Kevin Walsh's era begins: What kind of asset is there to revalue

Original by: @GlobalFlows, @alabitoreddit

Original by Peggy, Block Beats

 

THE EDITOR, BY KEVIN WALSH AS CHAIRMAN OF THE FEDERAL RESERVE, HAD IMPLICATIONS FAR BEYOND A PERSONNEL ADJUSTMENT, BUT THE LOGIC OF MARKET PRICING ITSELF WAS CHANGING. WITHIN THE FRAMEWORK OF THE WALSH, INFLATION HAS BEEN REDEFINED AS FISCAL OUT-OF-CONTROL AND GOVERNMENT INEFFICIENCY, WHILE AI IS SEEN AS A KEY TOOL TO PRESS ON LOW-COST, INCREASE PRODUCTIVITY AND RESTORE GOVERNANCE CAPACITY。

With the actual deployment of AI systems such as Palantir to such areas as federal expenditure audits, housing finance and medical claims, the system is moving from philosophy to implementation and is beginning to become structurally fragmented and re-pricing in the market。

AFTER AI AND FISCAL DISCIPLINE HAVE BECOME THE POLICY FOCUS, WHICH ASSETS WILL RECEIVE A NEW PRICING PREMIUM, AND WHICH BUSINESS MODELS WILL FACE SYSTEMATIC RE-EVALUATION, BECOMING THE MARKET MUST ANSWER. THE FOLLOWING IS THE ORIGINAL TEXT:

Kevin Walsh’s appointment as the new Federal Reserve Chairman sends a signal that much more than a change of personnel, but that heralds a profound shift in the paradigm of global monetary policy and the AI arms race. And the link between the two is much closer than most people realize。

AI IS BECOMING THE ONLY ASYMMETRIC LEVERAGE FOR DETERMINING THE FUTURE, AND IT IS THIS CENTRAL GOAL AROUND WHICH WALSH CAME INTO OFFICE。

The discussion around him, like, "Will he drop the interest rate?" "Is he a hawk or a pigeon?" "What will he do with the Fed balance sheets?" Of course it's important, but all of these issues ignore the fact that a larger institutional shift is already under way。

What matters is not the short-term policy orientation, but why Kevin Walsh, and how he embeds into this emerging system. Understanding this will be the most important judgement variable in 2026。

From personnel appointments to institutional signals: Why Walsh

"Policy technocrats" in the non-traditional sense of the word. He has long been seen as a person with a systematic understanding of global capital flows, financial market structures and institutional incentives。

More importantly, he is not an isolated individual。

Walsh has long been in close contact with Droken Miller, Becent and Karp, and several of them have had deep ties with Palantir. On several occasions, Drukken Miller has publicly praised Walsh ' s ability to understand the structure of global capital flows and financial markets。

In an interview with Bloomberg, Drukken Miller referred directly to Walsh as his "trustee"。

But there is more to this: Drukken Miller is an early investor in Palantir itself and is closely associated with his co-founder and CEO Alex Karp. (Refer to:Interview LinkI'm not sure

Why does that matter? Because Kevin Walsh himself has a direct connection to Palantir。

In 2022, Alex and Kevin recorded an interview on how the world was moving towards greater disorder and greater complexity。

As they said in their interviews: "Tomorrow, there will be a leap in complexity. I don't know

This is not an empty technical optimism statement, but a forward-looking judgement of the impending change in governance, the fiscal system and macroeconomic stability。

Palantir: "Enforcement Level" for system conversion

Understanding Walsh, you can't avoid Palantir。

Palantir is crucial because the company is gradually becoming the “operational hub” of the United States federal anti-fraud system. Currently, 42 per cent of Palantir ' s revenues come from the United States Government, and its technology is being deployed to multiple government departments to identify and deter large-scale fraud and excessive and inefficient government spending。

Why does that matter

Because Palantir is being used to systematically respond to excessive waste and fraud of various kinds in government spending. Its technology is landing in a number of federal institutions and is a key tool for identifying unusual financial flows and clearing redundant expenditures。

