A Modern-day Power Struggle: Trump Versus the Federal Reserve
Trump to assert control over the U.S. Federal Reserve
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In the realm of economic chaos, the Federal Reserve remains the last fortress of reason under President Donald Trump. Like elite institutions, courts, and agencies, the US President is determined to subjugate the central bank, with disastrous consequences - not just for America.
Unfiltered Facts 📝- The first meeting between Trump and Fed Chair Jerome Powell was tension-filled, as Trump demanded lower interest rates to boost his image.- Powell stood his ground, asserting that interest rate decisions are made based on "careful, objective, and non-political factors."- Trump has been publicly pressuring Powell for months, even going as far as calling him a "loser."- The independence of the US central bank is vital to the global financial system's stability. The creditworthiness of the USA is already precarious due to its mountainous debt.
Trump's Quest for Control
The showdown between Trump and Powell isn't new. In Trump's first term, he attempted to dominate the Fed, only to fail. This time, however, the legal constraints that once held him back no longer exist.
Critics argue that Trump intends to dismantle independent institutions like the Fed to consolidate his power. He's willing to cross all boundaries to achieve this, even if it means violating laws.
The Potential Consequences
If Trump can bend the Fed to his will, the consequences could be catastrophic. The global financial system's foundation relies on the Federal Reserve's independence. A weakened Fed could damage the US economy permanently, trigger a global financial crises, and permanently ruin the dollar's status as a global reserve currency.
The Opposition
While Trump has multiple options to coerce Powell, history shows that it's not easy. Previous presidents have tried to force their central bank chiefs to lower interest rates before elections. However, Trump wants to officially secure the right to determine monetary policy.
Legal Loopholes
Trump has publicly considered firing the Fed Chair, but the for-cause clause makes it legally complex. Powell's term extends till May 2026, and whether Trump can fire him remains debatable.
The Supreme Court, while upholding the president's right to fire other heads of independent agencies, has drawn a line at the Fed, describing it as a "unique, quasi-private institution." Trump and his supporters, advocating the unitary executive theory, may not respect this.
A Risky Gambit
Trump's attacks on the Fed are eroding its credibility and the market's trust. This uncertainty could lead to a global financial panic. Trump's arbitrary attacks could destabilize the markets, possibly leading to a global financial crisis.
Germany could face the brunt of the backlash. The Bundesbank holds a significant portion of its gold reserves in the Fed's high-security vaults in New York. Trump, known for his unpredictability, might even have "creative ideas" for German gold reserves.
In essence, Trump's quest for growth and jobs could lead to long-term economic instability, undermine the Federal Reserve's independence, and compromise the global financial markets.
- The ongoing power struggle between President Donald Trump and the Federal Reserve, particularly regarding monetary policy, is not just a domestic issue for the United States but also a concern for European countries within the Economic and Monetary Union, as the independence of the US central bank has a significant impact on the global financial system and the stability of the eurozone economy.
- The implications of Trump's attempts to control the Fed extend beyond financial markets and business, reaching into the realms of politics and general news, as an erosion of the Fed's credibility and the global financial system's instability could potentially lead to political instability and economic chaos across various EC countries.
