regime – LSD News

Kevin Warsh’s real Fed ‘regime change’ may happen deep inside Wall Street’s plumbing

LSD News Szerkesztőség — Fri, 22 May 2026 19:41:55 +0000

Kevin Warsh, then U.S. President Donald Trump’s nominee for Chair of the Federal Reserve, delivers an opening statement during his Senate Committee on Banking, Housing, and Urban Affairs confirmation hearing in the Dirksen Senate Office Building on April 21, 2026 in Washington, DC.

Andrew Harnik | Getty Images

Incoming Federal Reserve Chair Kevin Warsh’s talk about “regime change” at the central bank has generated speculation about everything from interest rates to major personnel changes to fundamental alterations in the way it operates and communicates.

But what that eventually might look like is subtler though perhaps more consequential – a rethink of how the Fed manages the financial plumbing in the U.S. economy and the mammoth balance sheet it has built through some 18 years of crisis fighting.

Interviews with former Fed officials and economists, along with a growing library of research, suggest Warsh could guide the Fed to a smaller role in day-to-day financial markets, while also setting clearer rules for how and when it should intervene.

Simply stated, the debate centers on whether the Fed should continue using its balance sheet as a regular tool for influencing financial conditions and supporting markets — as it has through much of the post-financial crisis era — or reserve it for periods of market dysfunction and more pernicious economic stress.

Rewriting the Fed playbook

The debate over the $6.8 trillion balance sheet is technical in nature and tucked away from the more common discussions about Fed policy. But the stakes are substantial.

Since the financial crisis that exploded in 2008, the Fed has aggressively used its holdings of Treasurys and mortgage-backed securities to stabilize markets and influence broader financial conditions.

Prior to the crisis, the Fed had a minuscule balance sheet relatively speaking – about $800 billion – but expanded it at one point to about $9 trillion. The Fed’s asset holdings now equate to about 23% of the U.S. economy, or some seven times where they were pre-financial crisis.

Any effort to change the system could have wide ramifications, potentially impacting Treasury yields, mortgage rates and other interest-sensitive areas of the economy, while influencing the way policymakers respond to future crises.

“It’s a debate we’re going to be seeing later this year. But one thing that’s encouraging about all of this is that nobody, including Kevin Warsh, is arguing that any of this could be done rapidly,” said Lou Crandall, chief economist at Wrightson ICAP and a longtime Fed watcher.

“It’s got to be done carefully, and some of the changes … would probably take time to implement,” he added. “Everyone’s looking at this as a medium-term project rather than part of the day-one agenda.”

Warsh called the balance sheet, in a Wall Steet Journal op-ed piece last year, “bloated” and said it could be reduced while at the same time allowing the Fed to lower interest rates.

What ‘regime change’ might entail

While Warsh has spoken in broad strokes about shrinking the Fed’s footprint, Wall Street already is gaming out what a new operating framework could look like.

Among the more provocative ideas comes from TS Lombard’s chief U.S. economist, Steve Blitz, who argues that a Warsh Fed could place greater weight on the overnight repo market — the short-term funding system that underpins the Treasury’s market function — rather than relying solely on the federal funds rate — which banks charge each other for overnight lending — as the key transmission mechanism for policy.

“The repo rate becomes the policy rate,” Blitz said in a client note.

In practice, that could create an unusual dynamic: Warsh might be able to satisfy Trump’s push for lower interest rates while still maintaining tighter underlying financing conditions as policymakers grapple with persistent inflation pressures.

However, he’s likely to run into quick opposition from his fellow policymakers, some of whom are skeptical of both the Fed’s ability to significantly reduce its holdings and the benefits this might provide.

“I think shrinking the balance sheet is the wrong objective, and many of the proposals to meet this objective would undermine bank resilience, impede money market functioning, and, ultimately, threaten financial stability,” Fed Governor Michael Barr said in a speech last week. “Some would actually increase the Fed’s footprint in financial markets.”

Barr’s thesis essentially is that looking merely at the size of the balance sheet is too narrow – that other issues, such as how it is comprised with respect to duration and composition also matter. Neglecting those issues, he asserts, could have “perverse” consequences such as increased volatility and even the possibility of more interventions from the Fed. At the same time, he said, lowering reserve requirements for banks could destabilize the system.

Understanding how it works

The balance sheet mechanics regarding reserves are straightforward.

When building the balance sheet, the Fed credits itself with digital cash and uses it to buy assets from banks, creating reserves. That provides the banks liquidity that then theoretically flows through the financial system. Conversely, when the Fed is reducing the balance sheet, it is no longer buying assets while also allowing the proceeds of the bonds it has purchased to roll off, rather than reinvesting them.

On the other side of the operation, the Fed is using its trading desk to achieve the interest rate it targets. The central bank also has a slew of other tools, such as the interest it pays on reserves, its discount window rate and, critically, overnight reverse repurchase operations that keep the financial flows moving.

The Fed has been operating under a system of “ample” reserves, a nebulous term that essentially means more than typical but not excessive — that would be “abundant.” Warsh has implied that the Fed can go back to its precrisis policy of “scarce” reserves, with the option to add when needed.

“Reasonable people can disagree on this,” said Bill English, the Fed’s former head of monetary affairs and now a professor at Yale. “The Fed could certainly go back to a system with scarce reserves, it would work perfectly well. Might be a little complicated to get there. You’d want to do it slowly, but I think they could do it.”

After spending much of the past 18 years depending on the Fed’s balance sheet to keep operations running smoothly — and, critics would argue, support the bull run in stocks — markets will be watching closely.

“I would very much expect the Fed to have an open discussion about establishing a framework for future operations, so the market doesn’t just assume that they’ll do unlimited amounts,” Wrightson economist Crandall said. Doing so “would allow the market to form more sensible expectations about what would happen.”

