Options for the new FED

Context: Kevin Warsh's First Meeting

Dixon frames the Wednesday Fed meeting as the third of the five world-repositioning events. Kevin Warsh held his first meeting as the new Fed chair, and the outcome was rates unchanged — which Dixon predicted.

His key framing: Warsh is not in charge. The FOMC is "predominantly a bunch of banks, and the Fed is owned by the banks." Warsh's job is to "read the script" of what the governors and board decide, and they represent the banks' interests . The public narrative — that Warsh was a "Trump puppet" who would slash rates — was, in Dixon's view, a CIA psyop spread via Q drops to convince the MAGA base that Trump was "taking on the Fed" .

Instead, Warsh's actual moves in the first meeting were:

• Less communication — he wants markets to decide based on data, not forward guidance
• Five task forces, including one on data — Dixon reads this as code for: "We need to change how we measure inflation" while maintaining the 2% target
• Reiterated the 2% inflation target — despite the Fed having been above 2% for ~36 months. Dixon reads this as a signal that rates could go up, not down

The Fed's Structural Power

Before explaining the two options, Dixon establishes why the Fed gets to choose:

"The Fed controls credit creation, liquidity, the banking system, the bond market (QE or QT), the stock market (rate cuts pump liquidity), the housing market (the 10-year determines mortgage rates), credit card debt, private credit, government financing through bond vigilantes"

And the chain of ownership:

Banks own the Fed → Fed is largest shareholder in the BIS (based on GDP)
→ BIS manages global financial architecture from Basel
→ Adjusting GDP weights for multipolarity gives other central banks more BIS power
→ This is how the managed transition to a multipolar world is orchestrated

Option 1: The Crack-Up Boom

Trigger: Cut rates significantly, do what Trump wants, look like a Trump puppet.

Mechanics chain:

Cut rates
  ↓
Refinance short-term government debt at lower rates
  ↓
Push bonds onto pensioners at negative real yields
  ↓
Let inflation rip while redefining inflation measurement (the "data" task force)
  ↓
Massive asset price inflation (stock market bubble continues)
  ↓
Fiscal dominance — government spending drives GDP
  ↓
Real estate rally
  ↓
Need to get long-term rates down → forces QE (balance sheet expansion)
  ↓
Credit expansion — more bank lending
  ↓
Dollar debasement → give up world reserve currency status
  ↓
Foreigners sell off US bonds
  ↓
Final speculative boom: AI boom, too-big-to-fail funded by private credit,
national security justification ("China will win the AI arms race")
  ↓
Eventually: everything blows up

Key features:

• Inflate away the debt — negative real yields means bondholders (pensioners, foreigners) pay for the debt through purchasing power loss
• Redefine inflation data — the "data task force" changes the measurement so official inflation stays at 2% while real inflation runs much hotter
• Dollar debasement — the cost of this path is losing the world reserve currency
• Socialize losses, privatize gains — the banks capture the upside of the boom; the public bears the inflation cost
• Justification narrative: "Trump rules the world" — growth, AI, national security

Dixon's label: "This is effectively where we were with the tariff policy" — i.e., the crack-up boom was already the trajectory under the first part of Trump's term.

Option 2: The Controlled Rug Pull

Trigger: Hold rates, or push them higher.

Justification: You have inflation, a tight economy, a booming stock market, and low unemployment — all the textbook reasons to raise rates. "If you increase rates, you're doing what the Fed would do under normal circumstances" .

Mechanics chain:

Hold or raise rates
  ↓
Massive economic slowdown
  ↓
Asset price correction (stock market, real estate, risk assets)
  ↓
Capital reallocation — money flows out of US into a multipolar world
  ↓
Debt restructuring (default/reflation/restructuring cycle)
  ↓
Managed transition to multipolar order
  ↓
FIC absorbs assets at distressed prices

The historical parallel Dixon draws:

Fed creates recession after WWI (booming 1920s)
  ↓
Great Depression
  ↓
Depression creates environment for WWII
  ↓
Transfer of wealth to the Fed, IMF, World Bank
  ↓
Fuels the Military Industrial Complex
  ↓
Come off gold standard in 1971
  ↓
Petrodollar → fiat-dominant globalization
  ↓
China manufacturing base → asset stripping through bond market
  ↓
Pumping the stock market → fiscal dominance (where we are now)

Dixon's point: the rug pull has happened before and it transferred wealth to the FIC every time. A debt restructuring via controlled recession is not chaos — it's a mechanism for wealth transfer.

The Fed Wins Either Way

This is Dixon's core structural argument:

"The Fed has the perfect narrative either way. The Fed controls timing."

Dixon's Personal Prediction

"I personally believe it will rinse the crack-up boom for as long as possible, and then the Fed has full control when to manage the full transition, once you got all the assets you can."

In other words: Option 1 first, then Option 2. Run the crack-up boom to capture maximum speculative gains and inflate away as much debt as possible, then deliberately trigger the rug pull when the FIC has accumulated all the assets it can — at which point the correction transfers even more wealth to the banks at distressed prices.

The Japan Carry Trade: The Liquidity Bridge

The crack-up boom depends on liquidity, and that liquidity was historically supplied by the Japan carry trade — the mechanism Dixon identifies as Tuesday's key event:

Bank of Japan offers free money (0% rates)
  ↓
Speculators borrow yen for free
  ↓
Convert to dollars → buy US Treasuries
  ↓
Hedge funds leverage via the "basis trade" (Treasuries vs. futures)
  ↓
Japan becomes largest foreign holder of US Treasuries
  ↓
This subsidized global liquidity and kept US rates low

The BOJ raising rates to 1% breaks this carry trade — ending "the final source of cheap liquidity" . Dixon's read: this is deliberate, part of the managed transition:

• Slowly increasing rates drains liquidity "bit by bit" without causing instability
• The liquidity shift redirects into domestic purchases (Japan buys its own bonds instead of US Treasuries)
• The FIC/Fed become the replacement buyers — they receive the yield
• If something breaks in the process, "you socialize the losses, privatize the gains, and the Fed will be able to manage those yields and take on the balance sheet"
• UAE FX swap lines replace the Japan carry trade as the new liquidity source for the Gulf/Iran reconstruction corridor

The key question: "Can the system survive without endless liquidity from the Bank of Japan?" — Dixon thinks the answer is a managed "yes," with the Fed ready for catastrophe because catastrophe = QE = balance sheet expansion = more FIC control.

The GENIUS Act: Stablecoins as FIC Consolidation

Dixon sees the stablecoin legislation not as crypto liberation but as another FIC power grab:

• The GENIUS Act gave banks the ability to use their Fed reserves to back stablecoins and pay yield
• Crypto companies that want to issue yield-bearing stablecoins must become banks
• This "concentrates power into the FIC" — rather than decentralizing money, stablecoins become bank-issued paper claims on Fed reserves, another layer of the crack-up boom's credit expansion

The Versailles Symbolism

Dixon ties the Fed regime story back to the Iran MOU signing location:

"The Bank for International Settlements was formed out of the Treaty of Versailles after World War I"

The BIS later became "the central bank of central banks" — and since the Fed is its largest shareholder (based on GDP), adjusting GDP weights for multipolarity gives other central banks more BIS power. Signing the Iran deal at Versailles signals, in Dixon's reading, a new monetary architecture being born in the same place the last one was — with the BIS/Fed managing the transition from unipolar to multipolar.

Critical Assessment