SBA: ZERO TOLERANCE FROM SINGLE STATE TO NATIONAL LIQUIDATION

ONE OF THE MOST REPRESENTATIVE EXAMPLES COMES FROM THE UNITED STATES SMALL BUSINESS ADMINISTRATION (SBA)。

DURING THE SCREENING OF LOANS DURING THE EPIDEMIC, SBA FOUND MASSIVE IRREGULARITIES IN MINNESOTA: 6,900 BORROWERS, APPROXIMATELY 7,900 PPP AND EIDL LOANS, TOTALLING ABOUT $400 MILLION。

In this context, SBA introduced Palantir and made it clear that the investigation would be extended from a single state to the whole country as a systematic anti-fraud exercise of " zero tolerance " 。

The documentation shows that Palantir, through its Foundation platform, consolidates government data scattered across different agencies and systems, tracks the investigation process and sorts the trails by risk level. This means that Palantir is not simply providing analytical tools, but is deeply embedded in the federal Government ' s audit and anti-fraud workflow。

Home America: systematic pre-audit of housing finance systems

A similar logic is also under way in the housing finance system。

Fannie Mae has formally established AI Anti-Fraud Technical Cooperation with Palantir to introduce Palantir ' s AI capabilities into its crime detection system, which is used to focus millions of data on fraud patterns that were difficult to detect in the past to reduce future losses in the United States mortgage market。

This cooperation is particularly critical in the context of the management of over $4.3 trillion in assets, its fundamental position in the United States housing finance system, its coverage of almost a quarter of single-house mortgages and 20 per cent of multi-house mortgages. It was stressed that this would enhance the security and robustness of the entire mortgage market, while Palantir CEO Alex Karp put it bluntly that this cooperation would "change the way the United States combats mortgage fraud" and place anti-fraud capacity directly ahead of the system level。

So what's the connection between them? The answer is that the federal Government is increasingly deploying Palantir's anti-fraud capacity in different areas。

This suggests that the “fiscal inflation theory” espoused by Walsh is not at the academic level, but is being translated into enforceable, auditable and accountable government capacity through an AI system such as Palantir。

I find it very interesting: Humana, which has over $100 billion in government contracts, is one of the largest contractors in the government, and its stock prices are weakening while Palantir continues to rise。

Whether or not there is a direct link between the two stocks, this relative performance itself is of concern. The business model of Humana is largely based on the high complexity of the government medical reimbursement system. This complexity has historically been difficult to be audited on a large scale and systematically. By contrast, Palantir is increasingly being deployed to introduce transparency for precisely such projects。

THIS DICHOTOMY MAY BE CREATING A MORE MACRO SIGNAL: MARKETS ARE RE-PRICING TWO TYPES OF COMPANIES, ONE BENEFITING FROM NON-TRANSPARENTNESS AND THE OTHER PROVIDING VISIBILITY AND TRANSPARENCY. IF AI-DRIVEN REGULATION AND AUDITING EVENTUALLY BECOME THE NORM FOR FEDERAL FISCAL SPENDING, THIS STRUCTURAL CHANGE IS LIKELY TO TAKE PLACE NOT ONLY IN THE HEALTH SECTOR BUT ALSO IN MORE INDUSTRIES。

Humana Inc. can be said to be the single largest publicly listed company with the largest exposure to United States government medical spending, with Medicare Advantage at its core. The highest proportion of Humana ' s income and profits directly linked to the Medicare reimbursement formula, compared to similar companies, makes it extremely sensitive to CMS tariff adjustments, audits and policy changes, with few comparable targets。

WHEN AI ENCOUNTERS INFLATION: WHY IS THIS A SYSTEMIC CHANGE

Kevin Walsh has been calling on the Fed for over a decade for a "regime change." But what exactly does that mean

The answer starts with a completely different set of inflation theories。

Most of the current dominant inflation model within the Fed was established in the 1970s and has been used to date. According to these models, inflation results from an overheating economy and from a disproportionate increase in labour pay。

Walsh totally rejected this interpretation. In his view, inflation was not rooted in wages, but in the Government itself — when the Government printed too much, spent too much, was too “comfortful”。

This view is not an implicit one, but rather one that he has made clear on many occasions。

This is a real "institutional shift". It's not about whether the Fed is a hawk or a pigeon, or whether interest rates are up or down 25 basis points. The key is to rewrite thoroughly the Federal Reserve ' s inflation analysis framework, moving from a set of theories that attribute inflation to workers and economic growth to a set of frameworks that include government spending itself within the accountability framework。