As things stand, the Fed has never communicated clear rules about when and how the balance sheet will be used.

Markets have adopted terms for the balance sheet operations – quantitative easing, or QE, for expansion and quantitative tightening, or QT, for reduction – but the Fed has never set out clear guidance about when either will be used. That’s particularly true when distinguishing between addressing financial market functioning and supporting its dual inflation and employment goals.

“They’ve never really set up a framework for when to use quantitative easing,” said former Cleveland Fed President Loretta Mester. “The Fed hasn’t done a very good job, I think, over time of distinguishing and explaining when it’s using asset purchases for a monetary policy reason.”

Changing the message

This is where Warsh especially can come in.

Setting the tone for policy guidance is right within the chair’s wheelhouse, and Warsh could try to diminish market expectations that the Fed is going to crank up asset purchases when Wall Street starts to get the jitters.

In addition, he has spoken in favor of efforts that Michelle Bowman, the Fed’s vice chair for bank supervision, has undertaken to ease some banking regulations. Part of that would alter what kinds of assets banks could claim as reserves and use in times of crisis, an effort that Dallas Fed President Lorie Logan cited in a recent speech, saying she looks forward “to seeing how that work progresses.”

Logan has firsthand experience with the dynamics that go into balance sheet management. Prior to her current position, she ran the trading desk at the New York Fed, which is charged with executing the central bank’s open market strategy.

Logan also noted, in the speech delivered April 2, that the Fed has other tools at its disposal to help the flow of liquidity — essentially using components from both the Warsh and Barr sides of the argument.

Like others, she spoke in favor of moving slowly to address the issue.

“I’d emphasize that any changes in the balance sheet should be gradual and planned carefully,” Logan said.

The work has begun

Internally, Fed officials are girding for debate.

Central bank researchers have released several papers on the issue, including one titled “A User’s Guide to Reducing the Federal Reserve’s Balance Sheet.”

The paper concluded, without an endorsement in either direction, that up to $2.1 trillion in reductions could be achieved through the current policy framework, with further cuts possible should the Fed change direction into a scarce reserves approach to banking. The paper also contends it would take “at least a year and quite possibly several” before the process could even begin.

All of these proposals are likely to be on the table after Warsh takes over Friday.

He inherits a Fed facing not only economic challenges but also high political expectations from a president who regularly attacked outgoing Chair Jerome Powell, nicknaming him “Too Late” as he repeatedly threatened to fire him for not carrying out Trump’s desire for lower rates.

For all the discussion about “regime change,” former officials caution against expecting a dramatic overnight overhaul, with Warsh’s lofty goals about to meet central bank reality.

Warsh will inherit a Federal Open Market Committee built on consensus, where even major policy shifts typically move deliberately and only after lengthy internal debate. Political considerations, these officials say, are left outside the central bank’s walls.

“I was going to FOMC meetings when [Alan] Greenspan was chair, so that’s a long time. Politics never enters that room,” said Mester, the former Cleveland Fed president. “Political considerations never enter the discussion.”

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Trump says regime change in Iran that ousts Islamic clerics ‘would be the best thing that could happen’ as another carrier heads to Mideast | Fortune

LSD News Szerkesztőség — Sat, 14 Feb 2026 00:53:40 +0000

Trump made the comments shortly after visiting with troops at Ft. Bragg, North Carolina, and after he confirmed earlier in the day that he’s deploying a second aircraft carrier group to the Mideast.

“It seems like that would be the best thing that could happen,” Trump said in an exchange with reporters when asked about pressing for the ouster of the Islamic clerical rule in Iran. “For 47 years, they’ve been talking and talking and talking.”

The president has suggested in recent weeks that his top priority is for Iran to further scale back its nuclear program, but on Friday he suggested that’s only one aspect of concessions the U.S. needs Iran to make.

Israeli Prime Minister Benjamin Netanyahu, who traveled to Washington this week for talks with Trump, has been pressing for any deal to include steps to neutralize Iran’s ballistic missile program and end its funding for proxy groups such as Hamas and Hezbollah.

“If we do it, that would be the least of the mission,” Trump said of targeting Tehran’s nuclear program, which suffered significant setbacks in U.S. military strikes last year.

Iran has insisted its nuclear program is for peaceful purposes. Before the June war, Iran had been enriching uranium up to 60% purity, a short, technical step away from weapons-grade levels.

Trump’s comments advocating for a potential end to Ayatollah Ali Khamenei’s rule come just weeks after Secretary of State Marco Rubio said a potential change in power in Iran would be “far more complex” than the administration’s recent effort to oust Venezuelan President Nicolás Maduro from power.

Rubio, during a Senate hearing last month, noted that with Iran “you’re talking about a regime that’s in place for a very long time.”

“So that’s going to require a lot of careful thinking, if that eventuality ever presents itself,” Rubio said.

Trump said the USS Gerald R. Ford, the world’s largest aircraft carrier, is being sent from the Caribbean Sea to the Mideast to join other warships and military assets the U.S. has built up in the region.

Trump had suggested another round of talks with the Iranians was planned for this week, but those negotiations didn’t materialize as one of Tehran’s top security officials visited Oman and Qatar and exchanged messages with U.S. intermediaries.

“In case we don’t make a deal, we’ll need it,” Trump told reporters about the second carrier. He added, “It’ll be leaving very soon.”

Already, Gulf Arab nations have warned any attack could spiral into another regional conflict in a Mideast still reeling from the Israel-Hamas war in the Gaza Strip. Meanwhile, Iranians are beginning to hold 40-day mourning ceremonies for the thousands killed in Tehran’s bloody crackdown on nationwide protests last month, adding to the internal pressure faced by the sanctions-battered Islamic Republic.

