Quoth the Raven
· QTR’s Fringe Finance
· May 16, 2026 at 10:55
· ⏱ 7 min read
| Read on Substack ↗
Summary
New Fed Chair Kevin Warsh inherits an impossible macroeconomic situation: sticky inflation (CPI 3.8%, PPI 6%), rising bond yields (30-year above 5.1%), weakening consumer credit (delinquencies near 2008/2009 levels), and euphoric stock valuations (Shiller P/E ~42x). The article argues that Warsh faces a no-win choice between tightening further (risking recession) or easing (fueling inflation), with bond markets likely to force his hand regardless. This means bond market instability is the primary risk, with spillover effects into housing, corporate credit, commercial real estate, and government finances.
•Kevin Warsh confirmed as Fed chair in the most partisan vote in modern history, inheriting inflation at 3.8% CPI and 6% PPI.
•30-year Treasury yield surged above 5.1% on Friday as investors repriced higher-for-longer rate expectations.
•Auto loan delinquencies are near 2008 levels, and credit card delinquencies are approaching financial crisis highs.
•Oil prices moved above $100/barrel amid Middle East tensions, adding to inflationary pressure.
•Shiller P/E ratio sits around 42x, described as deep into 'what could possibly go wrong?' territory requiring everything to go right.
•Warsh has previously argued for shrinking the Fed's $6.7 trillion balance sheet and reducing market intervention, now faces conflicting pressures from inflation and market stress.