Transcription
The new Fed chair is changing how inflation is measured, and it's the biggest monetary regime shift we've seen since 2008. Now, if you missed this, you'll position for the old Fed, while the new Fed rewrites the rules of the monetary system. Now, Jerome Powell, he was stuck fighting yesterday's inflation numbers. The new Fed chair is throwing out the old playbook and installing an entirely new framework, a new measuring tape for inflation. And if you understand this shift, you can ride it out to build serious wealth. But if you assume it's the same old Fed, then you're going to be left behind.
So, in this video, I'm going to break down how Kevin Worsh might be new in the chair. But he's not new to the game. He's coming in with his old colleagues, and he's installing a three-part regime shift at the Fed. How he wants to kill CPI as the core metric and use a new measuring stick, and what that means for the US economy going forward. Of course, most importantly, how we should be positioning through this. This is going to be a big video with massive implications. So, let's go.
All right, we have a big video to get through here. Uh, lot to go through. One that I've been waiting to give to you because it's a big video, but it's something I've been wanting to talk about because I've been watching the Fed for about 18 years. A lot of you guys have heard my story. In 2008, I got crushed to the great financial crash, and it made me wake up and go, "What the heck is going on with the monetary policy that has all this control over my life that I'm not really paying attention to?" And so, I've been studying the Fed for about 18 years. That was right around the time when Ron Paul was running on in the Fed campaign. And so I've been watching that. You know, today I run a Bitcoin venture capital fund. I advise public tech companies on treasury strategy. And I'm paying attention. I sit close enough to all this to read what's actually going on because this this matters. It matters a lot.
Now, this isn't what this isn't is a Fed reaction video. Again, you can always read the news on your own. I'm here to tell you what this really means. The second, the third, fourth order, because this is a this is a regime diagnostic. So, I want to break down three things that I'm going to walk you through. First, who Worsh is, what he's really doing, what he's moving to do, who he actually is, because most people don't really have an idea about that. Second, why the last four chairs, the four the last four Federal Reserve chairs that we've had couldn't have done what he's doing. I want to show you what they were trapped inside of, why they couldn't move, and third, what this regime will finance moving forward. So, like what assets we expect to move based off of this, and how of course we should position this.
So, let's start with Kevin Worsh. Okay? So the this is the guy taking over the Federal Reserve. All right? And it's not like a continuity pick. It's not somebody that's being hired to keep the status quo. He's being hired to come in and change everything. Okay? That's the first thing you have to understand. This is a regime change. This is a calculated installation. And here's what I mean. Uh, of course, he was uh confirmed here what May 13th, 54 to 45. It's a it's it it was tight. It's the narrowest confirmation vote in modern Fed history. Uh he was a Fed governor under Bush from 2006 to 2011, the youngest in history as you can see that at 35 years old. Um he was a very outspoken critic. This is a very a key piece for you. A very outspoken critic of quantitative easing, QE, publicly calling out uh Wall Street. He wrote a Wall Street um op-ed and then he resigned shortly after that. Okay. So he's been very critical of quantitative easing of the government just printing money.
Now, after he left the Fed, he became Stanley Druckenmiller's partner. Okay? And he spent 10 plus years inside one of the sharpest macro brains in the entire world. And let me just talk about this for a second. Stanley Druckenmiller is the GOAT. All right? The greatest of all time. Stanley Druckenmiller is the GOAT of investing. I believe he went over 30 years without ever having a loss. 30 years. Like the best returns, the best track record like in the investing world. Stanley Druckenmiller sits at the top. And Kevin Worsh sat inside his family office running his fund for over a decade. Which means he's not just uh Jerome Powell was an attorney. An attorney. Kevin Worsh has worked for 10 years running the the best investor of all times strategy. All right. We're talking about one of the sharpest minds. His own personal net worth is over $135 million and up. All right. So this isn't a continuity pick. This is not a random technocrat. This is not an attorney. This is this is one of the sharpest macro minds. It's a doctrinal coalition that's installed as an operator. Okay. Okay.
Now, two 54 to 45. All right. This was a thin vote. There was only one Democrat who crossed over to vote here. Only one. Any guess who that might be? Yeah. Federman. Federman of Pennsylvania. He's like the only one that seems to dissent from the Democrats. Everyone else sort of holds the line. So, half the Senate sees what's coming, right? They see what's coming and they don't want it. They didn't want this to be confirmed. Okay.
