Well, it was inevitable.
And even saying that’s a testament to just how far afield we already are in Donald Trump’s second term. Barely six months in, Jerome Powell’s early ouster as Fed Chair was already inevitable.
On Wednesday, just before noon, media reports indicated Trump plans to remove Powell, and that GOP lawmakers intend to support the decision, underscoring the notion that Republicans are so far gone they’d risk the currency if it means demonstrating fealty to Trump.
Powell’s ouster would mark the culmination of a smear campaign which began during Trump’s first term, when he berated the Fed for slow-walking rate cuts he characterized as a patriotic duty. Powell’s days were arguably numbered as soon as Trump won reelection. Since (re)taking office, he’s assailed Powell on a weekly, and sometimes daily, basis.
Late last month, Trump’s supporters, beginning with FHFA chief Bill Pulte, began laying the groundwork to fire Powell for “cause,” with the scare quotes to remind you that this scheme — to remove Powell in connection with cost overruns for renovations at the Marriner Eccles building — is as transparently absurd as it is nefarious.
As I put it on July 8, the fact that Trump’s resorting to such a farcical gambit to pressure Powell testifies loudly to concerns about the integrity of America’s institutions, including and especially the Fed. Two days later, on July 10, Russ Vought formalized Pulte’s accusations in an OMB letter demanding Powell answer for what Vought characterized as a series of criminally wasteful interior decorating decisions.
At that point, the writing was on the wall, and some analysts read it aloud. “Powell’s removal or resignation [would] likely trigger a new round of severe downward volatility in the dollar, and the damage would be there to stay,” ING warned. “It is stating the obvious that investors would likely interpret such an event as a direct affront to Fed independence putting the central bank under extreme institutional duress,” Deutsche Bank wrote, in a foreboding assessment.
Although Trump could still change his mind, it appears the moment’s upon us. The moment more or less everyone said would never — could never — come. “President Trump on Tuesday asked a group of House Republicans if he should fire Powell and people in the room voiced approval,” CBS, which was first to report the news, said Wednesday, noting that “multiple sources” told the network Trump “indicated he will do it.”
Although the Supreme Court this year tipped an inclination to protect the Fed while affording Trump leeway to remove personnel across other federal institutions, the logic’s torturous. And that might be purposeful. My sense is that the Court’s conservatives have no intention of protecting the Fed in the event Trump attempts to commandeer it.
Needless to say, this is a very, very bad idea. Other reports indicate Trump favors Kevin Hassett for Powell’s job. To call Hassett unfit would be to grossly understate the case in my opinion, and I doubt I’m alone. Hassett, whatever you want to say about him, is an unapologetic toady. He might quibble with my choice of words, but I don’t think he’d dispute the idea that he’s an unflinching Trump loyalist who’s inclined to parrot the party line come hell or high water.
Regardless of who Trump attempts to install as Fed Chair, the fact that we’re here — i.e., in a place where the US president’s fabricating an excuse to remove the Fed Chair for the “crime” of not cutting rates — is quite unnerving, and I say that sincerely. It’s actually disquieting, not just disturbing for the purposes of overwrought editorializing. America’s venturing perilously close to Recep Erdogan territory.
That Scott Bessent hasn’t threatened to resign in the event Trump moves against the Fed is almost as worrisome as Powell’s prospective ouster. While it’s hard to know what Bessent might be saying to Trump behind the scenes, his public remarks suggest that not only is he on board with removing Powell, he’s actually a semblance of enthusiastic about it.
From a markets perspective, Trump’s flirting with an equity selloff and chancing a vicious bear steepener which, if accompanied by dollar weakness, would be a damning indictment.
Unlike tariff threats, the damage from removing the Fed Chair won’t be easy to undo or reverse. You can’t fire Powell and then reinstate him depending on the market fallout. And Powell (or, who knows, maybe even the whole Fed) would almost surely sue Trump, setting up a historic legal fight and leaving stocks, bonds and the currency in the lurch while the drama unfolds in the courts.
To reiterate: This is an extremely risky gamble on Trump’s part and given the global ramifications of a Fed that loses its independence overnight, it’s very hard to see how he gets away without triggering an adverse market event that reverberates around the world and across assets.
According to The New York Times, Trump showed Republicans a draft of a letter dismissing Powell. As news of his intentions began to circulate Wednesday, Trump suggested Powell’s ouster isn’t imminent. “We’re not planning on doing it,” he said. “It’s highly unlikely.”
Rules, laws, and norms are all human constructs of the imagination that, like money, only exist because we agree that they should. They also only exist as long as people in power are willing to uphold them, in the current context that means none of them apply any longer. Money in the USD context is probably on its way out as well, given that the only reason we have hegemony is because other people in other countries with power agreed to let us have it. The fact that we invited this mess voluntarily only speaks to how little humans have evolved from our tribalistic forefathers. Sure, we have great technology and tools, but we still fall for the same old schtick when it comes to fears about things that are patently not scary at all.
Whatever incentivized someone to not vote for Harris certainly would not have been as bad as things are getting in a mere 6 months under Trump.
Last Wednesday, in a move that went almost completely under the radar, Trump stacked the National Capital Planning Commission with loyalists who, regardless of their qualifications, are not the sort of people you put on a planning commission usually staffed by architects and civil engineers. One of them was Stuart Levenbach, an aide to Office of Management and Budget chief Russell Vought. It was a day later that Vought sent his letter to Powell demanding answers to questions that pertained specifically to plans originally approved by the NCPC. Only Politico reported on the relevent NCPC meeting, their reporter dryly observing that she was the only person in the section reserved for members of the press. In other words, Trump has been getting all his ducks in a row for some time now. We’ve just been witnessing a set piece of political hardball unfold step by step.