Things started to be interesting here。

WALSH IS ALSO HIGHLY OPTIMISTIC ABOUT AI. IN THE SAME INTERVIEW, HE NOTED THAT AI WOULD REDUCE THE COST OF ALMOST EVERYTHING AND THAT THE UNITED STATES WAS AT THE START OF A PRODUCTIVITY BOOM. IN HIS VIEW, THE CURRENT FED DID NOT REALLY SEE THIS, BUT WAS BOUND BY OLD MODELS THAT MISJUDGED ECONOMIC GROWTH AS INFLATION。

THUS, ON THE ONE HAND, WALSH SAW AI AS A STRUCTURAL DEFLATION FORCE THAT WOULD CONTINUE TO PRESS LOW COSTS THROUGHOUT THE ECONOMY; ON THE OTHER HAND, HE ARGUED THAT THE REAL SOURCE OF INFLATION WAS OVERSPENT GOVERNMENT SPENDING AND FRAUD — LARGE SUMS OF MONEY WERE INJECTED INTO THE SYSTEM, WITHOUT PRODUCING THE CORRESPONDING REAL OUTPUT。

The two appear to be different judgments and eventually converge at the same node: Palantir。

Indeed, this institutional shift is not just a reshaping of the Fed itself, but a reshaping of the entire framework within which we understand interest rates, the dollar and global capital flows。

If Walsh's judgement is correct that inflation comes mainly from fiscal expansion rather than from supply-side shocks, then the traditional macro-operational manual will be completely ineffective。

WITHIN THIS FRAMEWORK, INTEREST-RATE REDUCTIONS NO LONGER IMPLY THE DOVE STANCE, BUT RATHER THE CONFIDENCE OF POLICYMAKERS THAT FISCAL DISCIPLINE AND AI-DRIVEN EFFICIENCY GAINS ARE TAKING ON THE MAIN TASK OF CURBING INFLATION. THE FED IS NO LONGER THE OPPOSITE OF FINANCIAL CONSTRAINTS, BUT RATHER ITS COLLABORATOR。

A Fed that rejects monetized fiscal deficits while actively supporting the reduction of fraud and expenditure would create a currency regime that was completely different from the environment that the market had priced over the past decade。

THIS IS EQUALLY SIGNIFICANT AT THE GLOBAL LEVEL. IF THE UNITED STATES CAN PROVE THAT AI CAN BE SCALED UP TO ENHANCE FINANCIAL ACCOUNTABILITY, INCLUDING REDUCING WASTE, IDENTIFYING FRAUD AND SIMPLIFYING GOVERNMENT OPERATIONS. SUCH A MODEL WOULD THEN BE REPLICATED BY OTHER DEVELOPED ECONOMIES, OR THEY WOULD BE SUBJECT TO COMPETITION。

THE SO-CALLED AI ARMS RACE IS NOT JUST ABOUT CHIPS OR MODELLING CAPABILITIES, BUT ABOUT WHO CAN TAKE THE LEAD IN RESHAPING RELATIONS BETWEEN GOVERNMENT AND ECONOMY WITH AI。

AND THERE'S THE DEFLATION POWER OF AI ITSELF. WALSH’S POSITION IS VERY CLEAR: HE BELIEVES THAT AI WILL BE LOW-COST IN THE ECONOMY AS A WHOLE, AND WE ARE ON THE EVE OF A WAVE OF PRODUCTIVITY, ALTHOUGH THE CURRENT FED IS NOT REALLY AWARE OF THAT。

IF HIS JUDGEMENT IS ESTABLISHED, WE WILL ENTER AN UNPRECEDENTED PHASE: STRUCTURAL FORCES ARE DEFLATIONARY (I.E. PRODUCTIVITY GAINS BROUGHT ABOUT BY AI), WHILE THE SOURCES OF INFLATION ARE DIRECTLY TARGETED AND SUPPRESSED (GOVERNMENT WASTE AND FRAUD). THIS WILL CONSTITUTE AN INVESTMENT CLIMATE THAT HAS NEVER EXISTED SINCE THE 1990S。

the old frame of thinking, eagles vs. doves, interest hikes vs. interest rates, risk preferences start vs. closed is not enough to explain what is happening。

