, he can exert considerable influence on the US central bank’s monetary policy, with proverbial global effects. The FOMC Chairman shapes the meeting procedures, the analytical work at the Fed, and the Fed’s public communication—think of press conferences and speeches, for example.

How the U.S. central bank’s monetary policy might change—or will change— under Warsh’s leadership is what we will consider in the following. To do so, it is useful to first recall the Fed’s mandate. The Fed’s objectives are set by the U.S. Congress in the Federal Reserve Act (as amended in 1977). They include:

• First, maximum employment. The Fed should create conditions under which as many people as possible can find work.
• Second, stable prices: The Fed aims for price stability so that consumers and businesses can plan for the long term without strong inflationary or deflationary movements.
• Third, moderate long-term interest rates: This third goal is often seen as complementary, because low and stable long-term rates can be viewed as a result of achieving the first two goals.

Although the Fed’s goals have not changed in recent times (the most significant change was the announcement of a specific inflation target in 2012), the various Fed chairs since the early 1970s have pursued quite different monetary policies. Broadly speaking, one can distinguish periods in which U.S. monetary policy was more Keynesian and less monetarist, as well as (relatively short) phases in which the opposite was true—i.e., when monetarist elements dominated over Keynesianism.

What is meant by this?

A Keynesian monetary policy is activist and discretionary. Its main goal is to stimulate the economy, even if that requires high inflation. In contrast, a monetarist monetary policy is limited to keeping inflation low by maintaining low and stable money-supply growth. The central bank does not intervene arbitrarily or ad hoc in the financial and economic system.

What can we expect from the new FOMC Chairman, Kevin Warsh (the new “high priest of the Fed,” as noted at the beginning)? He enjoys strong support from the U.S. administration, was confirmed by the U.S. Senate as Chairman on May 13, 2026, and was sworn in by President Donald J. Trump.

Given the enormous importance of Fed monetary policy, it is reasonable to assume that President Trump selected Warsh because he will pursue the monetary policy Trump wants (i.e., above all, lower interest rates). At the same time, Trump had to ensure that a “respectable” Fed Chair was chosen—someone acceptable to the banking and financial industry and capable of defending the U.S. dollar internationally as the world’s reserve currency.

Experience shows, however, that it is not so easy for a U.S. president to install a compliant Fed Chair. Especially because, once in office, an official may begin to fulfil the expectations of his new institutional role rather than those of his mentor—and this is the so-called “Thomas Becket Effect.”

Thomas Becket (1118–1170) was Lord Chancellor and a close confidant of King Henry II of England. Becket vigorously represented the king’s interests against the Church. When he was appointed Archbishop of Canterbury in 1162, he switched sides and fiercely defended the rights and freedoms of the Church against the king. This led to conflict and his murder in Canterbury Cathedral in 1170 (he was later canonized, though). The Becket Effect describes the phenomenon in which a person, after being appointed to a political office, suddenly acts in the interest of the new role—and no longer according to previous personal interests or old loyalties.

Against this backdrop, let us now look at what Warsh said before his nomination to get an idea of where the Fed’s monetary policy journey will go under his leadership. In our view, three points are particularly important (we already reported on them briefly in Dr. Polleit’s BOOM & BUST REPORT of May 21, 2026).

• (1.) Warsh wants to reduce the bloated balance sheet of the U.S. central bank, thereby scaling back the central bank’s influence on the capital market. He sees the swollen Fed balance sheet as the cause of market distortions in interest rates and risk premia. During his confirmation hearings, Warsh addressed the issue of the “size of the Fed’s balance sheet” and liquidity provision in detail. He emphasized, however, that any reduction must be gradual and cautious to avoid triggering a new crisis.
• (2.) Even during his time as Fed Governor (2006–2011), Warsh was no friend of permanently high liquidity provision by the central bank. Warsh wants more market discipline and less dependence on the central bank—i.e., tighter money and fewer permanent liquidity injections. This might suggest that Warsh may shape future Fed policy with a stronger focus on the development of commercial bank money (M2) and/or the monetary base. In other words, credit and money creation may receive more attention at the Fed than in recent decades.
• (3.) Warsh sees—and this is probably of particular importance—the possibility of lower (or even very low) interest rates. This conclusion follows naturally when one considers the effects of “Artificial Intelligence” (AI) on productivity and economic growth, as Warsh and many other influential voices predict. This popularizes a visionary narrative that is hard to beat in attractiveness: more prosperity and, at the same time, less inflation — and room for Fed rate cuts.

