The Fed Will CRUSH Jobs (On Purpose)

[00:00:00] Speaker 1: The Federal Reserve has two jobs. Keep inflation under control and make sure unemployment doesn't rise too much above 4%. But change is afoot at the United States Central Bank and that so-called dual mandate of managing inflation and unemployment is now under threat. The Fed has a new chair, recently confirmed by the narrowest margin in modern history, and the man he just brought in to advise him believes the Fed should have one job and one job only. Protect the value of money. So today we break down the 50-year promise that's now hanging by a thread, the hawkish philosophy that's starting to govern the Fed's thinking, and why the next recession might arrive without anyone coming to save you. My name is Guy and this is the Finance Bureau. Back in 1977, America was trapped in something economists once thought was impossible, stagflation. A nightmare cocktail of stagnant growth, high unemployment, and inflation that tore up the old economic rulebook and called for drastic action to resolve. So Congress passed the Federal Reserve Reform Act signed into law by Jimmy Carter on the 16th of November that year. This handed the Fed a clear, legally binding instruction to pursue maximum employment, stable prices, and moderate long-term interest rates. In practice, people call it the dual mandate because that third goal mostly takes care of itself. Now, that first goal, maximum employment, is the entire reason the Fed cuts rates when the economy tanks. It's the legal obligation that produces stimulus, rate cuts, and a safety net when unemployment starts climbing. Put simply, it's the clause that forces the most powerful central bank in the world to care whether or not you keep your paycheck. And for nearly 50 years, that clause has held. The Fed even reaffirmed it just last year, completing a five-year review of its framework that explicitly recommitted to both halves of the mandate. But the center of gravity has now shifted, and it started with one appointment. Kevin Walsh is 56 years old, a former Morgan Stanley banker who served as a Fed governor from 2006 to 2011. He was considered for the chair back in 2017, but lost out to Jerome Powell and spent the following decade at the Hoover Institution, sharpening a very particular reputation as a hard money hawk. Throughout his first stint at the Fed, Walsh was consistently described as an inflation hawk, deeply skeptical of the unconventional tools that became standard after 2008. He spent years criticizing quantitative easing, attacking the Fed's bloated balance sheet, and even rubbishing forward guidance, arguing that, in his words, moving markets with rolling Fed incantations is tempting but unhelpful. And he likes to use a particular phrase to describe his vision: "regime change". In January 2026, Donald Trump announced his intent to nominate Walsh, formally submitting the nomination to the Senate on the 4th of March. And on the 13th of May, the Senate confirmed him by a vote of 54 to 45. That is the most divisive confirmation margin for a Fed chair in the modern era. Then, on the 22nd of May, Walsh was sworn in at the White House by Supreme Court Justice Clarence Thomas, the first White House swearing in of a Fed chair since Alan Greenspan in 1987. And, intriguingly, at that ceremony, Walsh said something that seems to contradict everything I've just told you. He stated that the Fed's mandate is to promote price stability and maximum employment, i.e., he affirmed both legs of the dual mandate. So, on the surface, the mandate looks safe, defended by the very man now running the place. But while the chair publicly defends both parts of the mandate, the people he's placing around him believe in only one. And the timing could not be more significant, because Walsh inherits an economy that hands the Hawks everything they want. Headline inflation came in at 4.2% year-over-year in May 2026, the highest reading since April 2023. Energy prices alone surged 23.5%, driven by conflict in the region around Iran and the Strait of Hormuz. Meanwhile, unemployment sits at just 4.3%, a labor market that simply refuses to crack. So, sticky inflation plus strong jobs is the exact cocktail a hawk dreams of, because it removes the usual excuse for going soft. And, on the 2nd of June, Walsh made his first major personnel move. He hired two interim advisors: Daniel Heil from Hoover and a man named Paul Winfrey. Now, before we dig into this intriguing character, if you want to keep up with the stories that affect your portfolio, then you should be reading the Finance Bureau newsletter. It's absolutely free, and we break down everything regarding global finance, commodity markets, macroeconomic trends, and monetary policy, so that you never miss what truly matters. All you have to do is click the link in the description or scan the QR code on your screen to get started. And now, let's get back to Paul Winfrey, because his record is the whole story here. Winfrey was a deputy assistant to the President during Trump's first term, is a former Heritage Foundation Fellow, and the founder of a think tank called the Economic Policy Innovation Center. But his most important credential is what he wrote. Winfrey authored the Federal Reserve chapter in Heritage's Mandate for Leadership, the blueprint you'll know better as Project 2025. And his documented position is blunt. The Fed should have the sole objective of stable money. In that chapter, he argues for eliminating the maximum employment leg entirely, replacing the dual mandate with a single price stability mandate focused on protecting the dollar. His distinctive twist is that he blames the employment mandate itself, arguing that the pursuit of easy money causes a clustering of failures that ultimately drags economies into recession. In his framing, the jobs mandate actually causes economic sickness. Now, to be fair, Winfrey has walked back the most extreme version of these ideas. In a 2024 interview with Roll Call, he said plainly, quote, "I would not subscribe to the idea of nuking the Fed." So, he's not calling to abolish the central bank or return to the gold standard. Nonetheless, he distanced himself from destroying the institution, while leaving the single mandate argument completely intact. And crucially, Winfrey is an interim contractor. He can't rewrite the law. He can't vote on anything. But the man who literally drafted the blueprint for stripping your job out of the Fed's legal duties is now sitting inside the room, advising the chair in the first few weeks of a new regime. His ideas didn't win an election. They didn't pass a vote. They just walked in through the front door. And they're not staying inside that one room either. So, because there is now actual legislation moving through Congress that does exactly what Winfrey's chapter describes. It's called the Price Stability Act of 2025, House Bill 