Now, here's what almost nobody is really connected again because you can see the news, but what does this mean? So, Worsh wasn't just appointed by Trump. He was handpicked by the Treasury Secretary Scott Bessent. All right? So, he wasn't really a Trump appointee. He's part of the Trump administration, but he was handpicked by Scott Bessent. Now, Bessent ran a personal interview process with 11 candidates. He he talked about it live on CNBC back in August of 2025 and his stated public mandate was to quote, "reform the entire institution in terms of its processes and internal operations." Okay. So he was handpicked by Scott Bessent. Now Scott Bessent is at the US Treasury. So now we have the Fed that sets monetary policy and the Treasury that sets fiscal policy, and they're working together. Now Scott Bessent and Worsh work together. They both worked for Stanley Druckenmiller. They both worked for the GOAT. They both are some of the best assassins in the macro landscape the world has ever seen. And now they're bringing the band back together to work together. Now, we'll come back to Bessent in a few minutes because what he's been telegraphing on record for over a year now is exactly what Worsh is going to start doing now. Okay.
Now, there's three things here. What Worsh is doing isn't three separate Fed reforms. It's three expressions of one doctrinal break. Okay. That's the difference between methodology tweaking and again an entire regime shift. Now here's the three moves. Number one, we're shifting the gauge. Okay, now you've heard Jerome Powell stuck on 2% inflation. 2% inflation, 2% inflation as if that magical number changes the entire global economy. It's ridiculous. Okay, so he wants to change the gauge. All right, Worsh is moving the Fed off of core PCE and onto something called a trimmed mean PCE. Core PCE right now is about 3.2%. 2%. Trimmed mean is 2.4%. The same economy, just a different gauge. Two, what we want to talk about is the guidance. Okay, so we want to kill the forward guidance. We want to kill the dot plot. The dot plot is sort of uh the guidance of where we think the rates will be in the future. So this is the end of the era of these pre-signal moves. All right. And number three, we want to talk about the balance sheet, specifically shrinking the balance sheet. Uh that means less QE. Remember as I said, he was very outspoken of QE. He actually uh left the Fed over it. So he wants to shrink the balance sheet. He wants to end QE and he wants rate setting to be the primary lever again, not liquidity. So that's three moves, one single doctrine. Okay.
So what is this trimmed PCE? What what are we talking about? Well, each month, every single category of price gets sorted by how much it's moved, right? What is the movement or the change? Then you take the most extreme price changes on both ends and you drop them. Cut the high and the low and then you take the average. But things like geopolitical shocks, energy spikes, beef going crazy because of disease outbreak, we trim that out, right? Because like a geopolitical shock, like that goes away, right? If there was a disease outbreak in beef, that it it's a temporary shock, but that goes away. So we take out the high and low. Take the shocks away and what's left is the underlying inflation trend and it's stripped of these one-off events that that distort the data. Now, the Dallas Fed has been publishing this for years. It's access it's it seems pretty legitimate to me. It's academically legitimate anyway. And the controversy isn't in the methodology. It's making this the primary Fed gauge. That's the difference. If trimmed mean becomes the official gauge, well then inflation all of a sudden starts looking way closer to target. The Fed now gets to cover their rate cuts and this is all without prices ever having to come down. Now this isn't just some gamemanship. This is the right way to do it. When you look at um when you look at statistics, a lot of times you want to throw those anomalies out so you can look at the data a little bit more clean.
Now Jerome Powell, when he was there, he changed the target. What Worsh is doing is changing the entire tape measure altogether. You see, Jerome Powell adopted average inflation targeting back in 2020. And then, of course, famously, he let inflation run hot before tightening back up. Now, he changed what number to chase after. But, see, Worsh is doing something different. Worsh is changing how you even measure the number. Talking about a complete regime change. Now, the same logic on the other two reforms, killing forward guidance, that's not tactical communication change. It's a doctrine shift. Right? Right. What he's doing is he's moving away from telegraphing every single move. Shrinking the balance sheet isn't a portfolio adjustment. It's a return to rates being the primary tool of the Fed of the monetary policy. So that's three moves all broken down into one doctrine. That's the entire regime. But the part that a lot of people don't understand is that Scott Bessent has been telling us this. He's been telegraphing this critique on record for over a year. But nobody seems to be connecting the dots to what Worsh is doing. The Worsh appointment and you know when when all that happened, nobody seems to be looking at the trimmed mean swap right now. And once you understand the shift, once you understand the this the three different reforms that they're doing, all of a sudden the picture starts opening up. You can see what these guys have been riding for 55 years and you can see why the last four Fed chairs couldn't do anything. They were all stuck in the same cage.