How should we evaluate these “direction-setting” assessments made by Warsh? Let’s briefly examine the three points.

On (1.): Resistance to Warsh’s idea of shrinking the Fed’s balance sheet is already emerging. Fed Governor Michael Barr publicly warned that bank liquidity requirements would have to be reduced in order to shrink the Fed’s balance sheet—which would make the banking sector less stable. It would not be surprising if Barr’s words reflect the interests of the banks. When the Fed shrinks its balance sheet, it sells securities and/or does not reinvest the interest and principal payments it receives. In both cases, highly liquid central bank money is withdrawn from the banking sector—something banks are unlikely to welcome, since they earn a lot of money from high interbank liquidity.

In any case, a policy shift in which the Fed reduces its balance sheet is a very delicate matter that would probably take a great deal of time (if it is possible at all). The currently sharply higher capital market interest rates also make it unlikely that Fed policy under Warsh can or will immediately execute a sharp U-turn.

On (2.): It would be premature to assume that Warsh will transform Fed monetary policy from a Keynesian orientation to a monetarist one. Something like strictly following a “money supply rule” is not to be expected. There is simply no intellectual support for it from mainstream economists. This was different at the end of the 1970s: inflation was painfully high, and economists like Milton Friedman and Alan Meltzer had developed and positioned monetarism, so a monetarist policy (even if not in pure form) was seen as a real alternative and was implemented. Today the situation is different: mainstream economists doubt the feasibility of monetarism and largely reject it—for example, they question whether the money supply has a systematic influence on inflation or whether the central bank can deliberately control the money supply. Nevertheless, under Warsh’s leadership it could become more common in the FOMC to keep an eye on liquidity developments when setting interest rates. This could create a certain “rule-based” element and make it harder for Keynesian-oriented ad hoc decisions. In other words: Fed policy could perhaps become somewhat more predictable.

On (3.): Whether and to what extent AI will boost productivity and keep goods prices low or even drive them down cannot yet be said with certainty. What can be said, however, is that the trend development of goods prices—whether the technological innovation is called AI or something else—is determined by the trend development of the money supply. One should therefore not prematurely assume that successful AI will or can redefine the previous goods-price or inflation path.

A brief explanation: If a productivity increase makes produced goods cheaper and lowers their market prices, peoples’ real purchasing power rises (assuming the money supply remains constant). For falling goods prices result in an increase in so-called real balances: people can buy more goods with their money and/or demand additional goods. In this process, the initially fallen goods prices rise again, and the initially increased real balances are eroded by rising prices. In the new equilibrium, the general price level is unchanged, but the quantity of goods has increased. (An increasing real balance can, of course, also push up asset prices.) In short: productivity gains increase the wealth of the economy, but they do not determine the trend of goods prices—the trend of goods prices follows the development of the money supply.

Back to Artificial Intelligence. AI and “stablecoins” are extremely closely linked via “Agentic AI” (autonomous AI agents)—currently one of the hottest topics in tech and finance. AI agents are autonomous systems that make purchases, conclude contracts, pay bills, or trade with other agents. They need stable, programmable, machine-readable money. Stablecoins are virtually the perfect currency for the AI future world. Many therefore see AI as a major driver of stablecoin adoption.

