Central bank independence is a relatively new concept from the 1990s. Historically, central banks operated as junior partners to the government, executing industrial policy. The move to subordinate the Fed to the Treasury is a return to a long-standing historical model.
Silver's dramatic price collapse was driven by an unwind of excessive retail leverage, not a fundamental reaction to Kevin Warsh's nomination. The narrative driving the speculative fervor—fears of currency debasement and a banking squeeze—is identical to previous silver bubbles in the 1980s and 2010s, indicating a cyclical pattern.
QE doesn't increase private sector purchasing power. It is an asset swap where the Fed buys Treasuries and provides cash-like deposits. This pushes investors into riskier assets like stocks and corporate debt, causing financial asset inflation, but not necessarily consumer price inflation.
The Trump administration's desire for rate cuts is a given. Warsh's distinct, long-held agenda is to reduce the Fed's balance sheet. This reconciles his hawkish reputation with the dovish policy of cutting rates, a consensus view within the administration.
As the Federal Reserve becomes more aligned with the executive branch, its traditional mandate to control inflation independently weakens. Consequently, voters may start holding the incumbent political party directly responsible for rising prices, making inflation a key electoral issue rather than a purely monetary one.
With federal debt at high levels, raising interest rates creates a massive fiscal transfer. The government's interest expense, now over a trillion dollars, becomes income for bondholders. This stimulatory effect for the wealthy can counteract the intended tightening, while simultaneously hurting lower-income individuals who need to borrow.
While rate cuts are expected, the bar for restarting large-scale asset purchases (QE) will be much higher under a Warsh-led Fed. His career-long opposition to balance sheet expansion means that the "Fed Put"—the market's expectation of a central bank backstop—will only be triggered by a significantly more severe financial crisis.
Modern Western economies are dominated by services (media, law, medicine) that are not capital-intensive and don't rely heavily on borrowing. This diminishes the impact of interest rate changes on the real economy, explaining why aggressive rate hikes haven't caused a recession and why low rates post-2008 didn't create inflation.