Thoughtful Money with Adam Taggart

Warsh’s framework puts Fed policy under scrutiny

FOMC Live Reaction: Is The Fed Making A Policy Error? | Axel Merk

The discussion tests whether a more market-driven Federal Reserve can manage inflation, growth, fiscal pressure, and geopolitical shocks without repeating past policy mistakes.

3 key takeaways
  1. 1Kevin Warsh’s emphasis on financial conditions and a policy framework could mark a break from the Powell era’s forward guidance.
  2. 2Supply shocks and fiscal responses complicate the Fed’s inflation fight, while presidential and congressional choices shape the risks.
  3. 3A fragmented global economy could gradually weaken the dollar’s reserve role, with real rates and geopolitical risk driving precious-metals markets.

Don't miss

Axel Merk explains why Warsh’s repeated use of “framework” could signal a meaningful shift away from forward guidance toward stronger market signals.

The brief

Adam Taggart and Axel Merk begin with the Fed’s rate hold and two dissents, then parse Kevin Warsh’s language on financial conditions, growth, and the difficulty of reading subtle policy signals.

Merk argues that conditions may be tighter but not yet tight, leaving another hike possible while the Fed tries to slow demand without damaging productivity, investment, or growth.

The central tension is institutional: Warsh’s repeated focus on a policy framework suggests a return to meaningful market signals rather than the Powell-era reliance on forward guidance.

The conversation widens from monetary policy to fiscal risk, California’s proposed wealth tax, housing constraints, and the question of how much responsibility belongs to elected officials.

Merk rejects a simple replacement for dollar dominance, instead anticipating fragmentation and gradual reserve erosion as real rates, oil, Iran-related risk, and precious metals reshape markets.

What was said on this episode

39 statements · 19 positive · 14 negative · 1 mixed · 5 neutral

  1. Axel Merkon Kevin Warsh’s Fed initiativesPositive6:31

    Warsh’s Fed initiatives are worthwhile.

    “I believe that a lot of the initiatives he's undertaking are very much worthwhile”

    Listen at 6:31

  2. Axel Merkon Federal Reserve rate hikePositive15:05

    Warsh’s communication signals another rate hike.

    “which signals another rate hike is to come”

    Listen at 15:05

  3. Axel Merkon December Fed rate hikeNegative15:14

    Warsh’s comments imply a December interest-rate hike.

    “that means a December rate hike”

    Listen at 15:14

  4. Axel Merkon Kevin Warsh productivity policy speechNeutral20:45

    Warsh will give a significant speech on Fed productivity policy.

    “that means there's going to be a significant policy speech how he thinks the Fed should look at productivity going forward”

    Listen at 20:45

  5. Axel Merkon Federal Reserve mortgage-backed securities purchasesNegative23:16

    Buying mortgage-backed securities constitutes fiscal rather than monetary policy.

    “buying mortgage-backed security is not monetary policy, it's fiscal policy”

    Listen at 23:16

  6. Axel Merkon Federal Reserve credibilityPositive23:47

    A more credible, less politically influenced Fed permits lower rates and stronger growth.

    “interest rates can be lower than they would otherwise be. And growth can be better than it would otherwise be.”

    Listen at 23:47

  7. Axel Merkon Federal Reserve credibility and independencePositive23:50

    A more credible, independent Fed can support stronger economic growth.

    “growth can be better than it would otherwise be”

    Listen at 23:50

  8. Axel Merkon Kevin Warsh monetary policyMixed26:55

    Warsh favors gradual tightening rather than aggressively slowing the economy.

    “he doesn't want to slam the brakes, but he also he wants to have a slight tightening bias”

    Listen at 26:55

  9. Axel Merkon Financial markets and Iran war shockPositive28:38

    Markets will eventually move beyond the Iran war shock.

    “at some point, the market will move on”

    Listen at 28:38

  10. Axel Merkon Kevin WarshPositive34:53

    Warsh has achieved an appropriate communication balance.

    “I think by now, Kevin Walsh has the right balance on how he communicates that”

    Listen at 34:53

  11. Axel Merkon Kevin Warsh Fed frameworkPositive37:18

    Warsh has a framework and communicates it effectively.

    “Yes, I do believe he has a framework. Yes, I do believe he communicates it well.”

    Listen at 37:18

  12. Axel Merkon Kevin Warsh’s monetary-policy frameworkPositive37:19

    Warsh has a framework and communicates it effectively.

    “I do believe he has a framework. Yes, I do believe he communicates it well.”

    Listen at 37:19

  13. Axel Merkon Federal Reserve policyNeutral41:57

    Federal Reserve policy affects the economy with long, variable lags.

    “Fed policy acts with a long and variable lag.”

    Listen at 41:57

  14. Axel Merkon Federal ReserveNegative42:04

    The Fed should avoid rushing monetary-policy decisions.

    “the Fed shouldn't be rushing”

    Listen at 42:04

  15. Axel Merkon Central banks during supply shocksPositive42:18

    Central banks should focus on preventing excess demand during supply shocks.

    “the best that a central bank can really do is to prevent an overheating”

    Listen at 42:18

  16. Axel Merkon Heavy-handed fiscal response to supply shocksNegative42:56

    Heavy-handed fiscal responses are the biggest supply-shock risk.

