Martin Wolf, the chief economics commentator at the Financial Times, has just published a cautionary article focusing on Kevin Warsh, who may soon lead the Federal Reserve. The article's title poses a direct question: what exactly do we see when interpreting "the Federal Reserve in the Warsh era"? Wolf is an authoritative figure in macroeconomic studies. He has long focused on issues of central bank independence and the boundaries between fiscal and monetary policy, and his viewpoints have significantly influenced policymakers and markets since the 2008 financial crisis. This time, he turns his attention to this candidate for Fed chairman selected by Trump, attempting to discern the future direction of monetary policy from Warsh's past statements and recent shifts in stance. The article begins by posing a sharp question: if Warsh is confirmed as Fed Chair, will he truly be an inflation hawk, or merely Trump's "lapdog"? This question is not without basis. Warsh's fluctuating statements on monetary policy and his views on the Fed's broader responsibilities mark him as a hardliner. Yet, his recent comments on the inflation outlook, combined with the fact of his selection by Trump, point in the entirely opposite direction. A deeper concern lies in this: is Warsh a person of conviction and judgment, or simply a political weathervane? Supporting loose monetary policy under Republican administrations while pivoting to tightening under Democratic ones—this "double standard" could introduce unpredictable risks to the U.S. and global economy. Wolf warns that under Warsh's policy framework, "the outcome could be another financial crisis." Examining Warsh's public statements, he indeed appears to be a classic "hard currency" central banker. Wolf cites a speech Warsh delivered in March 2010 to the Shadow Open Market Committee in New York. At that time, the U.S. economy was still grappling with the deep recession following the 2008 crisis, yet Warsh was already voicing concerns about the Fed's credibility. In that speech, Warsh put forth four core arguments. First, Fed independence applies only to monetary policy, not to "regulatory policy, consumer protection, or other duties granted to the Fed." Second, the Fed, "as a first responder, must strongly resist the temptation to become the rescuer of last resort." Third, "governments may try to influence central banks to keep monetary policy looser for longer, to finance debt and stimulate economic activity." However, "the only reputation a central banker should seek, if any, is a place in the history books." The fourth point is particularly crucial. Warsh emphasized: "It took central banks decades to bring inflation down to levels consistent with price stability. We should not risk these hard-won gains." This almost dogmatic anti-inflation stance seemed exceptionally severe given the economic context of the time. On the surface, the intellectual persona of Warsh today seems identical to the man of 2010. In a speech to the International Monetary Fund in April 2025, he not only highlighted the issue of the Fed's "mission drift" but also criticized its "failure to fulfill a vital part of its statutory mandate—price stability." Warsh's criticism was quite pointed. He argued that the Fed "enabled an explosion in federal spending," and that "the Fed's excessive role and poor performance undermine the important and valuable case for monetary policy independence." His sharpest critique was: "Since 2008, the Fed has been the most important buyer of U.S. Treasury debt." He elaborated further: "Fiscal dominance—where national debt constraints dictate monetary policy—has long been considered by economists a possible endgame. My view is that monetary dominance—where the central bank becomes the ultimate arbiter of fiscal policy—is the clearer and more present danger." For Warsh, loose monetary policy is a path to ruin. This leads to a perplexing question: Trump himself is the "embodiment of fiscal dominance," consistently attacking current Chair Powell as a "jerk" for not cutting rates faster. So why would he appoint someone who appears to be a staunch anti-inflation hawk as Fed Chair? Beyond Warsh's "handsome looks," there must be deeper reasons. Wolf analyzes several possibilities. First, Trump might appreciate Warsh's hostility towards the Fed's perceived "woke" overreach. Second, he may value Warsh's inclination towards financial deregulation. Furthermore, Warsh is a relatively orthodox choice whose appointment could soothe nervous markets (which, so far, it has). But the key point is this: Warsh "happens" to have concluded that inflation is no longer a threat due to technology-driven productivity growth. This judgment might be correct—as Warsh himself notes, former Fed Chair Greenspan made a similar bet on the internet's impact in the 1990s. However, for someone who worried about inflation during the deep recession of 2010, this represents a bold shift. Wolf comments: "If he gets his way, he will replace the Fed's 'data dependence' with a hunch. Given the huge U.S. fiscal deficit and debt, and rapid economic growth, this would be a huge gamble." Wolf concedes that he actually agrees with some of Warsh's criticisms of the Fed, particularly regarding its drift from core functions. He also agrees that post-pandemic inflation was partly the Fed's fault: along with other central banks, it failed to even consider that the 2020 surge in money supply might lead to a jump in the price level. Wolf further agrees that the backward-looking monetary policy framework introduced in 2020 was "conceptually and practically flawed (not to mention terribly timed)." The Federal Reserve as an institution also offers some reassurance. As Wolf states, the Fed is far more than just its chair. Leadership is important, but Warsh cannot simply ride roughshod over other FOMC members or even staff, at least not in the short term. Yet concerns remain, centered on two areas. The first worry is that Warsh might be overly willing to defend whatever Trump wants, even if it means fully embracing fiscal dominance. More disturbingly, he seems prepared to justify this through a maneuver: actively shrinking the Fed's balance sheet while offsetting lower short-term rates with higher long-term rates. Concurrently, the U.S. Treasury is likely to shift further towards short-term financing. This would result in a more steeply upward-sloping U.S. yield curve, potentially increasing short-term dollar funding needs while reducing long-term demand. Wolf warns that, crucially, "given declining bank reserves and financial deregulation, the financial sector's balance sheets would become more fragile." The incentive to hold dollars might also decline, as short-term rates fall while inflation concerns rise. Wolf reaches a sobering conclusion: "The outcome could be another financial crisis." This is not alarmism. Historically, financial crises often stem from inherent policy contradictions: attempting to maintain a facade of monetary discipline alongside fiscal expansion and deregulation, ultimately allowing systemic risks to accumulate in the shadows until a trigger ignites the entire chain. Finally, Wolf offers a cautious but clear assessment: "Yes, Warsh is better than many other candidates on the list. But he is a confusing, and perhaps self-confused, figure." This critique is incisive—a central banker with an erratic stance can be more dangerous than one who is steadfast but wrong, because markets and economic agents cannot form stable expectations. Wolf emphasizes: "The United States and the world need a Fed Chair who can say no to Trump." He praises current Chair Powell for having "proven to be such a person." The article ends with an unresolved question: "Will Warsh be that person?" The answer to this question might only become clear during the next economic or financial turmoil. But by then, the cost may already have been paid. As the article's title implies, whether the next financial crisis is triggered by Warsh depends on whether he chooses to be a principled central banker or a self-justifying apologist serving political ends. Based on current signs, the outlook is not optimistic. History teaches us that when monetary policy independence is eroded, and short-term political calculations override long-term economic stability, the fragility of the financial system increases dramatically. In this moment of great uncertainty, we should perhaps remember the words Warsh himself spoke in 2010: the only reputation a central banker should seek is "a place in the history books"—the question is, for what will he be remembered?