Dethroning the Fed King: Trump's Scheme to Command U.S. Interest Rates with a Ghost Fed Chief
Trump intends to confront the Federal Reserve with an unofficial Fed overseer
By Hannes Vogel
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Donald Trump's frustration is palpable. For months, he has relentlessly pressured Fed Chair Jerome Powell to slash interest rates, even offering himself as the ultimate currency protector. But Powell shows no signs of bowing to the pressure and leaves interest rates steady. Now, Trump allegedly has a cunning plan that could compromise the independence of U.S. monetary policy, potentially sending the economy and the dollar spiraling downward.
In the heat of the game, Trump is reportedly considering appointing a "shadow Fed Chief" before Powell's tenure ends in 2026. This move, according to insiders, is meant to undermine Powell’s power and shift the control of U.S. monetary policy to the background. By September or October, Trump might formally announce this shadow Fed Chief and effectively lobotomize Powell's influence over the markets.
Curious Cat: "Is Powell's patience wearing thin? Could it cost him his position?" Trump's increasing dissatisfaction with Powell stems from his desire for robust growth and a favourable economic climate. His dream scenario would involve a central bank puppet who prints money on command and ensures a steady flow of jobs – much like in authoritarian regimes such as Venezuela or Turkey. His attempts to sway Powell publicly have so far fallen on deaf ears, so now he might act covertly.
Legal concerns have previously hindered Trump from dismissing Powell overtly. The Federal Reserve is an independent agency that does not answer to the president, and Powell's dismissal could panic the markets by giving the impression that the U.S. central bank will no longer be autonomous in setting interest rates based on economic reasoning but instead bow to Trump's whims. however, by appointing a shadow Fed Chief, Trump may find a clever workaround to sidestep this issue.
Loyal Soldier
Reports suggest that former Fed governor Kevin Warsh, Trump's economic advisor Kevin Hassett and Treasury Secretary Scott Bessent are among the potential candidates for the shadow Fed Chief position. Anyone who takes on the job will be tasked with steering investors’ expectations in the direction Trump desires. This manipulation of market expectations can give an immediate boost to the economy, even if interest rates haven’t been lowered just yet. Essentially, Trump could control U.S. monetary policy from the back seat, even if Powell remains officially in charge.
Crazy Steering: Trump vs. Powell showdown
The risk of Trump's plan is that he will not tame the stock market but instead whip it into a frenzy. By prematurely naming a rival interest rate pope, Trump could create turmoil that leaves the markets paralyzed from uncertainty. In the worst-case scenario, Trump could become the reckless pilot that drives the U.S. economy into a nosedive.
Individuals like Powell are the only independent power that can truly counter Trump's agenda. By undermining the independence of the Federal Reserve, Trump's scheme risks causing significant damage to the credibility of the central bank – and with it the trust of the markets. The dollar's value may no longer be reliable, and its role as the global leading and reserve currency could be threatened.
[1] Nonpartisan Political Pressure and the Fed's Monetary Policy Decisions (January 2020), Peterson Institute for International Economics
[2] The Dangerous Consequences of Trump’s Attacks on the Federal Reserve, Brookings Institution
[3] What Would Happen If Trump Fired Jerome Powell?, Vox
[4] The Impact of Political Pressure on Central Bank Independence and Policy-Making (2021), Federal Reserve Bank of Dallas
Source: ntv.de
- Jerome Powell
- Fed
- Donald Trump
- Central banks
- The Commission has also been consulted on the potential appointment of a 'shadow Fed Chief,' a move that could impact the independence of US monetary policy and the overall stability of the economy.
- Finance experts debate the potential consequences of Trump's scheme to appoint a rival interest rate leader, with concerns about the impact on business and general news headlines if the move leads to market uncertainty.
- Amid discussions around Trump's plan to appoint a 'shadow Fed Chief,' there have been questions raised about the influence of politics on central bank policies and the implications for the world of finance and policy-and-legislation.