Now the second reveal that we have right here is again shows why none of the last four Fed chairs could have done this. To get there, you have to understand what what kind of regime were they riding? What kind of engine was powering the system that they were on? The engine that's been running for about 55 years. So this is the engine right here. This is the engine. The government deficits force the Fed to enable cheap debt. Right? So the government's deficits, their shortfall means they need to borrow money to run. But in order to borrow more money, they need the debt to get cheaper. But then cheap debt enables more deficits. Okay? So this is the engine. Number one, we have government deficits. So the government spends more than they take on. So that's the deficit. In order to fund the govern government deficits, they need debt. In order to take on all the debt that they need, they have to enable cheap debt. They need to keep the rates down so they can afford it. The problem is that when money is ex uh when money's cheap, more people use it, which leads to inflation. And then inflation starts running hot and the inflation starts pumping asset prices. Asset prices start climbing. After asset prices um continue to climb, then the real debt erodes. All right? After the real debt erodes, then it goes back and the cycle continues to repeat. It just repeats over and over and over like a flywheel. Now, this is this is not a cycle that ends. It's a flywheel. It's a loop. It just keeps going. The loop just feeds on itself. And it's not political, right? This is just math. Forget the politics. The math requires this to happen.
Now, this started back in 1971 when Richard Nixon closed the gold window. And that was about 55 years ago. And since then, every Fed chair since then has been stuck inside this loop. Every single one. They didn't break it. They couldn't, they wouldn't, whatever you want to call it. Now, uh Lyn Alden, who I've had on my show many times, talks about this specifically and says it a little bit more uh a little more concise. Nothing stops the train. So, whatever you want to call it, a loom, a loop, a doom loop, a flywheel. She just says it pretty simply, nothing stops the train. Specifically, she wrote a 2024 piece titled "Why Nothing Stops the Fiscal Train." And it's probably one of the best breakdowns of the math that we've ever seen. Now, if we look at the deficits, right, again, the governments spend more than they take on. And if we look at the deficits, we can see that nothing stops this train. This is not political. We can see under Obama around 7.27, 27 about 7.3 trillion deficits. Uh Trump came in, did about five and a half trillion dollars of deficits. Under Biden, back up to about seven, seven, almost 7.7 trillion. And now Trump's second term here. Uh we're still writing right in the books. I'm guessing it's going to be up up here around the same level because it doesn't matter who's in charge. The deficits don't stop. The loop, the loop is the engine. Every Fed chair for 55 years has been riding in has been stuck in that loop. What changed is now who's steering the ship and more specifically what direction they're steering it in.
So let's look at the last few Fed chairs that have been stuck in this loop, riding this loop. Each one of these people stepped into the Fed, right? Looked at the loop and then chose a doctrine for how to manage that loop. Now each doctrine became the cage that they got stuck. They got trapped inside there. So here we have Greenspan from 1987 to 2006. And he set the Fed put. The Fed put president, which is the Fed's always going to step in and rescue the market, right? It's always going to support the markets. It's always going to support asset prices. If markets get scared, don't worry. The Fed put is there, right? He didn't have a formal inflation target. He just had discretion. Whenever he felt like the markets need a little bit of help, then he would lean in and he'd bail them out. Okay? That became the operating assumption that he was on.
