Let's start with the list of potential new Fed Chair candidates expanding to encompass most of the current FOMC --which will do wonders for the team ethic there, and perhaps for views on rate cuts(?)-- as well as to market commentators who didn't think there was any sign of underlying inflation in the last CPI report. Even Yellen's name was mentioned as a potential candidate by one newsfeed, which says a lot about newsfeeds. For conventional types, this matters. Yet to repeat yesterday's message, do you actually think a hawk will be appointed?

Treasury Secretary Bessent just stated he wants to see Fed Funds 150 to 175bps lower after backing a 50bps cut at the next meeting: President Trump said Fed Funds should be 1%. As such, focusing on which individual gets the hot seat rather than the hotline that will soon run from the White House to the Fed seems to miss the forest for the trees.

What a lower Fed Fund rate would mean for inflation remains to be seen: but Bitcoin is seeing it, perhaps. It too is at a record high.

But back to supply. Bessent just suggested the US could use the Nvidia "15% fee" model with other industries, so higher tax revenues which may lean against inflation. Moreover, he also reiterated that the vast pledges of inward investment struck with recent US trade deals --$7-8 trillion including those from firms-- are a form of 'private sector sovereign wealth fund' which D.C. will direct in order to reindustrialize the US. I didn't hear "because markets" there: did you? Michael Kao correctly uses the term I'd floated in a purely European context as political sugar-coating to a bitter trade pill to swallow: a "Reverse Marshall Plan." In other words, "We rebuilt you after winning WW2 and the Cold War; now rebuild us, not China, to 'save the West'."

Of course, the same counterparties and commentariat who pooh-poohed the idea of paying higher US tariffs before doing so are pooh-poohing this idea too: "It isn't state investment." "You can't compel people to do it." Right: and the Trump tariffs aren't a FTAs, but the US is collecting the tariff money anyway "because realpolitik, not markets."

What if this at-gunpoint wall of capital arrives over the next ten years, alongside US tariffs and low US rates?

If no economic statecraft tools are used to ensure liquidity flows to the supply side, we could see an inflationary boom in which most assets (except bonds and the US dollar) would do well in nominal terms, then a bust.

If statecraft tools are used --Bessent is talking about "directing" foreign capital, and presumably the new Fed Chair will be open to the idea for domestic capital(?)-- then we could see initial inflation in some areas, then lower prices alongside higher supply. That's where stocks getting high would be healthy, and the dollar would likely follow.