So there are real tensions and questions that accompany Trump’s pick of Warsh. If his nomination is confirmed by the Senate, will the new Fed chair be able to persuade the rest of the policy-setting Federal Open Market Committee to shrink the Fed’s balance sheet just weeks after they stopped quantitative tightening? If he does succeed, will this steepen the US yield curve, raising the price of long-term government borrowing while lowering short-term debt financing costs? Will the conviction of a productivity miracle survive contact with a messy real world for much longer? And how will the new Fed chair’s views change when the data is less than obliging as it will be on many occasions?
This coincidence must alert readers that a tempest is brewing on subjects noted: lurking inflation, increasing debt, suppressed interest rates and the shifting of hegemonic power. There are only two important questions in investing that also apply to subjects impacting the future stability of the world — tell me why and tell me when. Plender gives us the “why”, the ever-increasing “intolerable burden” of government debt and suppressed rates leveraging the global financial system. He gives us the tipping point. What we await is “the when”, as in when do we know we have “tipped”. Paul Hackett Madison, NJ, US Letter: Why the geopolitics of international currency choice matters
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