The real question in 2026 was not what the interest rate on federal funds was set at, but whether the Union was truly capable of implementing its ambitious vision。

How can markets be re-pricing when the system has landed

Kevin Walsh will be the next Federal Reserve Chairman. The market may subconsciously classify him as a hawk figure, but this is not an accurate understanding. After 2026, Walsh's policy stance will become more complex and structural。

The following are the main policy directions he may drive and the potential impact of these changes on different asset classes:

• AI / SEMICONDUCTOR ($NVDA, $MU): EXTREMELY MULTIPLE
• Metals (silver, gold): extremely empty
• ENCRYPTED ASSETS ($BTC, $CRCL): ON THE SURFACE, THERE ARE MANY
• BANK AND FINANCE SECTOR ($JPM, $BOA): LOOK AT MORE
• Housing and real estate: division / uncertainty
• Renewable energy: looking out
• SMALL CAPITALIZATION (RUT): LOOK AT MORE
• Overseas stocks:
• Japan, Korea: stronger resilience
• EMERGING MARKETS (EM): EXTREME PRESSURE
• China and Hong Kong: overload
• EUROPE ($VGK, $EZU): CAREFULLY VIEWED

AI / SEMICONDUCTOR (FROM ENGLAND TO LIGHT): EXTREMELY LARGE

WALSH IS A CLEAR AND CONSISTENT MULTI-HEAD。

IN LATE 2025, HE PUBLICLY STATED THAT AI WAS A STRONG STRUCTURAL “NO INFLATION” FORCE. IN HIS VIEW, THE PRODUCTIVITY LEAP BROUGHT ABOUT BY AI WOULD ALLOW THE ECONOMY TO MAINTAIN HIGH GROWTH WHILE NOT NECESSARILY PUSHING UP INFLATION。

It is this “productivity boom” judgement that provides him with a solid theoretical basis to support a reduction in interest rates without a significant slowdown in the economy。

The Fed's Leadership Fault, Wall Street Journal, November 16, 2025

This is in stark contrast to previous stereotypes of the market — in the past, Walsh was often seen as an anti-inflation hawk with a rigid position and an emphasis on high interest rates。

AND NOW, NOT ONLY DOES HE SUPPORT THE INTEREST RATE, BUT HE CLEARLY WANTS TO ACCELERATE THE LANDING AND EXPANSION OF AI。

Metals (silver, gold): extremely empty

Gold has long been seen as a tool for the weakening of the dollar against currency. However, this logic is being weakened within the policy framework of Walsh。

He advocated the contraction of the Fed's balance sheet and the end of the "fingerprint easing", which directly shaken the core rationale for holding gold. At the same time, a strong dollar further raised the cost of metals to international buyers。

It needs to be added that the sharp fall of 33% of the silver dollar on that day was still driven mainly by technical factors such as the chain of accounts triggered by the bond adjustment; the influence of the new Fed Chairman may be only a minor push。

ENCRYPTED ASSETS ($BTC, $CRCL): ON THE SURFACE, THERE ARE MANY

"If you are under 40, bitcoin is your new gold." In his view, Bitcoin is a legitimate value storage tool that represents an intergenerational migration from physical precious metals to digital assets。

He also highly rated the block chain as "the state-of-the-art, most subversive basic software", and believed that the United States must be in the lead in this area in order to maintain long-term competitiveness。

But the question is: why are prices under pressure when there are too many positions? This is because the market is becoming aware that, while supporting lower policy interest rates, Walsh is maintaining both contractionary and monetary discipline。

THIS HAS GIVEN RISE TO A NEW CONCERN -- WE MAY BE ENTERING AN ERA OF "LOW INTEREST RATES, BUT NOT WITH QE." THE COST OF THE LOAN MAY HAVE FALLEN, BUT IT MAY NOT HAVE RE-EMERGED AFTER PUSHING BITCOIN INTO THE HISTORICALLY HIGH “LIQUIDITY FLOOD”。

As a result, there is a tension that Walsh looks at encrypted assets in terms of technology and long-term trends, but that his monetary constraints may suppress the liquidity premium in the short term。

