Kevin Warsh could be next Fed Chair. He’s currently favourite in betting markets. A recent meeting with Trump has been confirmed. So, who is he?
Albert Edwards is not known for his optimism (I've worked with him, I should know!) The macro strategist, currently at SocGen, has mostly been an Equity bear for the last decade or so, and has the Ice Age thesis (West would slowly replicate Japan’s experience of the 1990s by descending into outright deflation) on deflation.
But Edwards has written very positively about Warsh. Not something I’ve come to expect from Albert regarding policy makers. This from Edwards after hearing Warsh speak in a Oct 2016 meeting:
“[Warsh] explained that the Fed has been “captured” by a groupthink of academics led by the ‘Secular Stagnation’ ideas of his friend, Larry Summers. Rather than admitting they are wrong, this group, who failed to predict the current economic malaise,have constructed this theory to explain why ever more stimulus is required. In particular Warsh warned that the Fed had become the slave of the S&P.”
For Fed watchers it’s worth looking at these articles. Warsh in WSJ in August 2016. He writes:
“The conduct of monetary policy in recent years has been deeply flawed. U.S. economic growth lags prior recoveries, falling short of forecasts and deteriorating in the most recent quarters.”
“Two major obstacles must be overcome: groupthink within the academic economics guild, and the reluctance of central bankers to cede their new power...
First, the economics guild pushed ill-considered new dogmas into the mainstream of monetary policy….
The second obstacle to real reform is no less challenging. Real reform should reverse the trend that makes the Fed a general purpose agency of government…
Warsh as Chair would be shaping a different kinds of Fed it would seem.
And interview with Warsh on CNBC below:
Read a thought on valuations here. Cross fertilise. Read about the autistic mind here and ideas on the arts here. Ray Dalio on populism and also a thought on risk and valuations. Or Black Swan author, risk expert, on life lessons from his commencement address.