Never a dull moment.
Among Donald Trump’s first orders of business on Thursday was menacing the Fed, and in language which pretty clearly suggests he thinks the legal battle over his authority to fire agency heads may ultimately give him discretion to remove officials at the central bank.
Someone apparently told Trump that the ECB was set to cut rates on Thursday, or he saw it while scanning the morning headlines. Enraged, he took to TruthSocial to vent.
“The ECB is expected to cut interest rates for the seventh time, and yet, ‘Too Late’ Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete ‘mess!'” Trump raved.
He was referring, apparently, to Powell’s remarks in Chicago, where Jay said tariffs are likely to stoke inflation, temporary or not, and also threaten to undermine growth, thereby pushing the Fed away from both of its goals simultaneously.
Powell also reasserted the Fed’s independence, which he described as a matter of law and said that in his view, the Supreme Court’s decision on Trump’s authority to fire agency heads likely won’t apply to the Fed. And let’s face it: That’s probably what irked Trump the most.
Trump’s accustomed to getting everything he wants from everyone and the notion that the Fed’s off limits, so to speak, is too much for him to bear. He’s got it in for Powell, and has pretty much since he appointed him in 2018.
Now, with the Fed on hold indefinitely pending clarity that isn’t forthcoming on trade policy, every FOMC meeting that passes without a cut is, in Trump’s mind, grounds for dismissal, if only someone — anyone — would give him legal cover to remove a Fed Chair.
Plainly, handing Trump that authority would be a disaster of epic proportions, and markets would hate it with the holiest of holy passions. But, to reiterate, that may be coming. This issue isn’t settled yet, and it’s possible Trump’s allies, including those on the high court, could bend the knee on this too by claiming that although there may be an economic rationale for protecting the Fed Chair, there isn’t a legal one if you overturn nearly 100 years of precedent and hand the president the authority to unilaterally remove agency heads.
It goes without saying that this “mess!”, as Trump aptly called it, isn’t Powell’s. It’s Trump’s. The US isn’t “getting RICH ON TARIFFS,'” as he went on to claim, in the same social media message. Rather, the US is filling Treasury’s coffers with money extracted from US importers, which is to say American companies, and those companies are going to pass that along to consumers in the form of higher prices, almost as sure as night follows day.
Trump also appeared to gloss over the fact that the Fed cut rates 100bps late last year. Powell, he said, “should have lowered Interest Rates, like the ECB, long ago, but he should certainly lower them now.” Trump surely knows Powell cut rates last year. Or maybe he forgot. Who knows, but the idea that the Fed should be cutting now’s the furthest thing from obvious.
Trump drove it home: “Powell’s termination cannot come fast enough!” Tellingly, S&P futures wavered.
The saving grace here may be that Powell doesn’t have that much longer on his tenure anyway. I assume someone — Scott Bessent, maybe — has told Trump that it’s not worth the trouble. That risking a market meltdown by trying to fire Powell is silly when Trump can just wait him out.
I’m sure Eric Trump is up to the task, and will work well in this position once Powell is gone. Just LOOK how GREAT TRUMP enterprises is doing.
Mar-A-Lardo certainly knows how to pick stupid fights, so this one seems obvious after deciding to headline a single transgender athlete in Maine that is apparently ruining all college sports, and a father in Maryland who apparently moonlights as a vicious gang rapist and sex trafficker.
For now, we’ll have to hope that Powell has not committed mortgage fraud and that he does not have any tattoos featuring crowns. He would be well advised to bring along his passport and birth certificate whenever he leaves his house.
truthsocial ? these meandering statements remind me of the novel 1984. big brother would put out a new message everytime a new direction was planned.
I think our president sees this trainwreck coming, and thinks, “well, now if we add this, it could still all work out.”
Then when it keeps going sideways, that last thing maybe made it even worse, time to go on truthsocial with a new demand, or crazy explanation about how we now need to add this next crazy thing, or how it turns out it was this new person’s fault all along…….
After all that has transpired over these past 100 days, I am struck by how complacent most analysts are that Fed independence is somehow sacrosanct.
I heard a law school professor assuring that 100 years of precedence protects the court and the odds on a betting site only rose from 16 to 19 cents.
Why do investors (aside from you) keep underestimating President Trump?
Hmm, I would like to take the other side of that bet.
After all that has transpired over these past 100 days, I am struck by how complacent most analysts are that Fed independence is somehow sacrosanct.
I heard a law school professor assuring that 100 years of precedence protects the Fed and the odds on a betting site only rose from 16 to 19 cents.
Why do investors (aside from you) keep underestimating President Trump?
Every morning, I read these stories and wonder how can this can any dumber? Then I remind myself that this is what suicide cults do. They don’t stop until everyone is dead.
I commented back when the “hard landing” estimates were at 5% that I thought those odds were way too low. I thought going long bonds would be the play, but now realize that I have to assume that whatever terrible scenarios might be in play, I need to assume that reality will be even worse than that. Probably best to choose a basket of quality stocks like DJT, NMAX, and anything else that’s either financially tied to Trump or part of his propaganda machine.
Then again, DJT will go to zero if Trump kicks the bucket. I’d be ok with massive financial losses in that scenario though.
I think that’s solid logic.
This is great. I never jumped on the trends of ESG, green energy, or any of the other virtuous rubrics. But just like betting against your team in the Super Bowl as a partial consolation for a more painful loss, getting overweight in the MAGA grifting sector might be just what the doctor ordered in the dystopia we find ourselves. I’ll even posit a placeholder name until someone comes up with something more clever — PRI — Psychologically-Responsible Investing.
Potential sectors to be included: men’s cosmetics and hair care, legal services, anything golf-related, private prisons, specialized pharma (adderall, GLPs, Botox, boner pills, ivermectin), bankruptcy and workout advisors, vulture funds, patriotic (albeit exclusively imported and low-quality) apparel and paraphernalia. I’ll add more as they reveal themselves.
Don’t overloook Cracker Barrel.
Did anyone hear Mohammed el erian sanewashing trump this morning? He said fed officials were “sacrificed before” to avoid congressional scrutiny. No, those officials misused their information to trade in front of fed decisions or otherwise made investments based on questionable ethical decisions. They were not “sacrificed”. To suggest that was precedent for Powell being forced out is just an excuse. It is an example of a commentator excusing bad behavior by trump to be safe.
Patience not being a virtue of the US monarch I’m not sure he can wait “Powell” out even if it makes sense and he receives such advice from his closest servants.
Bessent was supposed to be “the adult in the room” in Trump 2.0’s cabinet. We have all seen how that has gone. Powell may actually be the last adult left in Washington D.C. (Although I sincerely hope–if pressed–Chief Justice John Roberts would also hew towards the side of history.)
The greater question is how to “terminate” Trump .
VanceJohnsonn2025
Maybe Powell is more audacious now, knowing that some Republican politicians are finally standing up to Trump, Trump is weaker after his blinks and the possible resistance of buyers to US Treasuries will mute Trump’s outrage somewhat, especially knowing that you guys will have huge budget deficits now and in the future with his “plans.”