Sees price reactions as positive, believing Warsh will refocus the Fed on monetary policy and supervisory roles, reversing mission creep and bloated budget. Markets are reacting to expectations of a return to a more traditional, background role for the Fed.

Describes the 'Warsh maneuver': he can lower rates significantly without being inflationary by shrinking the balance sheet. The large balance sheet has fed inflation; reducing it allows lower loan rates while being non-inflationary.

Points to Warsh quitting the Fed post-crisis over balance sheet growth as a sign of principle. Believes balance sheet is root of inflationary evils and will push to correct past sins by shrinking it from ~$8T to more normal levels.

His principled stand allows him to escape notion of being under Trump's thumb. He has a huge task to intellectually convince the committee, similar to Volcker. If he pulls it off, he'll be the most consequential chair since Volcker.