The Ford, whose new deployment was first reported by The New York Times, will join the USS Abraham Lincoln and its accompanying guided-missile destroyers, which have been in the region for over two weeks. U.S. forces already have shot down an Iranian drone that approached the Lincoln on the same day last week that Iran tried to stop a U.S.-flagged ship in the Strait of Hormuz.

Trump in exchanges with reporters on Friday still offered measured hope that a deal can be struck with Iran.

“Give us the deal that they should have given us the first time,” Trump said about how U.S. military action can be avoided. “If they give us the right deal, we won’t do that.”

Ford had been part of Venezuela strike force

It would be a quick turnaround for the Ford, which Trump sent from the Mediterranean Sea to the Caribbean last October as the administration built up a huge military presence in the lead-up to the surprise raid last month that captured Maduro.

It also appears to be at odds with the Trump administration’s national security and defense strategies, which put an emphasis on the Western Hemisphere over other parts of the world.

In response to questions about the movement of the Ford, U.S. Southern Command said U.S. forces in Latin America will continue to “counter illicit activities and malign actors in the Western Hemisphere.”

“While force posture evolves, our operational capability does not,” Col. Emanuel Ortiz, spokesperson for Southern Command, said in a statement. U.S. “forces remain fully ready to project power, defend themselves, and protect U.S. interests in the region.”

The Ford strike group will bring more than 5,000 additional troops to the Middle East but few capabilities or weapons that don’t already exist within the Lincoln group. Having two carriers will double the number of aircraft and munitions that are available to military planners and Trump.

Given the Ford’s current position in the Caribbean, it will likely be weeks before it is off the coast of Iran.

Trump has repeatedly threatened to use force to compel Iran to agree to constrain its nuclear program and earlier over Tehran’s bloody crackdown on nationwide protests.

Iran and the United States held indirect talks in Oman a week ago, and Trump later warned Tehran that failure to reach an agreement with his administration would be “very traumatic.” Similar talks last year ultimately broke down in June as Israel launched what became a 12-day war on Iran that included the U.S. bombing Iranian nuclear sites.

Long carrier deployments affect crews and ships

The USS Ford, meanwhile, first set sail in late June 2025, which means the crew will soon have been deployed for eight months. While it is unclear how long the ship will remain in the Middle East, the move sets the crew up for an unusually long deployment.

The Navy’s top officer, Adm. Daryl Caudle, told reporters last month that keeping the Ford longer at sea would be “highly disruptive” and that he was “a big non-fan of extensions.”

Carriers are typically deployed for six or seven months. “When it goes past that, that disrupts lives, it disrupts things … funerals that were planned, marriages that were planned, babies that were planned,” Caudle said.

He said extending the Ford would complicate its maintenance and upkeep by throwing off the schedule of repairs, adding more wear and tear, and increasing the equipment that will need attention.

For comparison, the aircraft carrier USS Dwight D. Eisenhower had a nine-month deployment to the Middle East in 2023 and 2024, when it spent much of its time engaged with the Iran-backed Houthi rebels in Yemen. The ship entered maintenance in early 2025 as scheduled, but it blew past its planned completion date of July and remains in the shipyard to this day.

Caudle told The Associated Press in a recent interview that his vision is to deploy smaller, newer ships when possible instead of consistently turning to huge aircraft carriers.

Trump snatches Maduro but leaves his regime in charge for now | Fortune

LSD News Szerkesztőség — Sun, 04 Jan 2026 10:49:13 +0000

Hours after President Donald Trump stunned the world by saying the US plans to “run” Venezuela, uncertainty over what that means and who is in charge loomed over the South American nation.

Ousted Venezuelan President Nicolás Maduro was an indicted prisoner on a flight bound for New York by the time his Vice President Delcy Rodríguez — who Trump said would partner with Washington to “make Venezuela great again” — denounced the intervention as “barbaric” and a “kidnapping.”

Adding to the confusion was that the White House offered few details about what running an oil-producing nation of about 30 million people would entail. A US official said Secretary of State Marco Rubio — who has spent his career criticizing Maduro and his predecessor, Hugo Chavez — would take the leading administration role.

For now, there’s no plan spelled out to have American troops or administrators in Venezuela. But Trump signaled he’s keenly focused on the country’s petroleum, saying the US would have a “presence in Venezuela as it pertains to oil.” That could mean a greater role for Chevron Corp., which still operates in Venezuela under waivers from sanctions, as well as for other major American oil companies.

Trump’s resistance to keeping American boots on the ground and his dismissal of Venezuela’s opposition leader Maria Corina Machado as a “nice woman” not ready to take power suggest he decided on giving Rodríguez and other Maduro loyalists a second chance over full-blown regime change. Maduro was in US custody in Manhattan by Saturday evening, according to a person familiar with the matter who requested anonymity.

Trump is “essentially trying to control the vice president and people around her through carrots and sticks to get the outcomes the United States wants,” said Matthew Kroenig, vice president and senior director of the Atlantic Council’s Scowcroft Center for Strategy and Security. “We’ll see if it works.”

Trump appeared to confirm that approach with his remarks later in the day to the New York Post, when he said that US troops on the ground would not be necessary as long as Rodríguez “does what we want.”

That strategy is a huge gamble — particularly for a president who campaigned in 2016 on ending America’s “forever wars” but has since used the US military to strike targets in Iran, Yemen, Nigeria and the Caribbean Sea.

Venezuela has suffered through decades of mismanagement that eroded the country’s oil infrastructure, sparked prolonged bouts of hyperinflation and saw millions of economic and political migrants flee for neighboring countries and the US. A total collapse of the government sparked by the early morning US strike risks causing even more turmoil.

Rodríguez, considered by many to be the most powerful person in the country after Maduro, gave mixed messages in her public comments on Saturday. She called for the ousted president’s return, but she also said Venezuela could still have “respectful relationships,” perhaps offering a path to a detente with the US if she can consolidate power and the two sides cooperate.