The Fed under Warsh (who praises the AI revolution) will thus be confronted with the consequences of U.S. dollar stablecoins as a product of the AI boom. What is probably still underestimated: the shift from traditional bank deposits into stablecoins carries significant inflationary potential (see Dr. Polleit’s BOOM & BUST REPORT of August 7 and 21, 2025) that could surprise even the Warsh Fed.

But that is not the whole picture. Two major elephants remain in the room:

Elephant No. 1.—As mentioned at the beginning, the Fed is something like the “mothership of the globalists.” It primarily serves the interests of the most powerful forces—above all the “Deep State,” but also Big Business, Big Military, Big Tech and especially Big Banking. Murray N. Rothbard (1926 – 1995) put it succinctly in his 1994 book “The Case Against The Fed”: “(T)he Federal Reserve and other central banking systems act as giant government creators and enforcers of a banking cartel; the Fed bails out banks in trouble, and it centralizes and coordinates the banking system so that all the banks … can inflate together.

For the Fed and its decision-makers, their mission is preserving and possibly expanding U.S. dollar dominance. For the global fiat money system led by the U.S. dollar is ultimately a tool of American power and dominance. Consequently, only someone who is willing and able to effectively enforce American claims to power will be allowed at the controls of the Fed. In this sense, the Fed Chairman is a kind of high priest: the supreme servant and at the same time the leader of a large, invisible-to-many power apparatus and power cult that includes representatives of globalism, which makes use of the U.S. dollar fiat money regime.

Globalism stands for the ideology that people on the planet should not shape their destinies in a system of free markets, but should be directed and controlled from above by an elite.)As high priest, the Fed Chair serves the system—the fiat system, the globalist system—no matter how sympathetically and empathetically he may present himself to the public, as Kevin Warsh does.

Elephant No. 2.— The U.S. dollar-based world fiat money system forces a monetary policy of chronic credit and money-supply expansion, accompanied by low and trend-wise falling interest rates. In order for the fiat money regime not to collapse, credit and money volumes must increase over time, preferably at artificially suppressed interest rates, so that the inflationary illusion created by fiat money is maintained. It is simply not possible to end inflation or suddenly exit chronic credit and money creation without triggering a major crisis. The fiat money system can be inflated “very strongly” or “not quite so strongly,” but it must remain inflationary so that it does not collapse, so that the whole swindle does not come to light and a huge financial and economic crisis stands at the door. This also applies to the Warsh Fed.

What does all this mean for the investor? What impulses can be expected from US monetary policy?

The Fed under Warsh will very likely not undergo any fundamental change in monetary policy compared to its predecessors. Continuity will be high. The “hard restriction” under which the Warsh Fed will operate is the enormous and still growing US debt. This leads to “fiscal dominance”: the Fed must keep interest rates low and push them lower to prevent the debt pyramid from coming crashing down.

Warsh will work to lower the key interest rate as soon as a suitable opportunity arises. A decline in oil and energy prices, for example, would be a welcome trigger. Or the “AI narrative” will be used: rates will be cut in advance, before the hoped-for productivity gains from AI materialize. Shrinking the Fed’s balance sheet is certainly a correct intention, but in the current environment it is probably very difficult to implement and therefore not very likely in the short term.

Warsh will certainly not lead a “campaign against inflation” (as Paul Volcker did). The inflation of all goods prices will unfortunately continue, the purchasing power of the U.S. dollar will decline, and real interest rates (after deducting actual inflation) will very likely remain negative. Against this backdrop, investors continue to have good reasons (i) to expect rising goods and asset prices, that is ongoing currency devaluation, (ii) to avoid holding bank deposits and bonds, and (iii) to keeping physical gold and silver—because the Fed’s inflation regime will continue under its new high priest, Kevin Warsh.

If you want to know what this means specifically for savers and investors, and what they should and can do, then it is best to read the BOOM & BUST REPORT. All information at boombustreport.com.