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WASHINGTON — President Trump, his Treasury secretary and his choice to lead the Federal Reserve believe they can coax the U.S. economy back to a boom reminiscent of the 1990s.

They are putting their faith in artificial intelligence to duplicate what happened when another technology arrived during the Clinton era: the internet. Back then, the American economy surged as businesses became more productive, unemployment tumbled and inflation remained in check.

Trump expresses confidence that his nominee to become Fed chair, Kevin Warsh, can unleash an economic bonanza by jettisoning what the president sees as the central bank’s hidebound reluctance to slash interest rates.

Many economists are skeptical.

The world looks a lot different today than it did when the Spice Girls ruled radio and “Titanic’’ dominated the box office. And the story the Trump team is telling — that a visionary Fed chair, Alan Greenspan, fueled the 1990s boom by keeping interest rates low — is incomplete at best.

“The administration is offering a rather distorted version of what actually happened in the 1990s,’’ economist Dario Perkins of TS Lombard said in a commentary.

Nonetheless, the Trump administration believes history can repeat itself. All that’s been missing, Trump says, is a Fed chair with Greenspan’s foresightedness.

AI’s influence over interest rates

Trump has repeatedly attacked current Fed chief Jerome H. Powell, whose term as chair ends in May, for his caution in lowering rates while inflation hovers above the central bank’s 2% target. Treasury Secretary Scott Bessent said on social media in January that the president sought to replace Powell with someone with “an open, Greenspan-like mind.”

“Our nation can see productivity boom like we did in the ’90s when we are not encumbered by a Federal Reserve which throws the brakes on,’’ Bessent wrote.

On Jan. 30, Trump said he was picking Warsh.

In speeches and writings, Warsh has argued that AI-driven improvements in productivity could justify lower interest rates.

These views align with Trump’s desires for Fed rate cuts but mark a break with Warsh’s past as an inflation hawk.

In the aftermath of the 2007-09 Great Recession, Warsh — then a Fed governor — objected to some of the central bank’s efforts to help the struggling economy by pushing down rates even though unemployment exceeded 9%. He warned then, wrongly, that inflation would soon accelerate.

At issue now are gains in productivity and the possibility that AI will make them bigger — much bigger.

To economists, productivity improvements are almost magical. When companies roll out new machines or technology, their workers can become more efficient and produce more stuff per hour. That enables firms to earn more and to raise employees’ pay without raising prices. In short: Surging productivity can drive economic growth without spurring inflation.

Greenspan and the internet

In the mid-1990s, Greenspan was contending with a strange set of economic circumstances: Wages were rising but inflation wasn’t heating up.

Big productivity gains might have explained things, but government data showed no sign of them. Other Fed policymakers worried that surging wages and tame inflation couldn’t coexist and that higher prices were coming. They wanted to raise interest rates.

But Greenspan suspected that the official productivity numbers were missing something. For one thing, they didn’t jibe with the amazing tales of efficiency improvements the Fed was hearing from companies investing in computers and turning to the internet.

So he ordered his lieutenants to dig through decades of productivity numbers. The official statistics they assembled told an implausible story: Services firms — including retailers and legal practices — had supposedly seen productivity fall over the years, despite intense competitive pressure and massive investments in technology.

Greenspan didn’t believe it. He persuaded his Fed colleagues that the government’s numbers were wrong and were understating productivity. They agreed in September 1996 to hold off on raising rates.

The economy took flight.

Tardily, productivity advances began to show up in the official data. Overall, American economic growth surpassed 4% every year from 1997 through 2000, something it would do again only once in the next quarter century. The unemployment rate plunged to 3.8% in April 2000, the lowest in three decades. Inflation stayed in its cage, coming in below 2% — later the Fed’s official target — for 17 straight months in 1997-99.

History repeats itself … maybe?

American productivity looked strong in the second and third quarters of 2025, and some economists attribute the improvements to the early adoption of AI; they see bigger gains and stronger economic growth ahead.

Others aren’t so sure.

Joe Brusuelas, chief economist at consulting firm RSM, wrote that the 2025 productivity improvements “are not because of artificial intelligence’’ but reflect investments in automation that companies made when they couldn’t find enough workers during the COVID-19 pandemic. “Those investments are starting to pay off,’’ Brusuelas wrote.

Economist Martin Baily, senior fellow emeritus at the Brookings Institution, believes it will take time for AI to have a big effect on the way companies do business and on the nation’s productivity.

