Jerome Powell’s Silent Crisis: The Growing Revolt Inside the Federal Reserve

Today’s letter is brought to you by Lava!

Lava’s bitcoin-backed line of credit allows you to unlock your bitcoin’s purchasing power— instantly, flexibly, and securely— without selling your bitcoin.

Borrow dollars in real time with no monthly payments, open terms, and the lowest fixed interest rates in the industry— starting at just 5%.

Lava is the only bitcoin lending platform available globally—you can borrow from any country or state.

With Lava, you can access a full suite of bitcoin-powered financial tools:

→ Borrow dollars instantly

→ Earn 5% APY on your USD balance

→ Buy bitcoin with zero fees

It’s everything you need to grow your bitcoin wealth— without ever selling your bitcoin.

To investors,

The Federal Reserve and the Board of Governors have a history of debating policy decisions behind closed doors, yet they almost always put on a united front when it comes time for their periodic vote on monetary policy. That is why it was such a big deal when two Fed Governors dissented at the same time back in July of this year.

Not one, but two Governors dissenting in the same meeting. We had not seen two Fed Governors dissent in the same meeting since 1993, so the rarity of the situation raised eyebrows. At the time, most people wrote off the anomaly as a politically driven outcome. Fed Chairman Jerome Powell doesn’t seem to be a fan of Donald Trump and the two Fed Governors who dissented were Trump nominees.

The Fed is supposed to be independent, but if you believe that I have a bridge to sell you. The institution is made up of humans. Humans are biased. That bias doesn’t have to surface in a malicious or nefarious way, but every human is affected by their personal beliefs. That is how human nature works. No one, not even a central bank, is safe from it.

But now we are getting information that those two Governor dissents in July may have been the warning sign of things to come. Bloomberg’s Catarina Saraiva published an article over the weekend titled Fed Watchers Turn to Vote Counting as December Rate Drama Grows. In the article, Catarina writes:

“Division at the Federal Reserve has intensified in recent weeks, with officials staking out disparate positions ahead of the central bank’s December policy meeting — all while Chair Jerome Powell stays silent.

The drama was amped up Friday when New York Fed President John Williams, sometimes seen as a proxy for the Fed chief, signaled his support for a rate cut after several other policymakers came out leaning against one.

Powell himself hasn’t spoken publicly since the central bank’s last rate decision on Oct. 29. But a tally of recent remarks suggests the other voting members of the rate-setting Federal Open Market Committee are now nearly evenly split over what to do, all but ensuring some will vote against the Dec. 10 decision regardless of the outcome.”

These dissents are a big deal because they show cracks in the central banks’ armor. You can think of the constant dissents, especially from Fed Governors, as a very negative signal. There is no consensus. There is no peace. These dissents also highlight how difficult and complex the current economic environment is.

The recent disagreements are even more pronounced because Chairman Powell has done a good job driving consensus during his tenure, but that is all changing now.

This situation reminds me of the book Lords of Easy Money, which is the best break down of the Federal Reserve’s actions during the Global Financial Crisis.

The book is important because it lays out what many people are afraid to say in public: the Federal Reserve may have done more harm than good to the US economy in the last 20 years.

The book’s description states:

“If you asked most people what forces led to today’s unprecedented income inequality and financial crashes, no one would say the Federal Reserve. For most of its history, the Fed has enjoyed the fawning adoration of the press. When the economy grew, it was credited to the Fed. When the economy imploded in 2008, the Fed got credit for rescuing us.But here, for the first time, is the inside story of how the Fed has reshaped the American economy for the worse…The Lords of Easy Money skillfully tells the fascinating tale of how quantitative easing is imperiling the American economy through the story of the one man who tried to warn us.”

That one man was Thomas Hoenig and he looks very smart in hindsight. So what did Hoenig do? His legacy is explained with the following:

“In the aftermath of the 2007 recession, Hoenig was thrust upon a national stage as he spoke out frequently about the financial crisis and its causes, as well as the response to the crisis in terms of both regulatory changes and monetary policy. He cast the lone dissenting vote against the FOMC’s easy money policies at each of the eight FOMC meetings in 2010 and was troubled by the FOMC’s stated promise of keeping the federal fund rates at a historic low for “an extended period.”

He also spoke out frequently about the large and systemically critical financial firms known as “too big to fail,” whose carelessness and mismanagement, he said, were a major cause of the crisis.”

With the benefit of hindsight, it is hard to argue that Hoenig was wrong. My guess is other people in the room disagreed with the decisions being made, but they chose loyalty to the Fed institution over loyalty to the American people. Today it looks like there are fewer Federal Reserve officials willing to make that mistake again.

If the Fed held their monetary policy vote today, instead of on December 10th, Jim Bianco believes the current split would be 7-5 in favor of another interest rate cut. That belief is supported by the approximately 63% odds being assigned by the market to a December rate cut.

Even Polymarket has the odds of a 25 basis point rate cut in December at 95% right now.

But this rate cut decision is not going to happen for another four weeks. The vote won’t happen today. We have to wait until December 10th. That is a long time in financial markets. Data can change. Sentiment can change. And opinions can change. So you can’t rely on today’s information for a guaranteed outcome.

