Nobel Prize-winning economist Paul Krugman called President Donald Trump’s nomination of Kevin Warsh as Fed Chair “a big humiliation for the Fed” in a new interview on the Monetary Matters podcast.

‘Replaced By Nothing’

Krugman warned the biggest risk to the dollar isn’t a rival currency. It’s the absence of one.

“The issue is not that the dollar might be replaced by something else, but that the dollar might be replaced by nothing else,” Krugman said. “That we just have a chaotic, fragmented international monetary system.”

That warning lands as gold trades near $4,900 per ounce, just below the $5,000 level it breached last week.

On Polymarket, traders give gold a 53% chance of being the best-performing asset of 2026, ahead of both Bitcoin (CRYPTO: BTC) and the S&P 500 (NYSE:SPY).

A separate Polymarket market gives 73% odds gold hits $5,500 by June.

A Hawk Only When Democrats Are In Charge

Krugman didn’t hold back on Warsh’s record. “He’s not a hawk. He’s a hawk when a Democrat is in the White House. He’s a dove when a Republican is in the White House and he’s angling for the job of Fed chair,” Krugman said.

He called the selection “a real degradation in the process and the criteria for selecting a Fed chair” and said “almost everybody” he knows in central banking is “really quite unhappy.”

Polymarket traders have already expressed skepticism. Warsh’s nomination odds dropped from 98% to 94% earlier this month while Judy Shelton climbed from 2% to 5%.

Tariffs And The AI Spending Boom

On tariffs, Krugman offered a clean number ahead of the Supreme Court’s Feb. 20 hearing on Trump’s tariff authority. “Micro data suggests that tariffs have raised prices by about 1% relative to what they would have been without them,” he said.

He also flagged the $500-600 billion AI capital expenditure boom as increasingly risky.

At the beginning of 2025, the spending was funded by retained earnings.

Now “a lot of it is debt, so it really is starting to look problematic,” Krugman said, comparing the cycle to the late-1990s telecom bust.

Gold’s structural bull case may be strengthening.

Goldman Sachs forecasts gold could reach $5,400 by year-end, driven by what Benzinga reported as sustained central bank buying after roughly $300 billion of Russia’s reserves were frozen in 2022.

JP Morgan is even more aggressive, targeting $6,300 and forecasting 800 tons of official-sector purchases in 2026.

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