“Companies don’t change that fast,” said Baily, chair of President Clinton’s Council of Economic Advisors during the boom era. “It’s expensive to change. It’s risky to change. The managers don’t necessarily understand the new technology that well. So they have to learn how to use it. They have to train their staff. All that stuff takes a long time.’’

A productivity boom can raise the economy’s speed limit — how fast it can grow without pushing prices higher. But it might not justify lower interest rates, Fed Gov. Michael Barr said in a speech last month.

Businesses will borrow to invest in AI, putting upward pressure on interest rates. Likewise, American workers and their families probably would save less and borrow more in anticipation of higher wages, the payoff for being more productive; that would put still more pressure on rates to rise.

Bottom line, Barr said: “The AI boom is unlikely to be a reason for lowering policy rates.’’

Even Greenspan’s Fed eventually came to the same conclusion, reversing course and starting to raise its benchmark rate in mid-1999, taking it from 4.75% to 6.5% in less than a year. (The rate Trump complains about now is around 3.6%.)

“Warsh and Bessent talk only about the dovish 1995/96 version of Greenspan; they overlook the hawkish 1999/2000 variant,’’ Perkins wrote.

Then and now

Many of Warsh’s potential future colleagues on the Fed’s interest-rate setting committee see the late-1990s experience differently than he does, setting up what could be a clash at the central bank if the Senate confirms Warsh as chair.

Austan Goolsbee, president of the Federal Reserve Bank of Chicago, said last week that “the analogy to the late ‘90s is a little harder for me to understand.” Greenspan’s insight was that productivity gains meant the Fed could hold off on raising rates, not that it should slash them, Goolsbee noted.

“It wasn’t, ‘Should we cut rates because productivity growth is higher?’” he said.

The economic backdrop that awaits Warsh is also far less friendly than the one Greenspan enjoyed.

Greenspan was avoiding rate hikes at a time when the usually profligate U.S. government was running rare budget surpluses and didn’t need to borrow so desperately. Now, after a series of spending hikes and tax cuts, deficits are piling up year after year, and the Congressional Budget Office expects federal debt to hit a historic high of 120% of America’s gross domestic product by 2035.

Nor was productivity the only thing controlling inflation in the 1990s. Countries were lowering tariffs and dismantling trade barriers. Immigration was surging.

Now, due largely to Trump’s policies, notably his sweeping taxes on imports and his crackdown on immigration, the world is much different. “Trade barriers are going up,’’ Perkins wrote. “Globalization has given way to de-globalization.’’

“That benign era is clearly behind us,’’ said Michael Pearce, chief U.S. economist at Oxford Economics.

Wiseman writes for the Associated Press. AP writer Christopher Rugaber contributed to this report.

Winning tip: cycle the greenways of Annecy

Saint-Jorioz in Haute-Savoie will provide a springtime lift for your spirits. On the shore of Lake Annecy, it’s a short bus ride from the city of Annecy, but less busy and with superior lake and mountain views. Hike to the surrounding peaks, towards the lesser-known Col de l’Arpettaz, or cycle on the excellent greenways. Relax by the cool blue alpine water. Behind you lies the underrated Les Bauges Unesco Geopark. The department only joined France in 1860, and has its own Italian-influenced regional cuisine.
Brian Lowry

Naples is best in early spring

Although not the most traditionally beautiful city in Italy, Naples offers a glimpse of warmth in early spring. A world apart from Florence or Turin, Naples is a fascinating, lived-in city with a long history and a rich culinary tradition. The Spaccanapoli, which runs right through the core of the city, is a bustling place to walk along and experience Neapolitan life. The world-class sites of Pompeii and Herculaneum are nearby, as are Mount Vesuvius, Sorrento and the wonderful islands of Capri, Ischia and Procida. You can get to Naples by train from London via Paris and Turin or Milan in about 15 hours.
Michael Kuipers

Take the ferry to Corsica

Eurostar from London via an easy connection at Lille or a change in Paris takes between six and eight hours to arrive in Marseille. After a shower at the station, refresh in Vieux Port before arriving for breakfast in Bastia, Corsica, via a comfortable night-ferry. From Bastia, catch the scenic mountain railway into this remarkably unspoiled island to explore its wild interior and coastal regions. Mid to late spring is best for southern Europe, when snow-melt replenishes streams and waterfalls that dry up in summer. The weather is sunny yet exceedingly pleasant, hillsides blanketed with wildflowers, wild animals nurturing their young and locals refreshed in mood.
Jake

