Warsh, forward guidance, and a post-Keynesian world

Fed Chair Kevin Warsh stood up at Jackson Hole and talked for twenty minutes without committing to a single thing. He didn’t signal anything on the interest rate front, nor did he offer any hints.    Instead, Warsh made an honest statement about the future: "Our knowledge just doesn't extend that far... at least not yet."   Within minutes, the two-year Treasury yield jumped to a one-month high, rate-hike odds nearly doubled, and both gold and Bitcoin both sold off — over a speech that basically said nobody can predict the future.   Here's what jumps out at me: the market is once again refusing to admit that the rules have changed. That’s the topic of this week’s podcast episode.     Back in episode 12, we made the case that Warsh is not a Keynesian. And he already told markets months ago that forward guidance is over — that they should be making decisions on their own analysis, not waiting on him.    But the market's still trading the old playbook anyway, hunting for a hawkish signal in a system that stopped sending one. I saw the same thing happen in 2022, when everyone was convinced that the Fed could never get rates back up to 5%.   We’ll explore that dynamic in today’s issue, and we’ll examine how it relates to Treasury Secretary Scott Bessent’s expanded the Treasury's bond buyback program. Then we’ll close with the bigger shift running just beneath the surface... and what it means for our financial foundation.   You can catch this week’s episode at: https://phoenicianleague.com/podcast-episode-21-the-feds-bluff-kevin-warsh-jackson-hole-and-the-end-of-forward-guidance/   Have a wonderful week!   -Joe Withrow   P.S. The next installment of our American System essay series is in the works... I'll have it ready for you soon.

 

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