It’s been a challenging week for President Trump. The problems started when the Justice Department released a memo as part of their “commitment to transparency” that explained there was no evidence of an “Epstein client list” or that his death was suspicious. Trump offered a spirited defence of AG Pam Bondi, but this did little to placate the MAGA base, who appeared understandably sceptical. Reports that China believes it has the whip hand in trade negotiations because of its rare earth leverage can’t have improved the President’s mood. Worse still, there does seem to be substance to those reports. One poker tell was the recently announced deal between MP Materials and Apple, which will invest $500mn in rare earth magnets and a recycling facility (of course). That news followed last week’s announcement of a $400mn investment in MP by the Pentagon, no less! Trump then managed to go 0 for 3 when he ostensibly floated a trial balloon on firing Powell. The market reaction prompted a swift walk-back. The point was probably not to effect Powell’s ouster but just to undermine him further. Sadly, having bonds and the dollar breakdown on the rumour probably burnished Powell’s reputation more than it harmed it. So, a gaff-prone week for POTUS – it never rains but it pours! That said, Trump still had a better week than one unfortunate CEO and his head of HR, who suffered the indignity of being outed as Coldplay fans by Chris Martin himself. Our hearts go out to him and his wife, whose social media presence has predictably blown up. Let this serve as a warning to all Coldplay fans.
It was against this background that Kevin Warsh’s job interview on CNBC caught our attention. It was not so much what Warsh said, but rather how close Warsh’s comments mirrored some of Paul Winfree’s proposals within the Heritage Foundation’s Project 2025 policy document. Warsh and Winfree agree that the Fed should refocus on its core monetary policy function and have its scope for discretionary intervention curtailed. The balance sheet should be run down. It’s always nice when everyone sings from the same hymn book. Of course, if Warsh is interviewing, it makes no sense for other candidates to be silent. Waller reiterated his obvious qualifications for the job.
On a more sombre note, we occasionally highlight the fiscal implications of climate change. Regardless of whether we transition to net zero, increased climate variability imposes substantial economic costs due to the need to repair damage and harden existing infrastructure. The recent tragic events around the Guadalope River in Texas remind us that climate change can dramatically impact precipitation rates, making previously safe areas unsafe. We had another clear demonstration of this in the recent heavy rains in Manhattan and New Jersey. Extrapolating these costs has implications for public indebtedness, productive capacity and inflation, while all the time boosting apparent GDP figures, meaning that GDP will continue to deteriorate as a proxy for quality of life.
