Inside today’s Daily Journal…

Editor’s note: Today, Porter turns the Journal over to his longtime friend, Jim Rickards. Jim serves as an editor and lead research voice for Paradigm Press, where he publishes analysis examining the intersection of economic policy, geopolitics, and national strategy through the publication Strategic Intelligence… Over the course of his career, Jim has served as an advisor to the CIA, the Pentagon, and the White House on matters related to economic risk, financial security, and geopolitical strategy.

The swearing-in of Kevin Warsh as the new chair of the Federal Reserve on May 22, 2026, prompted a great deal of reflection on the tenure of prior Fed chairs and speculation about Kevin Warsh’s interest-rate policies.

One of the more interesting analyses was a post on X by Bloomberg reporter Lisa Abramowicz on the day Warsh was sworn in. She prepared a chart showing the yield-to-maturity on the 10-year Treasury note on the day each of the last seven Fed chairs was sworn in, going back to Arthur Burns in 1970. Here are the results of her research:

The 10-year Treasury note yield is not a rate controlled directly by the Fed. That rate is dictated by the market. Still, it is a good proxy for mortgage interest rates and corporate debt. Mortgages and corporate debt are important drivers of the real economy, and their yields reflect economic conditions generally. As a compendium of rates that each incoming Fed chair has faced over the past 56 years, the chart is useful.

Discussion of the chart noted that rates were much higher in the 1970s and early 1980s than they are today. The observation was also made that Warsh’s hands may be tied because rates have climbed recently from the relatively low levels faced by past chairs Janet Yellen and Jerome Powell.

The conclusion was that Warsh will be fighting a battle against rising inflation and may even have to raise rates in the near future to contain it. Is Warsh headed back to the environment that his predecessors Paul Volcker and Alan Greenspan faced?

That may well be the case but, if so, it will be another historic blunder by the Fed. Abramowicz’s data is exactly right, but it hides as much as it reveals. What’s hidden holds the key to interest-rate policy going forward.

The interest rates Abramowicz shows are nominal. They represent the actual coupon on the note – the amount of interest you will receive as a holder. But they are not real. A real interest rate is what you get when you take the nominal rate and subtract inflation. The difference can be positive or negative, but the real rate is what you receive (or lose) once the devaluation of the dollar due to inflation is taken into account.

It’s just fifth-grade math, nothing difficult. If the nominal rate is 5% and inflation is 3%, then the real rate is 2% (5% – 3% = 2%). If the nominal rate is 5% and inflation is 6%, then the real rate is negative 1% (5% – 6% = -1%). Higher real rates are good for lenders and bad for borrowers, and vice versa.

When you talk about “high rates” or “low rates,” you have to look at real rates to see what’s happening to the economy. Of course, nominal rates still matter when you have to write a check. That’s important for cash-flow purposes, but less important for economic analysis.

Let’s look at the Abramowicz data again after adjusting for inflation at the time: