Fed Chair Nominee Waller: Tech-Driven Deflation Is a Major Risk

Author: Anthony J. Pompliano, Founder and CEO of Professional Capital Management; Compiled by Shaw; Golden Finance

Last April, the U.S. President took the stage at the White House Rose Garden, triggering severe turmoil across financial markets. He announced across-the-board tariff hikes on all imported goods into the United States, and the stock market immediately plunged in a steep free fall. Academic circles fell into collective panic, and the internet was flooded with all kinds of commentary predicting that a new Great Depression was about to arrive.

Of course, this intense reaction is nothing more than self-inflicted distress. After that, the stock market kept rebounding and went on to set consecutive record highs. A group of “experts” got their forecasts wrong, while investors who ignored the noise and made rational plans reaped significant gains.

However, in the mainstream analysis at the time, there was one view that I found especially absurd: various “experts” kept claiming that tariff policies would lead to malignant inflation. By contrast, I emphasized repeatedly in multiple posts in April 2025: at that time, deflation was a far more serious threat than inflation.

In a tweet on April 10, 2025, I wrote: “All the finance professionals who follow the crowd are telling you that tariffs will drive up inflation, but I still want to be clear: the bigger risk is actually deflation.” To this day, I stand by this judgment.

You don’t have to believe me, and you don’t need to keep listening to my rambling. The next Federal Reserve Chair, Kevin・Worc, recently made his position clear during an appearance on CNBC: he believes technological development will bring structural downward pressure on prices; deflation is a serious risk; and the Federal Reserve must prepare in advance to respond.

Artificial intelligence will lower the cost of all goods and services. We may be on the cusp of a productivity boom; the long-term trend of structural price declines may be only just beginning to unfold.

Those remarks were a publicly stated view by the top official who is about to take the helm of the Federal Reserve on a nationwide television program. If you still can’t clearly predict that the Federal Reserve will keep cutting interest rates in the coming months and even years, then there’s probably no information that can convince you.

Some people will claim that Worc is merely a puppet of Trump, fully aware that he must cut rates to avoid conflict with the President. Others believe that a short-term rise in crude oil prices and a long-term increase in commodity prices will push up inflation, thereby limiting the Federal Reserve’s room for large-scale rate cuts.

I have no way of knowing Worc’s political stance, nor do I know how he will work with the President. Such doubts can only be validated by time—whether the final outcome proves to be true. But as for the claim that inflation will rise, in my view, there is no question that the threat of deflation to the U.S. economy remains far greater than inflation.

Oil and gas prices are indeed rising, and commodity prices are also moving higher. But the U.S. economy today is more dependent on the technology sector than ever before. The key is that technology is broadly suppressing the prices of all kinds of goods and services in the United States.

The structural downward pressure on prices mentioned by Worc has long been misunderstood by the public. As Jeff Booth once pointed out: “The natural state of a free market is deflation; prices fall back to marginal production costs.” I agree with this view. If that theory holds, then as AI and robotics accelerate in adoption, continuous price declines will become inevitable.

Those who rationally oppose this view will immediately argue: the U.S. government continues printing money, the scale of national debt keeps worsening, and unchecked fiscal spending has historically almost always led to inflation. I do not deny that past experience has indeed confirmed this pattern.

What’s special right now is that a powerful deflationary force is currently dominating the U.S. economy. Tariff policies, the expulsion of immigrants, artificial intelligence, and automation—multiple factors combining together—have formed a deflationary “force multiplier” that is highly disruptive. As Elon・Musk put it: even if the United States prints money infinitely, it’s still difficult to offset the strong deflationary momentum.

This line of reasoning may sound absurd, and it may feel odd to hear it said out loud. But the deeper I dig into the various data, the more firmly I believe: deflation is the bigger risk right now.

The first major test of this view is last year’s tariff policy. At the time, the market broadly expected inflation to soar; yet the deflationary forces directly suppressed inflation, and the anticipated surge in prices never materialized.

The second key test will come in the next two to three months. Most investors expect inflation to rebound sharply, with the year-over-year increase in the Consumer Price Index (CPI) breaking above 5%; but real-time inflation indicators such as Truflation show that CPI is likely to remain moderate. If CPI does not spike, then the sharpest market participants will see clearly: deflationary forces are deeply influencing the overall economy.

Finally, the ultimate test: whether residents’ consumer prices will fall meaningfully. Stopping price increases is far from enough—it can only ease cost pressures, but it cannot produce real “deflationary dividends” or reduce the burden of daily life. Prices staying flat merely means living costs will no longer deteriorate further.

But once consumer prices for everyday goods fall broadly, the U.S. economy may enter a golden period of development, moving into an ideal environment of high growth and low inflation. This is exactly the economic picture that central bank governors around the world dream of.

Every American should look forward to: AI companies can deliver strong deflationary effects, boosting domestic production value while lowering living costs. Once this vision becomes reality, all politicians, central bank officials, and regulators will be seen as heroes of the era.

It doesn’t matter who takes credit for this economic win. The American people just want lower prices, so they can embrace economic prosperity. May we ultimately get what we hope for.