The secret behind Kevin Warsh's appointment
Post number 2
In the previous post, we revealed who Kevin Warsh is, and also uncovered his hidden connection with Stanley Druckenmiller.
We explained the triple connection; these three share an identical philosophy. They oppose inflated government debt and believe that growth must come from the private market, not from printing money. Finally, we wrote that their combination promises rare synchronization between the Treasury Department and the central bank.
When examining all of this comprehensively, one suddenly understands how everything aligns with Trump's economic vision.
One of Trump's strongest principles during his term was stimulating the economy by eliminating financial regulation. Kevin Warsh is precisely the right person at the right time, and now also in the right place, for the practical implementation of this vision.
Why?
Because Warsh has always been a very sharp critic of financial regulation. He and Trump will work hand-in-hand to streamline the financial systems.
And that's not all. Trump, as we know, always has one eye on the market. Kevin Warsh, in this regard, is exactly who he needs.
If Powell was the person the market disliked the most (remember how the market reacted to his 'good afternoon'?), then Kevin Warsh is precisely the opposite.
As you've probably guessed, as a senior partner of Druckenmiller, Kevin Warsh is considered to have very deep connections on Wall Street. He is known for his connections, and moreover, for his sophisticated communication skills with the most powerful people in the industry.
Various reports even claim that one of the reasons Trump wanted him so much is because very senior figures on Wall Street, whom Trump trusts, highly recommended him. His communication with the market is smooth, and he is considered a well-known and respected figure in the global financial market.
To us, this sounds exactly like the 'star' Trump needs.
So if you've read various negative headlines, start looking at the facts. It's not for nothing that the market rose almost one percent on Friday after the announcement of his appointment (the market later fell due to problematic inflation data).
So what is the anticipated economic plan?
The anticipated policy combines several tools to drive the gears of the American economy:
1. Dramatic tax reform, reducing corporate tax from 21% to 20%, and down to 15% for companies manufacturing within the US.
The goal is to leave more money with businesses so they can invest in factories and technology.
2. Relief for households - tax exemption on tips and overtime to increase employee motivation.
3. Energy revolution - deregulation of fossil fuels (oil and gas). Cheaper energy reduces production costs for almost every product in the economy.
4. Liberalization of the financial sector. Warsh is known as a sharp critic of banking regulations (such as the Dodd-Frank Act). He aims to release capital restrictions on banks so they can inject more credit into the real economy.
The new monetary policy - walking a tightrope.
Warsh and the Fed are planning an interesting combination of 'carrot and stick': On one hand, interest rate cuts to encourage investment and growth. On the other hand, quantitative tightening (QT) - alongside interest rate cuts, the Fed will sell bonds to absorb excess money from the market.
This is a precise move designed to prevent 'bubbles' in the markets and control inflation, while encouraging the business sector to grow.
The expectation is that in the age of artificial intelligence, the old model claiming that 'rapid growth always brings inflation' is simply no longer valid. On the contrary, the rapid efficiency gains that will simultaneously affect many companies will lead to increased competitiveness and a reduction in production conditions and prices, ultimately resulting in lower prices.
If their forecast is correct, the US may enter a period of high growth alongside stable prices, which will support a positive stock market over time.
In the next post, we will review different parts of the market - and analyze Kevin Warsh's approach to them...