5396, introduced by Financial Services Committee Chairman French Hill. And it seeks to amend the Federal Reserve Act to delete the words maximum employment, leaving only stable prices. And on the 13th of May, 2026, the very same day Walsh was confirmed, that committee voted to advance the bill 30 to 21. Now, the Republican argument is that a single mandate prevents the policy errors that cause inflation. The Democrats, meanwhile, argue that ripping out the employment leg ignores the real economic pain of unemployment and dumps it onto workers. So, the philosophy is in the Fed chair's ear and the legal machinery is grinding its way through Congress. Which naturally begs the question, what would a stable-money-only Fed actually feel like for you? Well, for that, we don't need to imagine, because America has already lived it. In August 1979, Paul Volcker took over a Fed that had spent the decade blinking, easing up the moment unemployment rose and letting inflation become permanently entrenched. Volcker decided to break that pattern no matter the cost. He drove the federal funds rate to an all-time peak of around 20% by June 1981. Yes, 20% interest rates. As you can imagine, that caused a fair amount of pain. Unemployment climbed to 10.8% by late 1982, the highest since the Great Depression. Two recessions hit back to back. Farmers blockaded the Fed building with tractors, and construction workers mailed in planks of lumber in protest. A wave of farm foreclosures swept the country. Nevertheless, Volcker's take-no-prisoners approach worked in the narrow sense, as inflation fell from a peak of nearly 15% in 1980 to 3.2% by 1983. But here's how Volcker described it, and this is the entire single-mandate worldview in one sentence. He insisted the Fed did not cause the recession, that inflation caused it, and the recession was simply the unavoidable cost of the cure. And this is pretty much the same idea that's being whispered in Kevin Walsh's ear now. The likes of Paul Winfrey view the loss of your job as the necessary medicine for the US's economic ills. So, here's how it might look in the not-too-distant future. In a single-mandate world, when inflation runs hot, the Fed raises rates and keeps them high, even as you and your neighbors start losing your jobs. There's no legal obligation to ease, no requirement to cut, no cavalry coming, because your unemployment is no longer the Fed's problem. Recessions run hotter and longer for ordinary workers, because the relief only arrives when inflation hits target, not when your industry starts shedding staff. And guess what, the pain is not shared equally. Think about who wins here. Savers earn real returns, bondholders lock in higher yields, and the asset rich watch the dollar's purchasing power get fiercely protected. And with the 10-year Treasury yield already at 4.55%, those holding capital are doing just fine, thank you very much. But now, think about who pays. Wage earners who face deliberate labor market slack designed to crush their bargaining power. In fact, real average hourly earnings already fell 0.7% over the 12 months through May, meaning workers are losing ground even under the current dual mandate. The indebted pay too, because households carrying variable-rate mortgages, credit cards, and auto loans get crushed by higher-for-longer rates that are now the policy intention, not a passing storm. And the young pay most of all. Last hired, first fired, with the thinnest savings buffer, the heaviest student debt, and the most to lose from a downturn that steals their early earning years. This is, in effect, the most regressive trade-off in modern economics, fighting inflation by transferring purchasing power from those who borrow to those who lend. And in 2026, with household debt far higher than it was in Volcker's era, that all hits harder than ever. So, those are the stakes. But this is not yet a done deal, because formally killing the employment mandate takes an act of Congress. That means a House majority, 60 votes in the Senate, and a presidential signature, against the collective opposition of unions, progressives, and swing district Republicans, whose voters work in factories and on building sites. The optics of Congress officially voting to stop caring about unemployment are brutal. But there's a deeper counterargument, too. A Congressional Research Service report from May noted that changing the mandate wouldn't have prevented recent mistakes anyway because the Fed's real error was misjudging inflation as transitory, a judgment failure that could happen under any mandate. And the irony in all of this is that the man who appointed Kevin Walsh, Donald Trump, is publicly demanding lower rates, which puts him directly at odds with a hawkish, inflation-obsessed Fed. Markets don't want a Volcker-scale unemployment spike either, because that would threaten the very asset prices the political coalition behind these reforms depends on. So the real near-term danger isn't a dramatic law passing tomorrow, but a Fed that simply behaves as if it has one mandate, prioritizing inflation signals over your job in every decision, while the law stays untouched on paper. And as this video goes out, Walsh will chair his first FOMC meeting. The consensus expects a hawkish hold, with the committee likely dropping any hint of future cuts, and Walsh possibly scrapping the dot plot entirely. That tone is your early warning signal. So, the dual mandate survived for nearly 50 years for one reason: because someone, somewhere, was legally required to care about whether or not you had a job. That requirement is now being contested, not by a vote you got to cast, but by an appointment, an advisor, and a shift in philosophy that all happens behind closed doors. The era of assuming the Fed will always ride to your rescue is ending, replaced by a doctrine that treats your unemployment as the price of stable money, rather than a problem to be solved. Savers and bondholders, anyone whose wealth is protected when the dollar is defended at all costs, will come out of all this smiling, while wage earners, young people, and anyone carrying debt will be the ones feeling the pain because their only real asset is the paycheck the Fed may soon stop protecting. Gosh, it all sounds rather familiar, doesn't it? Right, but what are your thoughts on this? Does this single mandate philosophy harden into reality with the Fed letting unemployment rise on purpose? Or do Congress, the markets, and even Trump's own rate-cut demands hold the line and keep your job inside the Fed's job description? Let me know your thoughts down in the comments below. And if you want to understand how the dollar itself is being reshaped behind the scenes, then you can watch our full breakdown of that right over here. Okay, that's all from me for today though, so as always, thank you for watching and I will see you in the next one. This is Guy, signing off.