Kevin Warsh is expected to be the next Fed Chair. Here's exactly what he'd do differently. He starts with the numbers nobody wants to sit with. The day before COVID, the US was paying roughly $1 billion per day in interest on its debt. Today that number is over $3 billion per day. Every single day. None of it goes to the military. None of it helps the least well off. It's just being squandered. His diagnosis: the Fed inherited a fiscal and monetary mess and has been using both of its policy tools inconsistently. Most people think the Fed has one lever: interest rates. Warsh says there are two. Interest rates and the balance sheet. The $7 trillion balance sheet that is an order of magnitude larger than when he was last at the Fed. Here's the problem: The Fed grew the balance sheet to flood the system with money. That causes inflation to run above target. Then to fight the inflation it created, the Fed raises interest rates. Both levers pulling against each other at the same time. "If the balance sheet mattered when you were growing it, it should matter when it's going the other direction." His prescription is straightforward. Shrink the balance sheet. Take the Fed out of markets unless there's a crisis. In doing so you reduce the inflation pressure it's been generating. And with lower inflation, you can actually bring interest rates down, which is what the real economy needs. He calls it practical monetarism. And he wants a formal accord between Treasury and the Fed, like the 1951 agreement that clearly separated who is responsible for what.