Trump warned of a potential second wave of American attacks if that cooperation isn’t forthcoming.

“All political and military figures in Venezuela should understand what happened to Maduro can happen to them, and it will happen to them” if they weren’t “fair” to the Venezuelan people, he said.

‘Run Properly’

In the short term — and barring a breakdown of governance — the administration’s move could offer it the opportunity to help revive Venezuela’s decaying oil industry, something that Trump seemed particularly focused on when he announced Maduro’s capture.

“We’re going to have our very large United States oil companies, the biggest anywhere in the world, go in, spend billions of dollars, fix the badly broken infrastructure, the oil infrastructure, and start making money for the country,” Trump said. In the same news conference, he said, “We’re going to make sure that that country is run properly.”

A multiyear recovery of Venezuelan oil production could entail a 4% decline in global oil prices over time, according to an analysis by Bloomberg Economics. That would help the US president address the affordability concerns voters have, but energy analysts added that it could take years for Venezuela’s oil industry — plagued by mismanagement, corruption and sanctions — to recover.

“Both upside and downside scenarios have significant implications for Venezuela’s outlook, debt markets, global oil supply, and the US standing in the region and the world,” Bloomberg Economics analyst Jimena Zuniga wrote.

Following the Trump news conference, a US official laid out some priorities for the coming days, saying that administration officials will engage diplomatically with those remaining in the Venezuelan government, as well as with oil executives on expanding output. The official said the US military will remain ready and the oil embargo will remain in effect. US strikes on suspected drug vessels will continue.

Yet the uncertainty over what really happens next hung over Caracas as it settled into its first night without Maduro in more than a decade, with many of his regime’s loyal backers still in the country.

That reality, and Delcy Rodríguez’s long history with Maduro, are “why I’m a bit skeptical this can work out long term,” said Ryan Berg, director of the Americas Program and head of the Future of Venezuela Initiative at the Center for Strategic and International Studies in Washington.

All day long, Venezuelans lined up outside grocery stores and gas stations amid worries about the nation’s future.

“A bigger concern really would be that this all falls apart here, that there isn’t an effort to make sure there’s a successful handoff,” said Matt Terrill, managing partner at Firehouse Strategies.

Iraq, Afghanistan

While Trump sought to project optimism, the military maneuver recalled past US efforts at regime change that yielded mixed results.

Under President George W. Bush the US invaded two countries, Afghanistan after the Sept. 11, 2001 attacks and Iraq, to depose Saddam Hussein, in 2003. Both conflicts and the insurgencies they spawned mired the US in bloody and costly occupations for years. Frustration over those deployments and the messy Afghanistan withdrawal helped propel Trump to the presidency twice.

It’s now a legacy he — and perhaps Rubio, a potential 2028 presidential candidate — risks taking on.

“This is, to paraphrase Winston Churchill, not the beginning of the end, but the end of the beginning,” CSIS’s Berg wrote on Saturday. “Venezuela will enter a long transition with even greater U.S. involvement in shaping the government to come.”

This story was originally featured on Fortune.com

Behind Bitcoin’s Struggles In Trump’s New Regime — Analyst

LSD News Szerkesztőség — Mon, 29 Dec 2025 11:06:59 +0000

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Against widespread expectations, the second term of Donald Trump as the US President has yielded a positive effect on Bitcoin’s price. While the flagship cryptocurrency has recorded an all-time high since Trump’s inauguration in January, the market has mostly been in consolidation and range-bound phase, with the broader picture still taking on a bearish form. Crypto analysis page XWIN Research Japan recently offered a comparative analysis with the post-election euphoria seen in 2016, to explain why the post-2024 price action is without enthusiasm.

Analyst Explains Why Bitcoin’s Structure Differs Sharply From 2016

In the Quicktake post on CryptoQuant, the research and education institution draws a critical comparison between the 2016 and 2024 post-election periods. Just after Trump’s victory in 2016, the crypto market operated within a low-inflation and low-interest-rate environment, one that is ideal for a market with growing liquidity. Also, the crypto market’s relatively small size allowed for quick accumulation of speculative liquidity. Hence, the market was able to get sufficient capital to serve as fuel for a prolonged, yet powerful, uptrend.

However, early 2025 saw a different market environment and dynamic. The year began and extended into a high-rate period, where financial conditions increasingly became crippling. Also, the larger market size (compared to the post-2016 election market), alongside increased participation among several investors, has structurally reduced the stand-alone importance of political events on price movements. Simply put, policy implementations can barely move Bitcoin’s price alone, especially when encumbered by more liquidity constraints.

LTH-SOPR Ratio Further Reflects Caution

XWIN Research Japan also references data obtained from the Bitcoin SOPR Ratio (LTH-SOPR/STH-SOPR), which reinforces the cautious stance among investors following Trump’s second inauguration. The Bitcoin SOPR Ratio deciphers market sentiment by comparing whether long-term holders are realizing profits more aggressively than short-term holders, serving as an important indicator of whether a price trend is driven by institutional conviction or speculative trading.

According to the research team, Bitcoin’s long-term holders (LTHs) are realizing their limited profits. Short-term holders, on the other hand, are trading within red territory. Historically, this condition is typically found when the market is about to embark on a prolonged journey of demand-supply adjustments.

Source: CryptoQuant

Based on historical data, it becomes clear that Bitcoin is currently within a fundamentally bearish structure. Although XWIN Research elucidates that “as long as long-term holders maintain relative dominance and short-term holder selling is absorbed, downside may be supported,” but this came with a caveat that upside leadership would likely also remain restricted.