Then we got Bernanke. Bernanke was there from 2006 to 2014. He took he took Greenspan's discretion, brought it forward, and then he built a formal academic framework around it. So he was the one that introduced QE, quantitative easing, during the 2008 great financial crash. Then in 2012, he formalized the 2% inflation target and he locked that framework into place. Okay. Then we had Janet Yellen, 2014 to 2018, and she did something a little bit different. She maintained Bernanke's framework through the recovery. She she didn't break it. She didn't try to didn't try to reverse it. And so now the frameworks he used it was it was working as intended. Of course, then Powell came in, 2018 to now 2026, and he took that framework and he pushed it a little bit further. In August 2020, he adopted average inflation targeting. So that means they could let it run hot and then bring it back down and instead of looking at on short term, we can just look at the average. So the inflation could then move a little bit and then average it out. But then 2021 hit, the Fed called inflation transitory. Right? It's it's here temporarily. It's going to go away. But that burned the credibility of the framework because inflation went up to 9%. By the time he left, he was trapped inside of it.
Now, each one of these Fed chairs had to choose a doctrine. Each doctrine became sort of the cage that they were trapped into. None of these four would have changed that the gauge that they used. The framework wouldn't have let them. But Worsh is the first one coming in outside of the system and doing something completely different. Now when we think about Fed chairs, one name that comes up a lot is Paul Volcker. Paul Volcker was Fed chair back in August of 1979, about 47 years ago. Now he did something different. He broke the inflationary regime that had dominated the 1970s. And what he did is he had to install a new doctrine. Basically, what his doctrine was is kill inflation at all costs, even at the cost of a recession, which he did. He broke inflation and he caused a massive recession. But since Volcker, only four chairs ran inside that framework that he handed off. None of them changed it. Worsh is the first one to step outside of it. He's the first Fed regime change in 47 years.
So how do we get from the Volcker break to the Worsh break? Well, the bridge is one guy, again, Scott Bessent. And the regime that he's installing uh is intentional, right? Wasn't accidental. And he announced it in plain sight. He told us and he's been saying it for over a year. But again, most people weren't listening. They weren't connecting the dots. In October of 2025, Bessent said on Fox Business, quote, "The Fed is entrenched in outdated thinking. Their models are flawed." So, he's saying like, "They're too academic. They're using this old old framework, these old models. It's it's it's outdated. It doesn't work anymore. We need something new." All right? And and he wasn't maybe he was maybe he was taking a swipe at Powell personally. Maybe it wasn't, but it was really a critique of the framework, the outdated thinking that all the Fed chairs had been working on, the academic Fed with the flawed models.
Now, three months earlier, he was on CNBC Squawkbox, and he quote, he said that all these PhDs over there, I don't even know what they do. So they have so many PhDs, but they apparently don't even know what they're doing. Why do they have so many PhDs? We don't know what they're doing. He's mocking again the entire academic Fed. There's a difference of being academic, like studying theory, and actually living in it. Again, the academics, the PhDs, they studied in universities and they brought the theory, but they never worked it out in the real world. Scott Bessent, Kevin Worsh, they did it in the real world. They worked for the GOAT, the greatest of all time. Again, as I said, like they're like the best macroeconomic assassins the world's ever seen. They didn't learn everything in theory. They learned it in the real world, battling with the sharpest minds in the entire global macroeconomic space. So that's what he's mocking. He's like, "Hey, these PhDs, I don't even know what they're doing. They have a bunch of theory. It's not even working." And he's been telling us this.
Now, in July 2025 in Bloomberg, he said, "The committee seems to be a little off here in their judgment." So now he's starting to like doubt their judgment. Again, he's telling us what they're doing is wrong. His argument throughout 2025 was simple. The two-year Treasury yield is the forward signal the Fed should be reading, not their broken models, what the market is telling them. You see, academics want to believe in the model. The academics want to believe in the data, or not the data, but the model and what should happen as opposed to looking at the real world, which is Scott Bessent saying, "Look at the two-year." Now, I've been watching Bessent do this for over a year. I've been I've made a lot of videos about this because it's a big deal. And he told you the Fed's models were flawed. He told you the PhDs were missing the forward signal. He told you the two-year was the read and he led the 11 candidate interview process himself. So he installed Worsh. And so this regime, it's not catching people off offguard. It's just people weren't paying attention. But the Treasury Secretary told us for over a year this was happening. People just weren't watching it. Well, now you're watching.