Banking and finance sector: look at more

WALSH HAS BEEN THE PREFERRED POLICY CANDIDATE FOR THE BANKING SYSTEM, BASED ON HIS PROFESSIONAL BACKGROUND IN MORGAN STANLEY AND HIS LONG-STANDING CRITICISM OF THE "BREEDING OF FUNCTIONS " THAT REGULATES. THE MARKET GENERALLY EXPECTED THAT HE WOULD WITHDRAW SOME OF THE COMPLEX BANKING CAPITAL REGULATORY REQUIREMENTS (E.G. BASEL III)。

According to analysts, this would significantly benefit regional banks and small and medium-sized banks, as more capital would be released for the expansion of physical credit。

Housing and real estate: division

WALSH ADVOCATED A SUBSTANTIAL REDUCTION IN FEDERAL FUND INTEREST RATES, WHICH WOULD DIRECTLY REDUCE ** THE FLOATING INTEREST RATE MORTGAGE (ARM)** AND THE COST OF BUILDING FINANCE。

BUT THE RISK IS THAT HE IS CLEARLY OPPOSED TO THE FED HOLDING APPROXIMATELY $2 TRILLION IN MORTGAGE SUPPORT SECURITIES (MBS). MANY ECONOMISTS HAVE WARNED THAT EVEN IF OTHER INTEREST RATES GO DOWN, THE 30-YEAR FIXED MORTGAGE RATE COULD BE PUSHED UP TO 7-8%。

Renewable energy: looking out

Walsh plans to get the Fed out of global climate-related organizations (e.g. Green Finance Network) and end the climate stress tests imposed on banks。

During Powell ' s tenure, the Federal Reserve encouraged banks to include climate considerations in credit through a regulatory orientation. Walsh wants to put an end to this mechanism, which in effect removes the "policies go smoothly" that green projects had previously enjoyed。

Small capitalization: Look at more

Walsh has repeatedly stressed that the Fed should refocus its focus on the real drivers of the economy – small businesses and entrepreneurs – rather than “the large, overprotected institutions on Wall Street.”。

He expected to push for a systematic withdrawal of bank supervision, which would directly benefit small capitalization. By reducing the regulatory burden on small and medium-sized banks, SMEs ' access to finance will be significantly broadened。

Overseas stocks: fragmentation

WALSH ' S POLICY MIX MAY CREATE A CLEAR DIVISION ACROSS THE GLOBE: ONE GROUP OF ECONOMIES WOULD BENEFIT FROM GROWTH AND AI INVESTMENT IN THE UNITED STATES; THE OTHER WOULD BE MORE VULNERABLE TO A TIGHTENING OF THE STRONG DOLLAR AND GLOBAL LIQUIDITY。

/ KOREA (E.G. SAMSUNG, SK HERCULES): RELATIVELY RESILIENT BECAUSE THEY HOLD KEY PHYSICAL BOTTLENECKS IN AI AND THE ROBOTIC INDUSTRY, THE PRODUCTIVITY ENGINE THAT WALSH VALUES。

Against this background, the strong dollar has become their instrument of competition:

Export effects: contracts are mostly denominated in United States dollars and profits are significantly enhanced by exchange rate conversion

The US perspective is "lower": the strong US dollar has made Japanese robots, Korean chips, more price- appealing to American firms, accelerating productivity growth, and boosting the profitability of these firms。

China:

A strong dollar would continue to put pressure on the renminbi and limit the operational space for monetary policy。

Emerging markets:

The appreciation of the United States dollar significantly pushed up the United States dollar debt burden and increased risk exposure。

Europe:

While the euro is weak and favourable for exports, rising energy import costs constitute a structural constraint。

Last Friday, the collapse of silver and gold triggered sprinting and risk-taking, with a tight liquidity phase。

THE MARKET MAY STILL SIMPLY CLASSIFY WALSH AS A "TRADITIONAL HAWK" BUT, ACCORDING TO HIS RECENT STATEMENT, HE IS CLOSER IN THE SHORT TERM TO AN "AI-BASED DOVE."。

The market is currently digesting a new combination: interest-rate reductions, in parallel with balance sheet contractions。

WITHIN THIS FRAMEWORK, MULTIPLE TRANSACTIONAL LOGICS, RANGING FROM THE MAIN LINE OF AI TO SMALL CAPITALIZATION GROWTH, ARE STILL CONSIDERED CONTINUITY。