The analytics group further conjectures that a stable growth of Bitcoin ETF inflows, alongside a clear depreciation in LTH distribution, would be pivotal in rescuing BTC from its downward spiral. Until these happen simultaneously, bitcoin might remain in its current state of inertia, or — in the worst case — dive further south. At press time, Bitcoin holds a valuation of about $87,623, recording a slight 0.5% loss since the past week, and a 0.6% ascent since the last 24 hours, according to CoinMarketCap data.

BTC trading at $87,637 on the daily chart | Source: BTCUSDT chart on Tradingview.com

Featured image from Pexels, chart from Tradingview

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As regime change looms at the Fed, one candidate emerges as frontrunner for chair

LSD News Szerkesztőség — Tue, 02 Dec 2025 00:58:40 +0000

Kevin Hassett, director of the National Economic Council, speaks to members of the media outside the White House in Washington, DC, US, on Friday, Oct. 24, 2025.

Francis Chung | Bloomberg | Getty Images

President Donald Trump knows who he’s going to select as the next Federal Reserve chair but isn’t saying yet. Prediction markets have their minds made up, but the front-runner also is playing it coy.

While that part of the mystery appears ready to clear up in the coming weeks, what’s far less certain is the type of environment the new central bank leader will face at a potential crossroads for the U.S. economy.

National Economic Council Director Kevin Hassett has been dubbed the clear favorite, buoyed by a Bloomberg News report last week that handicapped the five-person race to succeed current Chair Jerome Powell, whose term runs out in May.

Asked Sunday about the situation, Trump told reporters aboard Air Force One, “I know who I am going to pick, yeah. We’ll be announcing it.” Beyond that, he smirked when asked about Hassett, adding “I’m not telling you, we’ll be announcing it.”

The candidate himself made the rounds on the weekend talk circuit, also dodging questions about his prospects. Hassett is part of a field that also includes current Governors Christopher Waller and Michelle Bowman, former Governor Kevin Warsh and BlackRock fixed income chief Rick Rieder.

“I’m really honored to be amongst a group of really great candidates,” Hassett said Sunday on CBS’ “Face the Nation.” He did note that markets had a positive reaction to the report of him emerging as the favorite, saying that Americans “could expect President Trump to pick somebody who’s going to help them, you know, have cheaper car loans and easier access to mortgages at lower rates.”

Shortly before that, on Fox News, Hassett merely stated, “If he picks me, I’d be happy to serve.”

Predictions markets have been off to the races in recent days, placing firm odds on Hassett getting the job. As of Monday afternoon, Kalshi traders assigned a 79% probability, while PredictIt put the chance at 75% and Polymarket had it at just 63%, with “no announcement by Christmas” having the second-highest probability of 22%, easily topping any of the other four finalists.

A divided Fed

Whomever the actual pick is will take over a Fed that is currently torn between officials who think additional interest rate cuts are warranted to head off potential trouble in the labor market against those who worry that inflation continues to pose a threat that would be exacerbated by further easing in monetary policy.

For the next rate decision on Dec. 10, futures market traders are assigning an 87.6% chance of a cut in trading that has been highly volatile in recent weeks.

Trump and other administration officials have been vocal about their preference for much lower rates, and the president has stated that is a litmus test for the next chair. In 2026, members of the rotating cast of regional presidents who get a vote on the Federal Open Market Committee will have a hawkish tilt, meaning a preference to fight inflation and hold rates steady.

But the coming Fed regime will be about more than rates.

In a CNBC interview last week, Treasury Secretary Scott Bessent, who is leading the Fed chair search, said he favors a rethink of the Fed’s mission.

“We’ve gotten to this point where monetary policy has gotten very complicated, and it’s more than just cutting rates,” he said. “I think we’ve got to kind of simplify things.”

Call for reform

In particular, Bessent singled out the role of regional presidents.

While they play a relatively limited role — at least compared to the chair and the Board of Governors — in setting rates and other issues related to monetary policy, public commentary from the local leaders can move markets at times.

Bessent said that is part of broader issues related to outsized role the Fed has grown to play in the economy and financial markets, largely since the financial crisis when the central bank played a pivotal role in implementing programs to guide the economy out of its worst slide since the Great Depression.

“I think it’s time for the Fed just to move back into the background like it used to do, calm things down and work for the American people, set monetary policy on a good course,” he said. “All these speeches by these bank presidents … are just redundant. Why don’t they actually just come out and talk about the meaningful issues to the American people, rather than the short term view of the next meeting?”

The view on regional presidents is important in that they come up for reappointment in 2026. While the local boards hire the presidents, they are subject to the Board of Governors’ approval. One issue Bessent also commented on was that several presidents are not from the districts they represent.

Mohamed El-Erian, the chief economic advisor at Allianz, applauded Bessent’s view.

“We don’t need a play-by-play Fed,” El-Erian said Monday morning on CNBC. “We need the Fed to cool it. We need the Fed to step back and take a bigger, sort of visionary view. And we need reforms. We desperately need reforms. And I think all five on the short list are committed to reforming that institution, which is critical, not just for the U.S. but for the global economy.”

Correction: The Federal Reserve’s next policy meeting is Dec. 9-10, with a rate decision released on the second day. An earlier version of this story misstated the date.

‘The tariffs are a big tax increase’: Top bank crunches the numbers on how much Americans are paying for Trump’s trade regime | Fortune

LSD News Szerkesztőség — Thu, 13 Nov 2025 06:10:35 +0000

“Bust or boom?” That’s the big question at the heart of UBS’ big forecast for the U.S. economy for 2026 through 2028. But the team led by economist Jonathan Pingle also tackles a question that economists have been raising throughout 2025: the fact that tariffs amount to a large tax increase in all but name. Their analysis finds that the tariffs are acting as a substantial drag on growth and are actively contributing to persistent inflation, eroding real income gains for consumers.