    “The biggest risk with a supply shock is a heavy-handed fiscal response.”

    Listen at 42:56

  17. Axel Merkon Fuel subsidiesNegative43:54

    Fuel subsidies would be costly and create additional problems.

    “if you subsidize it, not only is it going to cost an arm and a leg to subsidize it, but it's going to. create a host of other issues.”

    Listen at 43:54

  18. Axel Merkon Federal ReservePositive47:04

    Keeping the Fed out of fiscal debates is a positive goal of Warsh’s Fed.

    “The Fed was mostly out of those discussions. And that's good news, right? That's part of the goal of this Fed.”

    Listen at 47:04

  19. Axel Merkon Operation TwistPositive47:58

    Recent fiscal-market discussions have focused on Treasury Secretary Bessent, not Warsh.

    “There has been a discussion about what's happening. The Operation Twist that Besant talked about, the focus was on Besant, not on Walsh.”

    Listen at 47:58

  20. The U.S. president can significantly influence the federal budget.

    “the president can have significant influence on the budget”

    Listen at 50:19

  21. Axel Merkon U.S. government branchesNeutral50:52

    Power among the three U.S. government branches shifts over time.

    “the balance across the three branches of government is shifting over time”

    Listen at 50:52

  22. Axel Merkon California proposed wealth taxNegative55:14

    A five-percent California wealth tax would constitute expropriation.

    “the amount five percent is expropriation”

    Listen at 55:14

  23. Axel Merkon U.S. housing marketNegative58:17

    The housing market is currently frozen by high rates and limited mobility.

    “we have a frozen housing market”

    Listen at 58:17

  24. Axel Merkon Interest ratesNegative59:18

    Interest rates are unlikely to decline soon.

    “I don't think interest rates are going to go down”

    Listen at 59:18

  25. Axel Merkon Housing-market normalizationNegative59:36

    Housing-market normalization has not yet ended.

    “I don't think we're at the end of that.”

    Listen at 59:36

  26. Axel Merkon U.S. gold standardNegative1:04:52

    The United States will not return to a gold standard.

    “we're not going to go back to a gold standard in the us”

    Listen at 1:04:52

  27. Axel Merkon US dollarNegative1:05:15

    The absence of alternatives does not prevent dollar reserve-status loss.

    “the U.S. cannot lose its status as a reserve currency because there is no good alternative. And I think I've talked to you about that.”

    Listen at 1:05:15

  28. Axel Merkon Global reserve-currency systemNegative1:05:37

    Global monetary fragmentation could replace a single reserve currency.

    “The alternative is fragmentation. the alternative is that there is no world reserve currency”

    Listen at 1:05:37

  29. Axel Merkon U.S. borrowing costsNegative1:06:26

    Reduced foreign financing raises U.S. borrowing costs.

    “the cost of borrowing is higher than it would otherwise be”

    Listen at 1:06:26

  30. Axel Merkon U.S. dollar exorbitant privilegeNegative1:08:09

    Deglobalization weakens the dollar’s exorbitant privilege.

    “it makes that exorbitant privilege less effective”

    Listen at 1:08:09

  31. Axel Merkon US dollarPositive1:08:17

    The dollar will remain dominant for some time.

    “the dollar is going to continue to be dominant for a while”

    Listen at 1:08:17

  32. Axel Merkon GoldPositive1:10:54

    Gold benefits from central-bank incentives to reduce dollar dependence.

    “Gold is a beneficiary in the trend”

    Listen at 1:10:54

  33. Axel Merkon Precious metals and Iran conflict resolutionPositive1:16:35

    Any resolution of the Iran conflict should benefit precious metals.

    “Any resolution should be a positive for precious metals.”

    Listen at 1:16:35

  34. Axel Merkon Federal Reserve response to AI debt slowdownNeutral1:17:43

    The Fed would respond to an AI-debt-driven economic slowdown.

    “If we are to have a slowdown because there's too much of a debt binge on the AI train, different from the late 90s, I do think that the Fed will react to that”

    Listen at 1:17:43

  35. Axel Merkon Precious metals and mining sharesPositive1:18:10

    Precious metals may hedge an AI-debt-driven slowdown.

    “precious metals, including the miners, might be a path to do that”

    Listen at 1:18:10

  36. Axel Merkon Precious-metals miningPositive1:19:11

    High mining margins make precious-metals mining increasingly attractive.

    “precious metals mining in particular because of the high margins are becoming quite attractive”

    Listen at 1:19:11

  37. Axel Merkon Precious metalsPositive1:19:19

    Precious-metals valuations are attractive.

    “as far as valuations are concerned, I think they're very attractive”

    Listen at 1:19:19

  38. Axel Merkon Axel MerkPositive1:21:13

    Axel favors his current precious-metals allocation.

    “if I look at my balance of risks, I do like my allocation”

    Listen at 1:21:13

  39. Adam Taggarton Voting in the upcoming electionPositive1:22:46

    Voters should participate in the upcoming election.

    “Go vote”

    Listen at 1:22:46

Statements are attributed to the speaker as said on the episode and reflect their view at the time, not PodLume's. They are not advice.

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