Is The Fed Lying About Inflation? | James Lavish

July 8, 2026

AI Summary

5 min read

The Fed's Quiet Inflation Strategy

In a congressional hearing, when asked why the Federal Reserve targets 2% inflation, Chair Powell gave a long, obfuscated answer. The real reason, according to investor James Lavish, is simpler: "that's what we can get away with." The 2% target, he argues, has no rigorous foundation—it apparently originated when a New Zealand central banker was asked on television in the 1980s and just said "two percent." From that offhand remark, a global monetary mythology was born.

The Coming Definition Shift

Lavish argues that the Fed, now under new leadership, is preparing to quietly change how it measures and communicates inflation. The mechanism is not a sudden lie but a gradual redefinition. People have been conditioned to accept 2% inflation, but the Fed can slowly let that creep higher—to 3%, then 4%—while using different statistical measures to obscure the shift.

Continue reading the full summary in the app — free to try.

Read Full Summary →

Free • No credit card required

Listen to Audio Summary Open in App

Never miss an episode of What Bitcoin Did

Get every new episode summarized in your inbox — free, ~5 minutes to read.

No spam. Unsubscribe anytime.

What you'll learn

1 (00:02) **Opening: The Fiscal Trap** - James Lavish opens with the impossible position of Treasury Secretary Bessent, facing massive deficits and no political will to fix entitlements.
2 (01:01) **The Thesis: The Fed Will Change the Definition of Inflation** - The core argument of the episode: the Fed, under Warsh, will quietly redefine what "acceptable" inflation means.
3 (06:44) **The Danger of Lagging Indicators** - Lavish explains how using trimmed mean PCE creates a dangerous lag, repeating the 2020-2022 mistake of calling inflation "transitory."
4 (07:16) **Warsh's "First Principles" and the AI Distraction** - Lavish analyzes Warsh's stated goal of returning to "first principles" and the argument that AI is disinflationary.
5 (12:55) **Why the Fed Will Move Slowly** - Lavish predicts Warsh will sit on his hands, using the complexity of AI's economic impact as cover for inaction.
6 (16:13) **The Bond Market Won't Be Fooled** - Lavish explains why cutting rates won't work: bond traders will sell off, driving long-term yields higher, as they did when Powell cut rates before the election.
7 (21:46) **The Real Action: The Balance Sheet** - The key signal to watch is not the Fed funds rate, but the Fed's balance sheet and Treasury buyback programs.

+ Full timestamped outline available in the app

Show Notes

"They will allow inflation to run hotter than they'll admit to."

James Lavish is co-founder of the Bitcoin Opportunity Fund and author of The Informationist newsletter.

In this episode, we discuss Kevin Warsh's first months as Fed chair and whether the Fed is about to change how it measures inflation. We get into the inflation task force, the trimmed mean PCE, why the 2% target was always arbitrary, and how the balance sheet is quietly expanding through treasury buybacks and QE light.

We also cover credit card delinquencies hitting 2008 levels, the K-shaped economy, whether the Fed is hoping AI bails them out of the debt problem, the circular AI trade, and why James is confident Bitcoin will be back at all-time highs within 12 months.

THANKS TO OUR SPONSORS:

FOLLOW:

Danny Knowles: https://x.com/\_DannyKnowles or https://primal.net/danny

James Lavish: https://x.com/jameslavish