The loyal emissary

Clever partisans can always justify their leader’s policy priorities

Apologies for the bait and switch

I had promised to address what (almost) everyone gets wrong about “Quantitative Easing” and “Quantitative Tightening” this week, but events intervened, and with apologies I will put that topic off for another week. Given its importance as a signal to the direction of both Federal Reserve policy and President Trump’s economic policies, I will instead address new Fed Governor Stephen Miran’s speech last week explaining his policy framework.

The accountant, actuary and economist

There’s an old joke that an accountant, an actuary and an economist are interviewing for a job and each is given a copy of the firm’s books to review overnight. The next morning each is asked privately: “What is the company worth?” The accountant gives a precise figure down to the penny; the actuary gives a range, depending on what assumptions the company makes; and the economist leans in close and whispers, “What would you like me to say it’s worth?”

Professional shapeshifters “Peddling Prosperity”

Stephen Miran well epitomizes this type of economist. He is cast from the same mold as Peter Orzag, Jason Furman and Austin Goolsbee, just from MAGA iron instead of Democrat bronze. Paul Krugman, the exemplar, (unironically) described the type in his book Peddling Prosperity: bright, hyper-partisan economists that can reliably justify any policy their political master desires with a (seemingly) cogent economic argument.

Underestimated

I must admit to having underestimated Governor Miran. With little to judge him by other than his deeply misguided “Mar-a-Lago” thesis,¹ I had assumed that he was just one of the many Harvard graduates pushed along so that the university need not admit error. But after reading his Senate confirmation testimony and his speech last week it is clear to me that I was the one in error. I’m still not convinced that he knows much about markets, but he is bright and adept enough at economics to both wrap it around any position he needs to justify and leave himself wiggle room to escape when a new policy priority supersedes it.

“When the facts change...”

Most of the commentary on his speech last week makes hay of its supposed contradiction with an op-ed he contributed to Barron’s last year. In the Barron’s commentary, he and coauthor Sander Gerber made the case for a higher r*,² but in his Economics Club of New York speech he explains why both r* and the appropriate policy rate for the current environment are now much lower than last year.³ On their face, the two views do seem to contradict, but like John Maynard Keynes (supposedly), Governor Miran simply says “When the facts change, I change my mind. What do you do, sir?” The entire focus of his speech is on how both r* and presently appropriate policy stance should change in response to the radical turn in policies from the Biden to the Trump Administration.

“...I change my mind”

For instance, in the Barron’s commentary Mr. Miran claimed that President Biden’s lax immigration policies had raised r* by decreasing the capital-to-labor ratio and thus raising the marginal product of capital; and that the Biden fiscal stimulus had pushed the US towards a positive output gap (the economy running above its potential growth rate), requiring a restrictive (greater than r*) policy rate. Quite consistently, he maintains that President Trump’s reversal of immigration policies should then lower r*, and that the fiscal stimulus of “One Big Beautiful Bill” should, just like President Biden’s stimulus, contribute to a more positive output gap and raise the desirable Fed funds rate. Indeed, he even cites the same baseline estimate for r* in both the op-ed and the speech.⁴

With fitting spin

Of course, he ignores general price effects and assumes a forecast for declining rents that will drive inflation below the Fed’s target in three years. Of course, he assumes partial equilibrium effects, e.g. that neither private savings nor investment change in response to the supposed improvements in government savings he assumes. Of course, he biases all his estimated effects of those policy changes. He also cleverly sets his speech in a “Taylor Rule” framework to give himself infinite latitude to change his mind again whenever anything in the economy changes. I can (and do) take issue with his analysis in both the Barron’s article and his speech. But quibbling with either misses the point.

An emissary of the king

Recognizing Mr. Miran as an economic chameleon vastly simplifies interpretation of his speeches: like a diplomat’s flattery and framing of a communiqué, you can ignore his (current) view on the appropriate level for the Fed funds rate, his estimate of the neutral real rate of interest, r*, and his justifications for either. They are merely the temporary and meaningless bons mots dressing the real message: Stephen Miran is the loyal and trusted emissary of the king. When the king changes his mind, Governor Miran’s words will obediently change to suit them.

Thus the king commands

President Trump has spent much of this year loudly criticizing the Fed for holding interest rates too high and has explicitly stated that “I’m going to put somebody that wants to cut rates” on the Federal Reserve Board.⁵ Is there any real value in Governor Miran’s eloquent explanation for why interest rates should be lower? Or is it sufficient to know that “Ambassador Miran” speaks for the king? If the king were known for his constancy, the substance of Governor Miran’s message might add nuance, but among President Trump’s defining characteristics are his use of misdirection and his ability to walk away from a position without remorse or explanation. Hence, it’s not clear that we’ve learned anything new from Governor Miran that we didn’t know before the resignation of Governor Adriana Kugler whom he replaced.

A “third mandate” to bring down borrowing costs?

As with President Trump, people see in Governor Miran what they want to (again, that’s the point: he dutifully conveys President Trump’s intentional ambiguity). Thus, many claim that he added a “third mandate” for the Fed to bring down US borrowing costs.⁶ Yet, he never said that. This is what he actually said in his Senate confirmation: “Congress wisely tasked the Fed with pursuing price stability, maximum employment, and moderate long-term interest rates.” Compare that with the wording of the Federal Reserve Reform Act of 1977 (§2A, my emphasis added):

“The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.”⁷

Preventing “Depressions and hyperinflations”

The only difference I see between the wording Mr. Miran swore in his testimony to “transparently and honestly” pursue as Governor and Congress’s directions for the Fed is that he put “price stability” ahead of “maximum employment, and moderate long-term interest rates.” For good measure, earlier in his prepared statement, Governor Miran stated that “In my view, the most important job of the central bank is to prevent Depressions and hyperinflations.” Even for a chameleon, those don’t sound like someone prioritizing low government borrowing costs at the expense of economic stability.