However, one thing that has been changing is the financial environment for the average American. They are in pain and want relief as fast as possible. Maybe a rate cut would help in some cases, but it may also create more pain in other cases.

MSNBC’s Kristen Welker asked Treasury Secretary Scott Bessent yesterday “how long do Americans need to be patient? How long do they have to wait for the cost of living to come down?”

Bessent responded with his views on the “three I’s.” He said:

“I talked about the three I’s that were killing Americans: immigration, interest rates and inflation. The president’s closed the border, and the mass immigration is gone. And that was putting – a lot of the immigration was putting upward pressure on housing, downward pressure on wages. Interest rates are down… So across the board, prices are starting to come down. We’re having Thanksgiving week. This will be the lowest cost for a Thanksgiving dinner in four years. Turkey prices are down 16%.”

This is ultimately the challenge of managing an economy. The Federal Reserve is slowly bringing down interest rates, while the Treasury Secretary and the Trump administration’s economic policy advisors are trying to address affordability on a national stage.

You can think of the Fed trying to pull the short-term lever and the rest of the government trying to pull long-term levers. It isn’t a perfect analogy, but it is closer to reality than people think.

There will never be perfect solutions to these problems. The global economy is a complex machine. No one can agree on what the data says, let alone how various decisions will impact the economy. Politics, monetary policy, and economic decisions are all intertwined now. And all eyes are on the Fed’s December rate cut decision.

My guess is the central bank will cut another 25 basis points. I don’t necessarily agree with that decision. My preference all year has been for a 50 basis point cut so we can quickly get to a sub-3% number for the cost of capital. That should provide relief for the average family, incentivize investment in R&D, and generally increase GDP to even more impressive levels of growth.

I don’t think there is any chance of us getting a 50 basis point cut, especially because the Fed is flying blind without some of the BLS data from recent months. So they will chicken out and continue slowly bringing down the Fed funds rate. But if they don’t cut interest rates for some reason, there will be chaos on Wall Street and markets will fall. The crowd knows we need cheaper capital, so the Fed is expected to deliver.

And market chaos is not something Jerome Powell and the Fed are willing to risk.

Hope you all have a great start to your week. I’ll talk to everyone tomorrow.

- Anthony Pompliano

Founder & CEO, Professional Capital Management

Bitcoin Fear Hits All-Time High — What Happens Now?

Jordi Visser is a macro investor with over 30 years of Wall Street experience. He also writes a Substack called “VisserLabs” and produces deep-dive investing videos on YouTube.

In this episode, we unpack the latest market pullback — why prices are dropping, why investor fear has spiked, and whether this is the start of a bear market or simply a healthy correction.

We also break down asset performance, where Jordi sees opportunity, and the signals that could mark a reversal — plus a quick look at Bitcoin’s volatility and what it means for long-term investors.

Enjoy!

Podcast Sponsor

* Figure - Need liquidity without selling your crypto? Figure’s Crypto-Backed Loans allow you to borrow against your BTC, ETH, or SOL with 12-month terms and lowest rates in the industry at 8.91%. Access instant cash or buy more Bitcoin without triggering a tax event. https://figuremarkets.co/pomp

* Bitizenship – Get Italian Residency with €250k investment in Bitcoin Startup Italy , maintaining Bitcoin exposure. Book a free strategy call at bitizenship.com/pomp.

* BitcoinIRA - Buy, sell, and swap 75+ cryptocurrencies in your retirement account. Pay less taxes. Earn up to $1,000 in rewards.

* Arch Public - Arch Public’s cutting-edge algorithm tools ignite profits, harnessing razor-sharp data analytics to nail perfect entries, exits, and risk management. Turn volatility into opportunity and do it hands free with Arch Public. (Oh, and yes, try us out for FREE too!)

* Defi Development Corp - DeFi Development Corp. (Nasdaq: DFDV) is building the first Solana-focused public treasury, giving investors exponential exposure to Solana’s growth.

* easyBitcoin - Stack sats with easyBitcoin.app—earn 1% extra on buys, 2% annual rewards and 4.5% APY on USD. Download it at easybitcoin.app today.

* Bitwise Asset Management - Crypto specialist asset manager with more than $10 billion client assets and more than 30 crypto solutions across ETFs, index funds, alpha strategies, staking, and more. Learn more at bitwiseinvestments.com

* Xapo Bank: Fully licensed private bank and virtual assets services provider that integrates traditional finance and Bitcoin. Earn up to 3.6% in BTC over USD Savings. Spend globally with a debit card that gives up to 1% cashback in BTC. The Pomp Audience Exclusive: Receive $150 discount when they join with this link.

* Simple Mining offers a premium white-glove Bitcoin mining service. Want to grow your Bitcoin stack? Visit https://www.simplemining.io/

* Zkverify - A modular blockchain dedicated to efficiently verifying zk proofs across diverse blockchain stacks.

* Bitlayer - Bitlayer is powering Bitcoin beyond just a store of value, making Bitcoin DeFi a reality while staying true to its core principles of security and decentralization. Learn more about Bitlayer at https://x.com/BitlayerLabs

🚨READER NOTE: If you want to sponsor The Pomp Letter, you can fill out this formand someone from our team will get in touch with you.

You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research.

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit pomp.substack.com/subscribe