The choice of the next head of the US Federal Reserve involves revenge, "betrayals" at the Treasury, and a 1% interest rate target.
If you have money invested, you need to understand this.
This decision could define the value of everything from 2026 onwards!
2️⃣ Why does this matter?
The Federal Reserve (Fed) is the world's "money printing machine." It sets the interest rate.
• If it cuts too much, inflation returns and destroys purchasing power.
• High Interest Rates: Attract Dollars (currency strengthens).
• Low Interest Rates (1%): Money flees to seek returns elsewhere. The Dollar falls and inflation returns.
• The Risk: Trump has signaled that he wants to cut interest rates to 1% (crisis level). Whoever takes over will have to decide between obeying the president or protecting the currency.
3️⃣ The Resentment Factor
The motivation is personal. Trump has harbored a "burning resentment" over the choice of Jerome Powell for eight years, blaming former Secretary Steven Mnuchin for the nomination.
To avoid repeating the "mistake" of having a president who is slow to make decisions, the rule has changed: according to the WSJ, he demands to be consulted personally on interest rate decisions, eliminating the total autonomy of the past.
4️⃣ The Wall Street Candidate: Kevin Warsh
Former Fed director and former Morgan Stanley banker. He is the investors' favorite.
Knowing that Trump detests weakness, Warsh has recently changed his tune.
At private dinners, he has said: "If the president wants someone who is weak, I won't get the job."
He is trying to prove that he can be loyal without being a puppet.
5️⃣ The Loyal Candidate: Kevin Hassett
Longtime economic advisor to Trump and Ph.D.
He attacks Warsh (who is a lawyer) saying that the Fed needs "academic weight" to avoid being manipulated.
The WSJ says that Jamie Dimon (CEO of JPMorgan) privately warned that Hassett would cut interest rates too quickly just to please Trump, destroying the bank's credibility.
6️⃣ Cold War at the Treasury
This dispute has put Treasury Secretary Scott Bessent in a difficult position.
His longtime mentor, Stanley Druckenmiller, is working behind the scenes in favor of Warsh.
However, Bessent is forced to defend Hassett publicly to prove loyalty to Trump, contradicting his market-oriented "godfather."
7️⃣ The 3rd Way: Christopher Waller (The Technician)
Current director of the Fed and the choice of 81% of executives in NY, according to research.
He has become the deciding factor. He pleases the political establishment by blocking the Digital Dollar (CBDC) and climate change ("anti-woke") agendas, but maintains the technical confidence of Wall Street to manage the economy without recklessness.
However, his chances are low.
8️⃣ The Final Condition
Richard Fisher (former Fed chairman) summarized the reality of this choice to the WSJ: "I don't think you get this job unless you've made some promise to Trump."
Whoever is chosen will enter the room with the mission of delivering low interest rates under total surveillance.
9️⃣ Possible Scenarios
The market should react in different ways depending on the winner:
• Hassett Scenario: Total obedience. Interest rates fall rapidly now, but the risk of inflation skyrockets in the long term. Long-term interest rates remain under pressure.
• Warsh Scenario: Initial euphoria on Wall Street, followed by constant tension if he refuses to cut interest rates at the speed Trump wants.
• Waller Scenario: The pragmatic solution. Less political noise, more technical analysis. However, less likely.
Bessent is the most likely next fed chair and markets aren't pricing this at all even though talking heads in-the-know forshadowed it months ago. https://www.cnbc.com/2025/09/19/steve-bannon-floats-idea-of-bessent-running-both-treasury-and-the-fed.html
He's Andrew Mellon 2.0
The Fed-Treasury merger is already well under way, its the most logical next step.
There is a lot of logic to combining roles. The "fed" and their member banks are no longer buying Treasuries at the rate they did in the past, therefore they no longer really matter to US Treasury in terms of being a reliable partner for ongoing debt-financing.
Over the last 10 years, all thru Trump-Biden-Trump we've seen a gradual breakdown in US Treasury - Fed relationship.
It makes complete sense for US Treasury to push to take over role of "central bank" - whether this is a good thing or bad thing is largely immaterial....its just how the relationship is structured now. The US Gov needs buyers and if Fed isn't willing they need to be forced into the role.
Yea and for all the pearl clutches its really just a return to how things used to be
The SLR reform goes into effect April 1, conveniently when these bigger refund checks start hitting the wires. https://www.federalreserve.gov/newsevents/pressreleases/bcreg20251125b.htm
That effectively makes it so banks don't have to "buy" treasuries, for all intents and purposes they're cash reserves to banks, which monetizes the debt without a big fed brrrr shocking the market.
What matters in credit is collateral, treasuries are the collateral that matters, but that also forces the government to over-spend... enter Bitcoin as collateral to re-collateralize the banking system.... no more need for fed discretion.
Stablecoins can buy treasuries?
The next chair will be Kevin Warsh or Hassett
I thought to cut rates the board has to vote