Germany’s greenest, sunniest city

Take the Eurostar to Paris and continue east via Strasbourg by high-speed train through the rolling hills and vineyards of Alsace to Freiburg – Germany’s warmest, sunniest and greenest city. (Some routes go via Brussels and Cologne.) Feast on Swabian classics such as käsespätzle (cheesy egg noodles with caramelised onion), enjoy tacos at YepaYepa or drop into Hausbrauerei Feierling’s lively beer garden for a drink. From Freiburg, explore the Black Forest’s highlights, from Triberg’s cuckoo clocks and waterfalls to the treetop walk in Bad Wildbad. Opt to stay at a participating town and you’ll receive a Konus guest card, giving you free transport around the region for your entire stay.
George

Tiny beaches near Nice

I’ve spent many happy spring breaks in Villefranche-sur-Mer, just a few miles east of Nice. The charm of its historic heart, the beauty of its deepwater bay, the proximity to spectacular coast and mountains, plus excellent cafes and restaurants make it hard to beat. Take the TGV to Nice, then it’s just a few minutes on the local train (easy for day trips to Cannes and Menton, too). It should be warm enough for a dip at the tiny, secluded Plage de la Darse, or Plage de la Fosse on swanky Cap Ferrat …
Gill R

Lemons and light on the Côte d’Azur

My sister and I spent a beautiful sunny few days in Menton on the Côte d’Azur in early April. We spent our time meandering the cobbled streets with their pastel-coloured buildings, eating a mix of French and Italian meals (it’s the last French town before the Italian border) and paddling in the calm blue bay. We trekked in the hills north of the town, past stunning houses, pine trees and spring flowers to explore Maison Gannac, a citrus farm that grows the Menton lemon, which is renowned for its flavour and aroma.
Katie

A boat trip along the Moselle in Germany

The Moselle valley in April was stunning. Starting in the old Roman city of Trier, with its amazing Porta Nigra gate, we followed the river 30 miles north-west to enjoy the panoramic views from Burg Landshut. We took boat trips, including to Cochem, to take the chairlift opposite the castle up to the Pinnerkreuz viewpoint. Early April means wildflower-strewn meadows and fewer visitors. Castles, boats and cable cars kept the children entertained; the fresh Moselle valley rieslings kept the adults happy. We finished our trip in Koblenz, with its selection of traditional breweries where späzle and schnitzel pair well with any beer.
Kirsten Lowery

Coastal paths near Perpignan

Go south by train and resist the rush. Take the Eurostar to Paris, then a fast TGV to Perpignan in six hours, before a final 25-minute local train to Port-Vendres – about nine hours from London, end to end. Early spring suits this working harbour: many places are shut, the fish market is not. Lunch at its no-nonsense restaurant, then walk the coastal paths to Collioure, brighter and busier by comparison. The Pyréneés-Orientales coast is one of France’s sunniest areas, and even out of season the light does much of the work.
Becky

The hazily golden city of Avignon

En route to Sicily via ferry from Genoa, we stopped in Avignon. We got off the train in the early evening to find a hazily golden city with winding medieval streets full of small independent shops, the amazing Palais des Papes (Popes’ Palace), a beautiful shining Rhône river – and we explored the remaining four arches and gatehouse of the 12th-century Pont Saint-Bénézet. Everywhere was walkable, from the very comfortable and reasonably- priced Bristol Hotel. Warm in the evening, plenty of traditional restaurants, no crowds. In the off-season, Avignon relaxed us, warmed our bones and fed our souls.
Hilary

Published on
02/02/2026 – 12:02 GMT+1

Gold and silver prices extended last week’s dramatic sell-off on Monday, as investors continued to digest the implications of President Donald Trump’s announcement of Kevin Warsh as the next chair of the US Federal Reserve.

The move has fuelled expectations of a more government pressure on the Fed and prompted a sharp reassessment of positions across precious metals.

Spot gold fell as much as 10% in early trading, while silver plunged up to 16%, following Friday’s rout that marked the largest intraday decline on record for the white metal.

The scale and speed of the move underscored how vulnerable the market had become after months of aggressive buying driven by geopolitical tension and bets on looser US monetary policy.

“The sharp selloff on Friday followed news that US President Donald Trump intends to nominate Kevin Warsh as the next Federal Reserve chair – a development that boosted the US dollar and reinforced expectations of a more hawkish policy stance,” said Ewa Manthey, commodities strategist at ING, and Warren Patterson, head of commodities strategy.

“While a correction was overdue after the intense rally, the scale of Friday’s decline far exceeded most expectations.”

Why the Fed matters for gold

Gold and silver are particularly sensitive to US interest-rate expectations.

Higher rates increase the opportunity cost of holding non-yielding assets such as precious metals, while a stronger dollar makes them more expensive for overseas buyers.

