I spent the weekend thinking about the war and the FOMC rate decision due out on Wednesday. We talk a lot about the K-shaped economy and how it typically corrects as Fed policy attempts to reset it from what is deemed to be excessive values.  It’s currently at all-time highs, so it would follow that the Fed takes corrective action. In the past, this has consisted of a cycle of rate hikes which plateau and are then followed by rate cuts which initially benefit the “have-nots”, but later mostly benefit the “haves.”

We’ve seen this cycle repeat 8 times in a row since the 1970s. But, we’ve never had a real estate developer who is so focused on his and his family’s personal wealth sitting in the oval office. CRE developers love high inflation, as long as it doesn’t throw the economy into a recession or drive cap rates too high. The Trump organization is heavily concentrated in the property types that benefit most from inflation: luxury hotels, golf resorts and high-end residential. So, optimizing for personal wealth would mean 3-5% inflation is just fine.

Of course, if inflation is too high it could impact his odds of losing the House and Senate in the midterms and mean being impeached for a 3d time. So, the Iran war could benefit him by giving voters a boogey man on which to blame higher inflation. If it’s transitory it’s no problem, right? Likewise, his tariff poicy – whatever its stated rationale – is inflationary. It is also at odds with the pressure he’s applying to the Fed to lower rates. A developer-friendly inflation rate of 3-4% and a low-rate environment would be the ideal combination for his asset base and his donors.

Re the K-shaped divergence, the irony is almost structural: the dynamics that drive the divergence — asset price inflation, real wage stagnation for the bottom half, concentration of wealth in hard assets and equities — are precisely the dynamics that benefit him the most. Rising asset values lift his portfolio. The wage pressure and purchasing power erosion that squeeze the lower half of the K don’t touch him, his family, or most of his donor base. There’s no feedback mechanism other than elections that would make him feel the problem. Bonus: the war has pushed the Epstein files off the front page.

The deeper irony is that his MAGA base includes a substantial working-class population that is on the wrong side of that K — people whose real wages have been pressured, whose asset ownership is minimal, and who are genuinely hurt by the kind of inflation that increases Trump’s wealth. His rhetorical solution has been to redirect that economic anxiety toward cultural grievance and trade policy framing — tariffs as a populist instrument that signals “fighting for you” even though the actual incidence of tariff costs falls disproportionately on lower-income consumers through higher goods prices.

We won’t know exactly how Warsh fits into the above scenario until he’s running the show. But, it will be very interesting to watch.