Okay. So let's look at the doctrine break. It's simple. The old Fed that's uh managing lagging data, right? The same broken models over and over. Telegraphing with forward forward guidance every single move. But the new Fed is now forward looking. They're now looking at the future. They're reading market signals like the two-year yield. They're exercising operator judgment, tolerating short-term noise because they're looking at the big picture. They're zoomed out, let's just say, right? The three moves that I showed you earlier, trimmed to mean gauge, killing the dot plot, shrinking the balance sheet. Those are all expressions of this shift, rear view to forward looking. Like you don't drive in the rear view, right? You drive out of the windshield. We have to be looking forward. We have a we have a goal. We have a plan. We have a policy that we need to we need to uh accommodate here. We can't be looking at lagging data. Okay.
So, now we've gone through who Worsh is. We've covered why this is a regime change. But the question that actually matters for you and I for our own money is what does this regime finance? Where does the money actually go? If they're working towards something forward, what is the thing moving forward that they want to accommodate monetarily and fiscally? What is that? Because the question is really how do we get on the right side of that with our money? So there's two questions and there's one answer. Okay, so the five core uh sectors that are getting financed under this regime is re-industrialization. All right, so this is uh bringing manufacturing back home, bringing jobs back home. Then we have mining. Mining is of course critical minerals, rare earth elements, um things like that. Um then we have the refining. So we don't just need to mine it, we also need to refine it here at home. So this is processing capacity onshore that we let atrophy for decades. Um then of course we want to bring back energy. We want to have we want to power the AI economy. We have to power the grid. All of that. And then of course we have AI. So there's a AI race, a tech race, especially between the US and China. And we need compute. We need models. We need the productivity layer. The inflation pays down the old debt. But these five, these five build the new economy.
Now, of course, we've seen this playbook before. Okay? If you just study history, you can see this. After World War II, the US had a a debt problem. 119% debt to GDP. That was and by 1980, they were able to get it all the way down to about 32%. The US didn't pay the debt down. The US grew under it. Right? The debt to GDP is a ratio. So we don't have to get the debt down. We just have to get the growth up. And that's what the US did. It grew under it. So real GDP averaged around 4% per year through the 1950s and into the 1960s. Inflation ran hot. Yes. The dollar lost purchasing power. Yes. And the debt, it got eroded in real terms because inflation plus growth led the charge. Right? It wasn't repayment. It was that it was moving the growth up. That's the playbook. That's what's running again.
Now, here's what all this boils down to. Inflation is going to run hot. We're going to have massive growth. And the Fed wants to allow that because we need to grow. We need jobs to pay more, right? We need to build all this out and that's going to push prices up. And it's good. You'll be making more money. Your asset prices will go up, right? And the Fed is now going to tolerate it because the forward plan needs it. Not looking backwards, looking at the forward plan. They want real rates to stay low. They want productive assets and hard money to get bid up faster than the inflation itself. So inflation hot, asset prices hotter. So I talk about this judo framing, right? It's judo. It's not boxing. In boxing, you fight against the opponent. In judo, you use the opponent's energy against it. We don't fight the regime. We position for it.
Now, one more thing to add. Where does Bitcoin actually sit in this picture? Right? We talked about gold. We talked about productive land, real businesses. Bitcoin is sort of in the same category. All right. These are the assets that absorb monetary expansion instead of getting hurt. And it's one of the reasons why I think Scott, Worsh, and Trump have all been so pro-Bitcoin. It's kind of weird seeing Worsh come in the Fed chair talking about Bitcoin being digital gold for people under 40, but they see that Bitcoin and gold going up could sort of be this liquidity sponge. It could sort of absorb this monetary inflation so that people don't get priced out of homes, people don't get priced out of stocks. And so I think that's where it sits inside of this. It's allowing these assets to absorb all of that and grow. Okay.
Now, to kind of put all this together, the real question in all of this isn't whether you can stop the system. I showed you the loop. Nothing stops this train. We can't stop the system from printing money. You can't you can't put the brakes on that. You can't put the genie back in the bottle. The question is whether that printing fuels their wealth or if it fuels your wealth. Right? That's the whole game right now. The Fed, they've changed directions. The new regime is being installed. The forward plan is all starting right now. They're telling us what it is. And we can see that there's a boom coming and it's not going to wait for you to be ready. So, the question that you need to be asking yourself is, does your balance sheet capture this regime or do you watch it happen?
Now, if you want to see more videos about the new monetary regime and what this means for gold and Bitcoin specifically, you might want to watch this video right here. And I'll see you over there.