Weekly Economic Update 02-06-26: A New Fed Chair; ISM Manufacturing Index; ISM Services Index; and January ADP Employment

The President's Fed Chair appointee seems to not understand basic monetary policy.

The views and opinions expressed in this post are solely those of the author and do not necessarily reflect the views of the Georgia Institute of Technology or the Georgia Board of Regents.

Last Friday morning, I sent out a long, detailed explanation as to why gold and silver prices were exploding. As you were reading that very post, gold fell 9%, and silver dropped an astonishing 26%. If you waited until Saturday to read the post, you must have thought I was a nut. (Although both are still quite high over the past 12 months.)

Over the weekend and during this week, I have read dozens of “experts” explain what happened, with some of them saying that silver will rebound and head much higher, while others think it was all a bubble and it is headed back down below $50. In other words, they have no clue. However, the “reason” most prevalent in the mainstream media is President Trump’s appointment of Kevin Warsh to lead the Federal Reserve when Chair Powell’s term expires in a few months. The logic goes something like this…Warsh is a “known fiscal hawk” who opposes Quantitative Easing (QE) and wants to shrink the Fed’s balance sheet. Ergo, easy money is coming to an end.

Really?

Do they have any idea how utterly absurd that sounds?

Let me get this straight. The President of the United States, who has been extremely vocal in his displeasure with “Too Late Powell” for not cutting rates, and with the mid-terms later this year, desperately wants to lower mortgage rates, is going to appoint a man to run the Federal Reserve, who is an inflation hawk; who is less likely to cut rates that Chair Powell; and who wants to resume Quantitative Tightening (QT). Have I got that right? And that is why gold and silver tanked last week?