The Fed’s Reckless Monetary Policy Mirrors Trumpian Chaos—And Markets Are Paying the Price

The Federal Reserve’s economic maneuvers increasingly resemble a bull in a china shop—loud, disruptive, and oblivious to collateral damage. Sound familiar?

Monetary Policy as Performance Art: Central bankers keep jawboning inflation while real wages stagnate. Another case of ’very stable genius’ decision-making.

Quantitative Tightening? More Like Quantitative Blundering: The Fed’s balance sheet reduction has all the precision of a Twitter rant at 3 AM. Banks wobble, credit crunches loom, but hey—at least they hit their spreadsheet targets.

The punchline? Wall Street still bets on Fed puts while Main Street eats the losses. Some things never change—whether it’s Mar-a-Lago or the Eccles Building.

Fed fuels spending and kills price stability

Kevin said the Federal Reserve fed the reckless spending that exploded after the pandemic. He said, “I struggle to absolve the Fed of the nation’s fiscal profligacy.” And it helped! It supported government spending during crisis times but stayed quiet during the recovery.

Instead of urging caution when the economy started heating up again, it just kept the money flowing. “If the Fed chooses to cross the line,” Warsh said, “there should be real and rhetorical symmetry.” There wasn’t.

The central bank also became the biggest buyer of federal debt after 2008. Kevin said its balance sheet went from under a trillion dollars to $7 trillion by the time he gave the speech. That was the cost of buying Treasurys and mortgage-backed securities.

And it gave Congress cover to keep spending without worrying about interest rates. This was the outcome of quantitative easing, or QE, a tool Warsh helped create during the 2008 meltdown. “I strongly supported this crisis-time innovation, then and now,” he said. But after the crisis ended, the Fed refused to pull back.

By 2010, growth had returned and markets were stable. Warsh said he opposed QE2, which was another round of debt-buying by the Federal Reserve. He warned it would drag the Fed into politics. He resigned not long after it was announced.

Now QE is no longer just a temporary emergency measure. It’s been baked into the Fed’s daily playbook. And Congress got used to it.

Fed dives into politics, blows its job, and demands no oversight

The chaos didn’t stop with spending. Kevin also said the Federal Reserve went headfirst into politics it wasn’t built to handle. “The Fed has neither the expertise nor the prerogative to make political judgments,” he said.

In 2020, the Fed joined the Network of Central Banks and Supervisors for Greening the Financial System and said it was “active” and even a “leader” on climate. But by January 2025, under a new political climate, the Fed quit that group.

“If it’s no different in practice, then was the new language simply a political nod?” Warsh asked. “If the new definition is different, then shouldn’t Congress have some say?”

Either way, the cost landed on the same groups the Fed claimed it was helping. Inflation hit hardest at the bottom. Meanwhile, the Fed kept pretending it could do everything without consequences. Kevin said it failed the most basic task in its job description: “The Fed foundered on fundamentals and inflation surged.”

He reminded the crowd that for 40 years, people didn’t worry about inflation. Now it’s front-page news again. “Stable prices were the Fed’s plot armor,” he said. Once inflation blew up, that armor vanished. What was left was an exposed, oversized institution that couldn’t fix what it broke.

Kevin also took a hard swing at the Fed’s habit of yelling “independence” every time someone questions its decisions. “Independence isn’t a policy goal unto itself,” he said. It only matters if the Fed actually delivers results.

And when the Fed crosses into Treasury territory or picks sides on social issues, it weakens its own position. It invites politicians to get involved, and they will.