Monetizing debt with a small balance sheet

There’s another problem with the thesis that the Trump Administration seeks a second “Fed-Treasury Accord” to hold down borrowing costs through debt monetization: the Treasury Secretary, Scott Bessent. Unlike Governor Miran, who dutifully mirrors President Trump’s message in erudite language, Secretary Bessent is the one member of the Trump Cabinet who has repeatedly broken new ground in economic policy and yet seems to retain the support of President Trump. Coincidentally, Secretary Bessent also is the man the President has tasked with finding the next chairman of the Fed. Given that Secretary Bessent has made clear that the Fed’s balance sheet is too large and is being abused in policy⁸ – a view that is also apparent in Governor Miran’s confirmation testimony⁹ – it would be odd for him to then propose a Federal Reserve chairman who would use the Fed’s balance sheet to “moderate long-term interest rates.”

Faith in the king to be the king

Since President Trump’s re-election I have been accused of being one of his partisans because I have a more positive take on many of his policies. But as an analyst, political blinders can only result in a right hook from markets. Yet, I do have faith in President Trump to act in what my analysis tells me is his best interest. That’s not a political position; it’s an analytical one. As a result, my base case view – albeit with falling conviction – is that President Trump will appoint a responsible “hawk” as the next chairman of the Fed, despite his current statements to the contrary. As I’ve written before, President Trump is playing for the history books and leading the US into either a “Depression” or “hyperinflation” is not the history he’s targeting.

I cannot claim that the President’s rhetoric doesn’t unnerve me; it does. His appointment of Governor Miran – albeit temporarily, perhaps – to the Federal Reserve compounds that worry. But my faith in President Trump to do what is best for himself grounds me in the uneasy view that the greater threat to inflation and economic stability in the US is the current Federal Open Market Committee and its repeated policy errors (as I have written twice in the last week).

Be a loyal emissary for Seriously, Marvin?! with a ❤️ and by sharing with friends!

Financial Disclosure and Disclaimer

The information provided in Seriously, Marvin?! or referred to in Thematic Markets is for informational purposes only and are not intended to constitute financial, investment, legal, tax, or other professional advice. The content is prepared without consideration of individual circumstances, financial objectives, or risk tolerances, and readers should not regard the information as a recommendation to buy, sell, or hold any specific securities, investments, or financial products.

Readers of Seriously, Marvin?! are solely responsible for their own independent analysis, due diligence, and investment decisions. We strongly advise consulting qualified financial professionals or other advisors before making investment decisions or acting on any information provided in our materials.

The information and opinions provided are based on sources believed to be reliable and accurate at the time of publication. However, neither Seriously, Marvin?! nor Thematic Markets, Ltd makes any representation or warranty, express or implied, as to the accuracy, completeness, or timeliness of the information. Markets, financial instruments, and macroeconomic conditions are inherently unpredictable, and past performance is not indicative of future results.

Neither Seriously, Marvin?! nor Thematic Markets, Ltd accept liability for any losses, damages, or consequences arising from the use of its content or reliance on the information contained therein. Readers acknowledge that investment decisions carry inherent risks, including the risk of capital loss.

This disclaimer applies globally and shall be enforceable in jurisdictions where Thematic Markets, Ltd, a company incorporated and based in England and Wales, operates. Readers in all jurisdictions, including but not limited to the United Kingdom, United States, Canada, European Union, Australia, Singapore, Japan, South Korea, and Taiwan, are responsible for ensuring compliance with local laws, rules, and regulations.

By accessing or using the information provided by Seriously, Marvin?!, users agree to the terms of this disclaimer.

1. “A User’s Guide to Restructuring the Global Trading System,” Stephen Miran, Hudson Bay Capital, November 2024.

2. “The Fed Is Facing a Changed World. The Case Against Cuts,” Sander Gerber and Stephen Miran, Barron’s (Op-Ed), 15 March 2024.

3. “Nonmonetary Forces and Appropriate Monetary Policy,” Stephen I. Miran, speech at the Economic Club of New York, Federal Reserve Board, 22 September 2025.

4. “Quo vadis, r*? The natural rate of interest after the pandemic,” Gianluca Benigno, Boris Hofmann, Galo Nuño Barrau, & Damiano Sandri, BIS Quarterly Review, Bank for International Settlements, 4 March 2024.

5. “Trump says he won’t appoint anyone to Fed who doesn’t back rate cuts,” Trevor Hunnicutt & Kanishka Singh, Reuters, 28 June 2025.

6. “Why everybody’s talking about the Fed’s ‘third mandate’,” Neil Irwin, Axios, 17 September 2025.

7. “Federal Reserve Reform Act of 1977,” Public Law 95-188, 91 STAT. 1387, 95^th US Congress, 16 November 1977.

8. “The Fed’s ‘Gain of Function’ Monetary Policy,” Scott Bessent, The Wall Street Journal (Op-Ed), 5 September 2025.

9. In his opening remarks to his testimony, Governor Miran framed balance sheet operations as liquidity management tools, saying “managing financial system liquidity is a complex exercise requiring regular fine-tuning,” and stated that “the ultimate composition of the Fed’s balance sheet is an open-ended question.