Warsh, a former Fed governor, has voice sentiments supportive of Trump’s vision for the Fed, including regular rate cuts.

That reassessment has been swift. Investor caution has been evident in exchange-traded funds, with silver holdings falling for a seventh consecutive session to their lowest level since November 2025.

Futures data also show speculators cutting back sharply on bullish bets, signalling a broader retreat from the sector.

“CFTC positioning shows a cooling in speculative interest across precious metals,” the ING report continued.

“Managed money net longs in COMEX gold fell by 17,741 lots last week… Speculators also cut net longs in silver… taking positioning to its lowest since February 2024.”

Margins rise, volatility bites

Market stress has been amplified by mechanical factors.

CME Group is set to raise margin requirements on COMEX gold and silver futures after last week’s historic swings, forcing traders to post more collateral or reduce exposure.

Such moves tend to accelerate sell-offs, particularly in heavily leveraged markets.

Attention is now turning to Asia, where Chinese investors have historically provided support during price dips. However, with volatility elevated and the Lunar New Year approaching, participation may be more cautious than usual.

“With volatility spiking and the Lunar New Year approaching, traders are likely to pare back positions and reduce risk,” the ING analysts said.

“Price direction in the near term will hinge on the extent of dip-buying from Chinese investors following Friday’s retreat.”

Outlook remains fragile

For now, the precious metals market remains at the mercy of macro forces, with little clarity on how quickly sentiment will stabilise.

Investors are watching US data closely for clues on real interest rates and the dollar’s next move, both of which will be shaped by expectations around the Fed’s future direction.

“Overall, volatility across precious metals is likely to remain elevated in the near term,” Manthey and Patterson said.

“For gold and silver, macro uncertainty, real rate expectations, and USD direction will continue to dominate sentiment,” the report concluded.

South Korean stocks nosedived by more than 5 percent Monday, due largely to a risk-averse sentiment following the nomination of the new Federal Reserve chair, and a sharp decline in silver and gold prices. The Korean won plunged against the U.S. dollar.

The benchmark Korea Composite Stock Price Index (KOSPI) tumbled 274.69 points, or 5.26 percent, to close at 4,949.67, snapping a four-session winning streak.

The country’s main bourse operator, the Korea Exchange (KRX), issued a sell-side circuit breaker for 5 minutes around noon.

Trade volume was heavy at 568.8 million shares worth 32 trillion won (US$21.9 billion). Losers outnumbered winners 795 to 116.

Foreign and institutional investors offloaded a net 2.5 trillion won and 2.2 trillion won, respectively. Retail investors, on the other hand, went bargain hunting and snapped up a net 4.6 trillion won.

Local stocks came under selling pressure following the nomination of Kevin Warsh, seen widely as a hawkish figure, as Fed chair, and sharp declines in silver and gold prices, according to Lee Kyoung-min, an analyst from Daishin Securities.

“A sharp drop in precious metals triggered the liquidation and margin call of derivatives holding them. This in turn led to the forced liquidation of other assets, as investors went to preserve margins, further amplifying the stock market’s decline,” Lee said.

International gold prices have experienced a sharp decline of over 10 percent in the past few days, while sliver prices plunged over 30 percent.

The local gold market was affected, too, with gold traded on the KRX falling to its lowest permissible limit of 10 percent Monday. It marked the first time KRX gold prices fell to the floor since the market opened in March 2014, according to the bourse operator.

“There is a possibility the benchmark KOSPI could take a breather, considering its sharp gains recently, but a daily decline of 4 to 5 percent seems excessive,” Han Ji-young, a researcher at Kiwoom Securities, said.

Shares closed lower across the board.

Market top-cap Samsung Electronics declined 6.29 percent to 150,400 won, while its chipmaking rival SK hynix tumbled 8.69 percent to 830,000 won.

Top car marker Hyundai Motor retreated 4.4 percent to 478,000 won, bio firm Celltrion lost 3.33 percent to 203,000 won, and defense giant Hanwha Aerospace closed down 4.69 percent to 1,239,000 won.

Financial shares were among the few winners.

Hana Financial Group added 3.2 percent to 103,300 won, and Meritz Financial Group inched up 0.69 percent to 117,400 won.

The Korean won was quoted at 1,464.3 won against the U.S. dollar at 3:30 p.m., down 24.8 won from the previous session.

Bond prices, which move inversely to yields, closed lower. The yield on three-year Treasurys rose 1.4 basis points to 3.152 percent, and the return on the benchmark five-year government bonds rose 1.2 basis points to 3.448 percent.

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