The Fed’s “heroin on the table” [Video]

Mike Maharrey opens the Midweek Memo with a sharp analogy: if the D.A.R.E. officer lectured against drugs and then left heroin and syringes on the desk, that would mirror Jerome Powell’s performance. The chair talked tough, lowered expectations for future easing, and still delivered another hit of easy money.

The show centers on last week’s rate cut and the decision to end balance sheet reduction on December 1. Maharrey argues this combination abandons any pretense of fighting inflation and sets the stage for renewed money printing.

What the Fed actually did

The FOMC voted 10–2 to cut the policy rate by 0.25 percent, placing the federal funds rate in a 3.75 to 4 percent range. By historical standards, Maharrey notes, that is not high, yet the committee eased anyway while officially acknowledging that inflation has “moved up” and remains “somewhat elevated.”

More consequential is the halt to quantitative tightening on December 1. Instead of letting maturing Treasuries and mortgage-backed securities roll off, the Fed will replace them. That means it must buy bonds, boosting prices and suppressing yields, and in turn making it cheaper for the federal government to borrow.

Inside the vote and the message

Two officials dissented, but from opposite directions. Steven Myron, a newly appointed governor, wanted a half-point cut. Kansas City Fed President Jeffrey Schmidt wanted no cut at all. Everyone else sided with another 25-basis-point reduction.

The statement flagged rising downside risks to employment even as inflation remains elevated. Maharrey reads the tea leaves this way: the economy is wobbly under the weight of higher rates, and the Fed is already back to easing despite its rhetoric.

Powell’s talk versus the tape

Powell tried to lean against hopes for a December cut, saying it is “not a foregone conclusion” and that some members want to “wait a cycle.” Markets listened. Implied odds for a December cut fell from 90 percent to 67 percent after his press conference. Stocks sagged. Gold and silver softened as traders priced a slower pace of easing.

Maharrey’s view is blunt: ignore the jawboning and watch the actions. The Fed cut in an inflationary environment and ended QT. The talk merely tries to keep the party from getting out of hand after refilling the punch bowl.

Inflation by design

Powell suggested that inflation excluding tariffs is “not so far” from the 2 percent goal, offering examples such as 2.8 percent that imply core PCE around 2.3 to 2.4 percent without tariff effects. Maharrey calls this number-massaging and cites Ryan McMaken’s critique that “inflation-ex-tariffs” is a political ploy to declare victory.

The larger thesis is harsher. Two percent was always a made-up target. If three percent becomes the new normal, that simply formalizes the quiet devaluation needed to run a sprawling government on fiat money. In Maharrey’s words, inflation is the plan, not a policy error.

From QT halt to QE restart

The United States is already paying over $1 trillion per year in interest. With global demand for Treasuries softening, the Fed must lean in. Ending QT reduces net supply to private buyers, supports prices, and pushes yields down. Maharrey doubts that it will be enough and expects a return to outright quantitative easing within a year or two.

He quotes Ambrose Evans-Pritchard’s argument that the Fed is preparing the ground for a rapid return to net purchases, likely branded as open-market operations to “manage reserves.” Different label, same effect. Money printing.

What history already taught

Quantitative easing began after 2008 alongside zero rates. Ben Bernanke told Congress it wasn’t debt monetization because the assets would be sold later. They weren’t, at least not meaningfully. Rates didn’t lift off zero until December 2015, seven years on, and QT in 2017 sputtered by late 2018.

By 2019, the Fed had cut rates three times and ended QT before the pandemic. COVID then justified another giant balance-sheet surge, roughly $5 trillion. Subsequent QT removed about $2.4 trillion, still less than half the pandemic addition. Powell has no plan to return to pre-pandemic levels, effectively validating what Tim Congdon calls monetization of deficits, estimating around two-thirds of U.S. debt monetized in one form or another.

The debt black hole

Decades of easy money bred a bubble economy that struggles with even modestly higher rates. Maharrey points to the Chicago Fed’s National Financial Conditions Index to argue conditions have been loose all along, and policy is getting looser.

In the Austrian business cycle framing, distorted rates fuel malinvestment, then busts, then more easing to paper over the damage. Addiction ends badly. The longer we suppress market signals, the bigger the comeuppance.

Gold, Silver, and the world’s response

The World Gold Council’s third-quarter data shows demand up 3 percent year over year to 1,313 tons, the highest quarterly level ever. In dollar terms, demand jumped 44 percent to a record $146 billion, driven by investment as jewelry slowed under higher prices.

The United States was the outlier, with bar and coin demand at just 7 tons, the lowest since the 2017–2019 trough. Interest picked up when the price broke above $4,000, but many Americans used strength to book profits with gold at $4,500 and silver over $50. Maharrey warns that selling metals to hold dollars is a wager against an inflation regime the Fed keeps reinforcing.

A dealer’s eye on opportunity

Maharrey highlights a limited-time deal on pre-1965 U.S. quarters, dimes, and halves that are 90 percent silver and priced five cents under spot. He notes the silver value of a pre-1965 quarter is currently well over $8, which is why they rarely turn up in circulation.

He frames dips as accumulation opportunities, adding practical avenues for investors: IRAs, installment plans to build a position over time, and vaulted storage in Eagle, Idaho.

What it means right now

If inflation is policy rather than an accident, holding cash becomes a slow, predictable burn. The QT halt suggests the Fed is prioritizing Treasury market function and federal financing costs over a clean break with inflation.

Maharrey expects a rebrand of QE rather than a repudiation of it. The debasement trade, as Evans-Pritchard put it, is still young. In that world, real assets endure in ways paper promises do not.