Kevin Warsh Assumes Leadership of the Federal Reserve at a Most Challenging Time

On Friday, May 22, 2026, Associate Supreme Court Justice Clarence Thomas swore in Kevin Warsh as the 17th Chairman of the Federal Reserve Board. Chairman Warsh will guide the nation’s financial system for the next four years, and, like most recent Fed Chairs, he faces a most challenging economic environment.

That seems to be the recent pattern for Fed Chairmen: three of the last four began their terms just before a financial crisis. Only Janet Yellen escaped this fate. Ben Bernanke, for instance, began his term just 24 months before the Great Financial Crisis, which Wall Street considers the worst financial crisis in recent times. Warsh’s predecessor, Jerome Powell, began his term just 22 months before the COVID-19 pandemic and the shortest but steepest recession, when Ben Bernanke sat down at the Chairman’s desk only 8 months before the 1987 Stock Market Crash.

No matter who assumes the head of the Federal Reserve, they must know, from day one, that the potential for an economic crisis lies just beyond the next business day.

Kevin Warsh is no different; although the specific issues may vary, a crisis is a real possibility.

Inflation, or as it’s more popularly called, “affordability,” is the number one issue today. Driven principally by President Trump’s War with Iran and the closure of the vital Strait of Hormuz, petroleum prices are rising across the nation, with the current price of a gallon of regular gasoline at $4.51, up 42% from last year’s price.

Energy is the most fundamental of all economic variables, and that’s reflected in our overall price measure, the Consumer Price Index (CPI). We began the year with a CPI measured at 2.63%. While April’s CPI came in at 0.64%, that may not seem like much, but if the next 11 months came in at that same fraction, our annual inflation rate would rise to over 7%, the highest rate since the stimulus-powered COVID bounce-back year of 2022. Fortunately, the CPI is NOT measured that way. Instead, it’s an average of the last 12 months, leading to the current CPI reading of 3.78. Still, it’s apparent to all that inflation is our number one economic issue, and one that new Chair Kevin Warsh needs to address.

Finally, President Trump welcomed Chairman Warsh to his new position, declaring:

“The Federal Reserve is a pillar of the world financial system and the most important central bank anywhere in the world, with a history stretching back more than 100 years.

It is truly the institution that’s most looked to and most respected. And it’s now taken on a new, even higher level of respect in my opinion. And honestly, I really mean this. This is not said in any other way.

I want Kevin to be totally independent.

I want him to be independent and just do a great job.

Don’t look at me. Don’t look at anybody. Just do your own thing and do a great job. Okay.”

https://www.whitehouse.gov/videos/new-fed-chairman-kevin-warsh-%f0%9f%87%ba%f0%9f%87%b8/

A remarkable mandate from the President who campaigned so long and hard that the last Fed Chair should lower interest rates. But that was 3 days ago. Do you suppose the mandate still stands?

This Week’s Economy: The Cost Of Gas

We’re wrapping up the Memorial Day Holiday, a day reserved for honoring those US military personnel who fell while serving in the Armed Forces. Millions of Americans will set aside a few moments to honor their sacrifice.

It’s also become the unofficial start of summer; for many, it’s the first time all year we can escape the confines of home and take to the open highway. Memorial Day is the most significant driving holiday each year, with the Automobile Association of America estimating that 39 million Americans will drive 50 miles or more to celebrate the end of winter and the beginning of warm weather.

Each time they drive into the gas station to fill ‘er up, they’ll be reminded that their dollars don’t stretch as far as they did last year. In Walmart’s Earnings Report released this week, the company noted a trend it hasn’t seen since the Great Financial Crisis 18 years ago: people are limiting how much gas they purchase. Fill-ups are a thing of the past; drivers limit their gasoline purchases to less than 20 gallons. Price is having an impact.

But if you think it’s bad for the average holiday traveler, consider the poor truckers. They’re the ones who literally make this economy run. Virtually everything on our store shelves must travel by truck at some point. Yes, it may begin its journey by ship, plane, or rail, but actual store delivery is inevitably by truck.

For the truckers, the current price hike is oppressive. Last year, the national average price of a gallon of diesel was $3.54; this year, it’s $5.60, a 58% increase. Consider this: for the long-haul trucker, whose tank holds 200 gallons (some hold 300), the cost to “fill up” has gone from a little over $700 to over $1,100. An expense that many independent truckers have to put on a credit card.

Now you know why truckers may only choose full, highly profitable loads, which can help them pay for fuel.

This Week’s Economy: Looking At The Consumer

For 48 years, the University of Michigan has measured the outlook of the average American Consumer. Begun as a graduate school exercise, the University has, over the years, become an expert in their survey methods and data collection. In fact, they now have the most authoritative dataset on the economic and financial attitudes of our nation’s consumers. Imagine what they’ve observed over nearly half a century, a whole panoply of economic conditions: a stock market crash, a couple of bout of inflation, several regional wars, domestic riots, almost any financial condition that we can imagine.

Currently, the President and others tell us that we’re living in the best of times, a “golden era.” After all, the Stock Market continues to reach record highs, and a select group of stocks (those tied to Artificial Intelligence) is making people rich.

So, it must follow that UofM’s Consumer Confidence Survey is also hitting new highs. But not so. In fact, just the opposite, the Michigan Survey is crashing, hitting lows never before reached. Here, in May, the survey fell to 44.8, the lowest ever. To give some perspective, before this year, the survey never fell below 50, and now it stands more than 10% below those prior “floors.”

Don’t take this lightly. We live in a consumer-driven economy, and consumers drive more than two-thirds of all commercial activity. Ordinary Americans, like you and me, making everyday purchases, are the heart and soul of our commercial system. If we turn sour on our future, if we put our hands in our pockets and stop spending, if we begin hoarding instead of spending, this economy will be in a world of hurt. And that’s just what the University of Michigan’s Survey is telling us.

This Week’s Economy: Our Conversation

The ValueSide Community is one of the most thoughtful and insightful on the internet. Whether you connect with us via our several reading, audio, or video platforms, your input makes a difference. Thank you for engaging with the ValueSide.

Here are some insightful comments this week:

From the article: The Mystery of Jobs: How the Numbers Don’t Add Up

https://medium.com/@david-reavill/the-mystery-of-jobs-how-the-numbers-dont-add-up-9598a22734bf

Jim challenged our Labor Force Data on Medium, prompting us to review the official numbers. Here’s the latest published data from the Bureau of Labor Statistics. It’s the total number of working Americans (the Labor Force). If you look in the upper right-hand corner (those blank months were the government shutdown), you’ll see that there are currently 1.5 million fewer workers than last year (170mm vs. 171.5mm).

The exact cause of this decline is not certain. I’ve suggested that demographic changes may be a partial explanation, but I don’t believe this is the entire reason. We need to dig deeper into this decline.

Thanks, Jim.

From the article: Finding the Real Cost of the Iran Conflict

https://david-reavill.medium.com/preparing-a-financial-statement-for-the-iran-conflict-417f21fe04e3

Both Gail and Raymond suggest that we should include the higher energy costs in our financial statement for the war. They’re absolutely correct. I agree that the true cost of the conflict should include the financial burden borne by Americans. Unfortunately, we’re unlikely to see that sort of analysis from Washington. So, we’re left to figure it out on our own. I’ll keep working on it.

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