So... Much... News...
Media Hit, 1/31/26
I’m going on THE Randy Tobler Show in the morning, with a wide range of potential topics that I think Randy and I might talk about. This week was another busy one out of Washington, so let’s dig into it.
Kevin Warsh Nominated to Fed Chair
News outlets are already calling this “the beginning of the end” for Jerome Powell’s Chairmanship.
I was also on NewsMax yesterday where this was explicitly the headline they were showing on air. Alas, the clip is behind a paywall for now.
If you want to know more about what Warsh could be like as chair, you absolutely MUST watch this interview conducted with Stanford University’s Hoover Institution.
In it, Warsh comes across as even more of an inflation hawk (i.e., he does NOT like inflation!) than even Powell.
Here’s the thing, and why this is an interesting pick. The Fed has a dual mandate:
Promote price stability (i.e. keep inflation low)
Promote full employment (not zero percent unemployment!)
These two things are fundamentally at odds in the sense that the Fed cannot actively achieve both simultaneously.
This is because, if they want to lower the unemployment rate, they need to stimulate the economy. This is done by… injecting more money into the economy. Which raises inflation.
If inflation is too high, then they need to slow down the printing presses. But this (usually) has a chilling effect on labor markets.
Historically, Powell has been pretty firm on trying (and sometimes failing spectacularly) to rein in inflation. But last summer he reversed course and said that the labor market deserved some additional focus when the Fed decided to cut interest rates.
Warsh, by contrast, states (in the video above) that “inflation is a choice… the Central Bank can hit any price level it wants, any inflation level that it wants. We might not like how they do it…”
Which… whoa. That, to me, sounds like he’s going to want to lay down the law and declare that the high inflation era is over.
But that means… higher interest rates, not lower.
So all of this begs the question: why on Earth would Trump nominate him to be the next Fed Chair?
Government Shutdown
In typical fashion, because Congress once again failed to pass a budget last fall and instead resorted to passing a “continuing resolution,” we are now, as of midnight, in another period of government shutdown.
To their credit (I guess?), the Senate managed to pass a “compromise spending package” on Friday, but because the House is not in session at the moment, they couldn’t meet to vote on the Senate’s bill.
We’ll probably be in shutdown mode until at least Monday, when the House members are able to get back to DC, but it could take until late into the evening for them to actually pass it.
Will the damage of this one be all that bad? Probably not. But once again, Congress is neglecting their self-imposed responsibility to pass an actual budget, preferring instead to engage in the political theater that is “government shutdowns.”
My AIER colleague, Paul Mueller, and I wrote about this last fall in Law & Liberty.
I maintain that we were exactly correct then and we’re exactly correct now (though I am, obviously, biased).
New Trade Deals
Canada and China reached a new trade… deal-type-thing just this past week.
Though they have been careful to point out that this is not a free trade deal, but is instead a sort of “reset.”
Really, tariffs and other trade restrictions between the two countries are coming down.
In response, Trump threatened 100% tariffs on Canada, even though a few weeks ago he said Canada should do a deal with China.
As if that weren’t enough, the EU and India announced a trade agreement just a few days later.
Not to toot my own horn, but almost a year ago, I wrote about this and warned of exactly this.
I’ve got another article that I’ve pitched to an outlet and am still waiting to hear back, but I have a LOT more to say about this.
Consumer Confidence: DOWN
The Consumer Confidence Board released their latest report on Tuesday.
Short version: consumer confidence is now even lower than it was during the pandemic.
Think about that for a minute…
The University of Michigan (Go Blue!) also released their Index of Consumer Sentiment recently.
They say that consumer sentiment is actually increasing at the moment, though we now have one full January-January of data.
When Trump took office, the index of consumer sentiment was at 71.7. Today, it’s at 56.4.
That’s… not really inspiring.
Trade Deficit: UP
Finally, we come to the trade deficit.
In their latest release, the BEA announced that the US trade deficit increased by 94.6% from October to November.
This was fueled by a decline of exports (-3.6%) and an increase in imports (+5.0%)
As a result, the trade deficit increased from $29.2 billion in October to $56.8 billion in November.
This definitely doesn’t help, considering that Trump has been giving talks in Michigan and Iowa talking about how he has been cutting the trade deficit.
Oops.