Freak Power
Monday, February 2nd, 2026
Bill Bonner, from Rancho Santana, Nicaragua
The big news Friday was the selection of Kevin Warsh to take charge of the Fed. Associated Press on the story:
President Donald Trump said Friday that he will nominate former Federal Reserve official Kevin Warsh to be the next chair of the Fed, a decision likely to result in sharp changes to the powerful agency that could bring it closer to the White House.
Warsh would replace current chair Jerome Powell when his term expires in May. Trump chose Powell to lead the Fed in 2017 but this year has relentlessly assailed him for not cutting interest rates quickly enough.
“I have known Kevin for a long period of time, and have no doubt that he will go down as one of the GREAT Fed Chairmen, maybe the best,” Trump posted on his Truth Social site. “On top of everything else, he is ‘central casting,’ and he will never let you down.”
Warsh was on the short list. But he seemed like a long shot. He has a reputation for being an inflation ‘hawk,’ an unlikely candidate to push Trump’s low-interest rate agenda.
Why, then, choose Warsh?
Karl Rove asked a related question last week:
“Is Trump Trying to Lose the Midterms?”
Both questions suggest that POTUS may not need enemies; he has himself.
But let’s look at the evidence. You decide.
Changing the subject, here in Nicaragua, rumors are flying.
“It’s in the press,” said a local real estate agent. “It says Daniel Ortega (Nicaragua’s dictator) got a call from the US. Marco Rubio apparently told him he had to step down. He saw what happened to Maduro. He doesn’t want that to happen to him.
“But what country would take him?”
Spare a prayer for replaced dictators. They have no ‘Dictator Relief Committee’ to help them. They make enemies. Then, when they lose power, the enemies come after them. The US may grant asylum, but only if the CIA has been supporting them for years.
We also had an encounter with a coral snake on Saturday.
“Just leave him alone,” was the local advice.
We sought guidance from the Bible too. “It shall bruise thy head; thou shalt bruise his heel,” it says in Genesis. We didn’t know what that meant either, so we used our own instinct and killed it before someone stepped on it.
Donald Trump can be inscrutable too. But a president comes into office with a certain amount of ‘political capital.’ It’s a limited thing. He can’t afford to waste it. So, he has to focus on the most important issues — those that will bring most joy to his fans...while not stirring up too much resistance or resentment among the independents. He doesn’t want to repel too many of the ‘swing voters’ who might otherwise swing his way.
So, what does Trump do with his ‘political capital?’
How many Americans do you think dreamed of invading Greenland?
How many want to pay 100% more for imports from Canada?
How many want to see tariffs threatened, set, changed, revised, reversed, paused and restarted — willy nilly, day by day — all over the world?
How many want to see young women shot dead by Fallujah-ready masked heavies?
How many want to see POTUS deny that there is an ‘affordability problem’ and then promise to do something about it?
All of these are examples of political capital — squandered. A shrewd, alert, sensible man wouldn’t have done these things. But Trump is none of those things. Some even wonder if he is still sane. We don’t know. We’ve been following American politics for more than half a century. We’ve never seen anyone like him make it beyond baroque local elections.
In the late ‘60s, for example, Hunter Thompson led a ‘Freak Power’ campaign for mayor of Aspen. When that failed, he ran for sheriff, promising to change Aspen’s name to ‘Fat City,’ publicly punish dishonest drug dealers, and as for developers…they should be “f**ked, broken and driven across the land.” He lost and later committed suicide.
Nature has programmed us all to adapt...to change the way we dress...and change our opinions, as necessary. At the beginning of WWII, for example, an estimated 70% of Germans looked favorably on Hitler. By the end of the war, interviewers had a hard time finding a single person who admitted to ever favoring the Nazis.
A caterpillar doesn’t choose to become a butterfly. And people don’t really choose what they think.
At this stage, just about the only thing that will save Republicans in this year’s elections will be a war (people don’t like to change horses in the middle of a stream) or a booming economy. Both require cheap credit. Trump promises bribes to consumers, veterans, young families, the firepower industry and others. But if Warsh holds-the-line against rate cuts...or even raises rates to try to bring inflation under control...the Republicans’ grip on Congress is likely to weaken.
Did Trump change his mind about taking control of the Fed? Did he make a mistake? Or did Warsh conveniently adapt his opinions to the demand for them at the moment? MarketWatch:
‘Warsh’s hawkish credentials are real. His hawkish future is not. Trump didn’t pick him to raise rates and crash markets before the midterms. He picked him to sound responsible while doing what he’s told.’
As of this morning, gold was down 16% from last Thursday. Is this a dip you should buy? Maybe…
More to come...
Regards,
Bill Bonner
“When you see that trading is done, not by consent, but by compulsion - when you see that in order to produce, you need to obtain permission from men who produce nothing - when you see that money is flowing to those who deal, not in goods, but in favors - when you see that men get richer by graft and by pull than by work, and your laws don't protect you against them, but protect them against you - when you see corruption being rewarded and honesty becoming a self-sacrifice - you may know that your society is doomed.”
Ayn Rand
Consistent with my new year's pledge to read these missives from the perspective that it the piece is completely correct, proper, and applicable, I was doing fine, even coming to the end when I read this: "the Republicans’ grip on Congress is likely to weaken." And I lost it, big-time lost it. Don't you have to have a grip first of all, much less one that is "likely to weaken"? Seems to me what isn't there to begin with can't be "weakened." Maybe Bill should have used a modifier, like, you know "alleged", "nominal", "theoretical", or "purported". Maybe then I could have made it to the end. A Republican grip? Get a grip! No such thing. Best always. PM