“The tariffs are a big tax increase,” the report states simply. According to UBS, the current tariff policies imply a weighted-average tariff rate of 13.6%, based on 2024 import shares, a fivefold jump from just 2.5% at the beginning of the year. This steep rate effectively translates to a tax on imports representing 1.2% of GDP.

The most immediate impact of the trade regime is felt in rising prices, which are “keeping things elevated.” UBS estimates that the new trade regime will add 0.8 percentage points to core PCE inflation in 2026, enough to erase a year’s worth of disinflation progress and keep prices climbing at roughly 3.5% even if other pressures like housing or energy ease.

Over the longer term, UBS expects the tariffs to have a cumulative direct impact of 1.4 percentage points on the level of core PCE through 2028, rising to nearly 1.9 points once knock-on effects like supply chain rerouting and domestic producers raising prices under tariff protection are factored in. Simply: tariffs alone could account for nearly two-thirds of the remaining gap between current inflation and the Fed’s 2% target.

Inflationary Headwinds Hit Households

This tariff-related price pass-through is already translating into pressure on American households. With average hourly earnings growth having slowed to roughly 3.5% annualized over the past six months, and aggregate payroll income running at about 3.25% annualized, this inflationary surge is proving costly. Economists expect quarterly annualized PCE inflation to run between 3% and 4% over the next two quarters, effectively wiping out those income gains.

The report highlights that most households are less able to weather inflation now than they were two years ago. While upper-income households are supported by AI-driven equity market wealth, households below the top 20% of the income distribution suffer from historically low liquid assets. Rising costs, coupled with a slowing labor market, are diminishing consumer perceptions of future prospects.

This headwind is particularly concerning because the U.S. economic expansion is already characterized as “narrowly driven” and “precarious.” The current economic outlook is essentially described as “a big bet on AI,” where the only obvious areas of growth are investment in software and computers (AI-driven) and consumption supported by upper-income equity market wealth. “A decent chunk of the US economy is in recession,” UBS adds, including real residential investment and non-residential construction, is in recession or declining outright.

Returning money back to the people?

As inflation pressures mount, President Donald Trump is touting his tariffs not only as a shield for American industry but also as a new source of household income. He has floated the idea of a “tariff dividend”—a payout of “at least $2,000 a person (not including high-income people!)”—claiming the surge in tariff revenue is big enough to share directly with Americans.

The headline numbers are certainly striking. The Treasury took in $195 billion in tariff revenue in fiscal 2025, up 153% from $77 billion the year before. The Committee for a Responsible Federal Budget projects that Trump’s broad “reciprocal tariffs” could raise $1.3 trillion through 2029 and $2.8 trillion by 2034. That would lift tariffs from about 2.7% of total federal revenue to nearly 5%, roughly comparable to imposing a new payroll tax or trimming one-fifth of the defense budget.

But analysts say the math behind Trump’s proposed dividend doesn’t hold up. John Ricco of Yale’s Budget Lab estimates a $2,000 payment for every American would cost around $600 billion, far more than the government’s tariff take.

“The revenue coming in would not be adequate,” Ricco told the Associated Press. Even Treasury Secretary Scott Bessent appeared caught off guard, telling ABC’s This Week that he hadn’t discussed the idea with Trump and suggesting any “rebate” would more likely appear as a future tax cut.

Economists also warn that while tariffs generate revenue, they do so by driving up prices. Importers typically pass those costs to consumers, making the policy function more like a regressive tax than a dividend.

Economists find that what’s emerging is a feedback loop: tariffs designed to revive industrial strength are now helping to sustain inflation, which in turn weakens real income growth and constrains the very consumers meant to benefit from the policy. UBS calls it a “narrow expansion,” but it may be narrower still: an economy whose growth depends on circular AI investments and government revenue creation schemes as opposed to the broad spending power of its citizens.

Trump is open to regime change in Iran, after his administration said that wasn’t the goal

LSD News Szerkesztőség — Sun, 22 Jun 2025 23:45:59 +0000

President Donald Trump on Sunday called into question the future of Iran’s ruling theocracy after a surprise attack on three of the country’s nuclear sites, seemingly contradicting his administration’s earlier calls to resume negotiations and avoid an escalation in fighting.

“It’s not politically correct to use the term, ‘Regime Change,’ but if the current Iranian Regime is unable to MAKE IRAN GREAT AGAIN, why wouldn’t there be a Regime change???” Trump posted on social media. “MIGA!!!”

The posting on Truth Social marked something of a reversal from Defense Secretary Pete Hegseth’s Sunday morning news conference that detailed the aerial bombing.

“This mission was not and has not been about regime change,” Hegseth said.

What the administration has made clear is that it wants Iran to stop any development of nuclear weapons, with Secretary of State Marco Rubio warning on Fox News’ “Sunday Morning Futures” that any retaliation against the U.S. or a rush toward building a nuclear weapon would “put the regime at risk.”

But beyond that, the world is awash in uncertainty at a fragile moment that could decide whether parts of the world tip into war or find a way to salvage a relative peace. Trump’s warning to Iran’s leadership comes as the U.S. has demanded that Iran not respond to the bombardment of the heart of a nuclear program that it spent decades developing.

The Trump administration has made a series of intimidating statements even as it has simultaneously called to restart negotiations, making it hard to get a complete read on whether the U.S. president is simply taunting an adversary or using inflammatory words that could further widen the war between Israel and Iran that began earlier this month.

Up until the U.S. president’s post on Sunday afternoon, the coordinated messaging by Trump’s vice president, Pentagon chief, top military adviser and secretary of state suggested a confidence that any fallout would be manageable and that Iran’s lack of military capabilities would ultimately force it back to the bargaining table.

Hegseth had said that America “does not seek war” with Iran, while Vice President JD Vance said the strikes have given Tehran the possibility of returning to negotiate with Washington.

But the unfolding situation is not entirely under Washington’s control, as Tehran has a series of levers to respond to the aerial bombings that could intensify the conflict in the Middle East with possible global repercussions. Iran can block oil being shipped through the Strait of Hormuz, attack U.S. bases in the region, engage in cyber attacks or double down on a nuclear program that might seem like more of a necessity after the U.S. strike.

All of that raises the question of whether the strikes will open up a far more brutal phase of fighting or revive negotiations out of an abundance of caution. Inside the U.S., the attack quickly spilled over into domestic politics with Trump choosing to spend part of his Sunday going after his critics in Congress.

Trump, who had addressed the nation from the White House on Saturday night, returned to social media on Sunday to lambaste Rep. Thomas Massie, R-Ky., who had objected to the president taking military action without specific congressional approval.

“We had a spectacular military success yesterday, taking the ‘bomb’ right out of their hands (and they would use it if they could!)” Trump said as part of the post on Truth Social.

What Trump’s national security team had to say

At their joint Pentagon briefing, Hegseth and Air Force Gen. Dan Caine, chairman of the Joint Chiefs of Staff, said that “Operation Midnight Hammer” involved decoys and deception, and met with no Iranian resistance.

Caine indicated that the goal of the operation — destroying nuclear sites in Fordo, Natanz and Isfahan — had been achieved.

“Final battle damage will take some time, but initial battle damage assessments indicate that all three sites sustained extremely severe damage and destruction,” Caine said.

Vance said in a television interview that while he would not discuss “sensitive intelligence about what we’ve seen on the ground,” he felt “very confident that we’ve substantially delayed their development of a nuclear weapon.”

Pressed further, he told NBC’s “Meet the Press” that “I think that we have really pushed their program back by a very long time. I think that it’s going to be many many years before the Iranians are able to develop a nuclear weapon.”

The vice president said the U.S. had “negotiated aggressively’ with Iran to try to find a peaceful settlement and that Trump made his decision after assessing the Iranians were not acting “in good faith.”

“I actually think it provides an opportunity to reset this relationship, reset these negotiations and get us in a place where Iran can decide not to be a threat to its neighbors, not to be a threat to the United States, and if they’re willing to do that, the United States is all ears,” Vance said.

Rubio said on CBS’s “Face the Nation” that “there are no planned military operations right now against Iran, unless, unless they mess around and they attack” U.S. interests.

Trump has previously threatened other countries, but often backed down or failed to follow through, given his promises to his coalition of voters not to entangle the United States in an extended war. It was not immediately clear whether Iran saw the avoidance of a wider conflict as in its best interests.

How Iran and others are reacting to the US strikes

Much of the world is absorbing the consequences of the strikes and the risk that they could lead to more fighting across the Middle East after the U.S. inserted itself into the war between Israel and Iran. Israeli airstrikes that began on June 13 local time targeted Iran’s nuclear facilities and generals, prompting retaliation from Iran and creating a series of events that contributed to the U.S. attack.

While U.S. officials urged caution and stressed that only nuclear sites were targeted by Washington, Iran criticized the actions as a violation of its sovereignty and international law.

Iran’s foreign minister, Abbas Araghchi, said Washington was “fully responsible” for whatever actions Tehran may take in response.

“They crossed a very big red line by attacking nuclear facilities,” he said at a news conference in Turkey. “I don’t know how much room is left for diplomacy.”

China and Russia, where Araghchi was heading for talks with President Vladimir Putin, condemned the U.S. military action. The attacks were “a gross violation of international law,” said Russia’s Foreign Ministry, which also advocated “returning the situation to a political and diplomatic course.” A Turkish Foreign Ministry statement warned about the risk of the conflict spreading to “a global level.”

British Prime Minister Keir Starmer said the United Kingdom was moving military equipment into the area to protect its interests, people and allies. His office said he talked on Sunday with Trump about the need for Tehran to resume negotiations, but Trump would have posted his remarks about regime change after their conversation.

The leaders of Italy, Canada, Germany and France agreed on the need for “a rapid resumption of negotiations.” France’s Emmanuel Macron held talks with the Saudi crown prince and sultan of Oman.

Iran could try to stop oil exports through the Strait of Hormuz, which could create the same kind of inflationary shocks that the world felt after Russia invaded Ukraine in 2022. Oil prices increased in the financial markets as the war between Israel and Iran had intensified, climbing by 21% over the past month.

Hegseth offers an explanation for the timeline

The Pentagon briefing did not provide any new details about Iran’s nuclear capabilities. Hegseth said the timeline for the strikes was the result of a schedule set by Trump for talks with Iran about its nuclear ambitions.

“Iran found out” that when Trump “says 60 days that he seeks peace and negotiation, he means 60 days of peace and negotiation,” Hegseth said. “Otherwise, that nuclear program, that new nuclear capability will not exist. He meant it.”

That statement was complicated as the White House had suggested last Thursday that Trump could take as much as two weeks to determine whether to strike Iran or continue to pursue negotiations. But the U.S. benefited from Iran’s weakened air defenses and was able to conduct the attacks without resistance from Iran.

“Iran’s fighters did not fly, and it appears that Iran’s surface to air missile systems did not see us throughout the mission,” Caine said.

Hegseth said that a choice to move a number of B-2 bombers from their base in Missouri earlier Saturday was meant to be a decoy to throw off Iranians. Caine added that the U.S. used other methods of deception as well, deploying fighters to protect the B-2 bombers that dropped a total of 14 bunker-buster bombs on Iran’s sites at Fordo and Natanz.

The strikes occurred Saturday between 6:40 p.m. and 7:05 p.m. in Washington, or roughly 2:10 a.m. on Sunday in Iran.

U.S. Treasury Issues Crypto Tax Regime For 2025, Delays Rules for Non-Custodians

LSD News Szerkesztőség — Sun, 30 Jun 2024 07:34:34 +0000

The IRS said it tried to avoid some burdens on users of stablecoins, especially when used to buy other tokens and in payments. Basically, a normal crypto investor and user who doesn’t earn more than $10,000 on stablecoins in a year is exempted from the reporting. Stablecoin sales – the most frequent in the crypto markets – will be tallied collectively in an “aggregated” report rather than as individual transactions, the agency said, though more sophisticated and high-volume stablecoin investors won’t qualify.

The agency said that these tokens “unambiguously fall within the statutory definition of digital assets as they are digital representations of the value of fiat currency that are recorded on cryptographically secured distributed ledgers,” so they couldn’t be exempted despite their aim to hew to a steady value. The IRS also said that totally ignoring those transactions “would eliminate a source of information about digital asset transactions that the IRS can use in order to ensure compliance with taxpayers’ reporting obligations.”

Conservative-backed couple’s claim for a $14,729 refund could help Supreme Court kill a wealth tax on billionaires—and throw the entire tax regime into ‘chaos’

LSD News Szerkesztőség — Mon, 04 Dec 2023 14:22:15 +0000

Democratic dreams of imposing a wealth tax on the richest Americans risk being snuffed out by the US Supreme Court in a dispute over a $14,729 bill.

Calls to tax assets in addition to income have grown since Senator Elizabeth Warren ran for the White House on the issue in 2020, with President Joe Biden’s 2024 budget requesting a “billionaire minimum tax” to ease the federal deficit. But in a case set for argument Tuesday, the justices will consider whether the Constitution effectively precludes Congress from putting a levy on stock holdings, real estate and other wealth.

“The case literally could involve trillions of dollars and directly affect the way our economic and tax systems work because it calls on the court to decide whether a wealth tax might be constitutional,” said John Yoo, a University of California at Berkeley law professor who helped draft a brief in the case for the anti-tax group FreedomWorks.

The court’s decision to take up the case puts the justices in the middle of the partisan battle over the nation’s tax and budget policies. The court is likely to rule next year in the middle of the presidential election campaign.

The case stems from a 2017 tax law provision that aimed to collect hundreds of billions of dollars on earnings accumulated and held overseas by big multinational companies. The provision, known as the mandatory repatriation tax, was part of a Republican-backed tax overhaul passed during Donald Trump’s presidency.

Taxpayers Charles and Kathleen Moore are seeking a refund of the $14,729 in taxes they paid on their ownership of a stake in KisanKraft Machine Tools Private Ltd., an Indian company that supplies tools and equipment to farmers.

The Moores invested $40,000 almost two decades ago, acquiring 13% of the company’s common shares. Although the KisanKraft has grown steadily since then, it has reinvested its earnings rather than distributing them to shareholders as dividends. The Moores, who are represented by the conservative Competitive Enterprise Institute, contend that they can’t be taxed since they never realized any gains.

Along the way, the Moores are arguing for a narrow interpretation of the Constitution’s Sixteenth Amendment, the 1913 provision that empowered Congress to levy an income tax.

Alito Controversy

The Moores themselves have become a subject of scrutiny. Company documents indicate Charles Moore might have been more involved with KisanKraft than the couple revealed in the legal proceedings. He was a director of the company for five years and received thousands of dollars in travel-reimbursement payments, according to the company’s filings with India’s Ministry of Corporate Affairs, and he engaged in transactions that suggest he was more of an insider than a passive outside shareholder.

One of the Moores’ lawyers, David Rivkin of Baker & Hostetler, sparked another controversy when he co-wrote two article that described conservative Justice Samuel Alito in favorable terms. The articles, which appeared in the Wall Street Journal’s opinion section, gave Alito a forum to discuss calls for stronger ethics rules and the leak of the court’s abortion 2022 opinion.

Alito then rejected Democratic demands that he recuse from the Moore case, saying in an unusual statement that “there was nothing out of the ordinary about the interviews in question.”

The Moore case drew relatively scant attention when the court granted review last June, just as it was releasing a flurry of opinions at the end of its 2022-23 term. Outside groups and individuals have since filed more than 40 friend-of-the-court briefs underscoring the potential impact.

Tax ‘Chaos’

A victory for the Moores could cause “chaos” across the federal tax code and invite litigation over a swath of provisions enacted over decades, said Chye-Ching Huang, executive director of the Tax Law Center at New York University’s law school. She said the Moores and their allies are using the prospect of a wealth tax as a “diversion” in the case.

“What they don’t want the court to be focusing on is the very real damage their theory could have on the existing tax regime,” Huang said.

The Biden administration says the court can uphold the mandatory repatriation tax without making any judgment on a hypothetical wealth tax. Quoting from a 1943 Supreme Court case, US Solicitor General Elizabeth Prelogar said the court traditionally “does not decide whether a tax may constitutionally be laid until it finds that Congress has laid it.”

Prelogar, the administration’s top Supreme Court lawyer, said a wealth tax, which would be levied on assets at a particular point in time, would be “fundamentally distinct” from an income tax, which targets economic gains over a period of time. She contends undistributed corporate earnings constitute income under the Sixteenth Amendment.

The Sixteenth Amendment authorizes Congress “to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States.”

Biden rejected an outright wealth tax as advocated by Warren during the 2020 campaign but has since embraced a scaled-back version. His most recent budget would require taxpayers worth more than $100 million to pay a minimum of 25% on their capital gains each year, whether they sold assets for a profit or continue to hold them. Biden touted it at this year’s State of the Union Address as a “billionaire minimum tax.”

The case, which the court will decide by late June, is Moore v. United States, 22-800.

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