Vought gave Powell 7 business days to respond to his questions, so Jay should have until EOB this Friday. I imagine team Trump will spend the weekend going over his answers and deciding on the best path forward.
I can imagine a few realistic scenarios for the timing from that point (basically coming down to whether it’s before or after the July FOMC meeting). What I can’t imagine is any scenario where Powell doesn’t get fired.
Link to the aforementioned Politico article: https://www.politico.com/news/magazine/2025/07/11/jerome-powell-donald-trump-federal-reserve-building-blair-00448363
I made a note right after reading last week’s article to start hedging yesterday because of that deadline. The signs just get more and more pronounced. Today’s data is going to make him more unhinged and willing.
Trump figures Powell firing rumors is a cure for Epsteinitis.
Bigly
Typical trump playbook: Float the idea in public, let it gradually gain steam through more and more credible sources, then formalize the decision when no one will be surprised. He tries to wear down good ppl in any potential opposition w/ his relentless lies and personal attacks. The market’s rebound from April, along w/ many other “wins” in his mind, have caused him to believe he is invincible (even more than before Jan 2025).
If he fires Powell, maybe the bond market marks a turning point and the beginning of the end for trump. Or maybe greed delivers trump another win, emboldening him to become even more aggressive toward Putin, leading to Hawaii’s elimination and another “could never” to actually happen.
The bond market is Trump’s daddy.
Broader problem is firing Powell and replacing him with Hassett still wouldn’t get him rate cuts unless somehow Kevin can convince the hawks to start cutting rates in 100 BPs increments or get any of the governors to actually respect him once he is inserted into the role
We could have our first situation where governors vote against the Fed chair simply out of spite.
Until he just fires the rest of them too and replaces them all with various Maria Bartiromos. At a certain point, I think it’s important we all accept the grim reality that continues to hit us over the head every, single day: He does whatever he wants to do with no regard for what’s supposed to be “legal” and permissible in the context of the system, and everyone’s letting him do it, from the GOP to SCOTUS to Democrats who are just utterly powerless. I mean, how many times does he have to do something that everyone said was impossible before we all concede that this isn’t a democracy anymore? The reality denial on display weekly is truly incredible, even as I certainly understand the reluctance to concede the point. It’s very difficult to admit when your country’s become an autocracy, because then you have to grapple with all sorts of other uncomfortable questions, not least of which is, “Gosh, was I complicit? Am I still complicit?” And so on. It’s not obvious to me who would stop him if he just woke up tomorrow and said “The whole Fed Board’s fired, they all have to leave today.” Who would stop him? Nobody. That’s the answer. My contention is that he could fire them all tomorrow with no consequences other than, of course, market consequences.
Some of you will scoff at that, just like a lot of people scoffed that he might fire Powell during his first term, just a lot of people scoffed that he might do XYZ until he did XYZ. It’s always the same pattern: “He can’t do XYZ because laws.” He does XYZ. “Well, ok, he did XYZ, but he can’t do XYZZ.” Then he does XYZZ too. And on and on.
I’m not scoffing at it at all. If he can get away w/ firing the Chair, he’ll loudly proclaim he can fire all of them. And then he’ll do it. He may even change the Fed’s size and composition.
This is the State of the Union until midterms, assuming we are still having midterms.
Yeah, I don’t think it’s a safe assumption that he’s going to let the midterms proceed. Ironically, Elon Musk might be the best bet for ensuring that they do, given that he’s going to run candidates.
That crazy old coot doesn’t even remember that he was the one who appointed Jay Powell as Fed Chair. Today he said that Joe Biden had placed him in the position. “He’s a terrible Fed chair,” Trump told reporters. “I was surprised he was appointed. I was surprised, frankly, that Biden put him in and extended him. But they did.”
I’d say that nothing is a safe assumption. The best thought exercise one can execute is asking “what would I do if I had complete and total unchecked power over the most power country in the world?”
Now some of us will probably, being wholesome folks who try to be good superhero types, say that we would do what is best for everyone. The reality is never even close to that for anyone who’s been given such power. The worst of people appears when they have no accountability.
The last time he lost an election he pulled every lever he could to try to undo the loss. Do we really think he’s going to put himself at risk like that again? Hell no, we’re stuck with this guy until he leaves on his own terms or because whatever supernatural being you believe in finally freed us from his horrible grip on the world.
For those worried about being complicit, I recommend reading “On Tyranny”, it’s a how to book more than anything and it helps guide you through the environment we are in right now.
As far as complicity goes, I recently visited Dachau, the model for all concentration camps. There is a lovely village right next door to this horrific place, the people who lived there were probably very much like those of us who don’t agree with Alligator Alcatraz. You’re stuck in a place that you once loved but now don’t agree with. If you go down there and try to “do something” you’re either dead or stuck in the same place as those you want to help.
Nobody wants to voluntarily die for nothing, and good people don’t want to allow these things to happen, what do you do? There is no good answer, you just survive.
In summary and conclusion: Humans suck.
The demagogue and autocrat’s playbook is a well established strategy that has been implemented many times before, leading credence to the saying that no one learns from the misery experienced by others. I saw Hugo Chavez systematically dismantle the institutions that used to make Venezuela the oldest democracy in Latin America, sure Chavez did it by appropriating a leftist ideology and making the US the boogeyman while Trump has captured power by captivating the right and blaming immigrants and wokes, but the playbook is the same. Concentrate power, weaken independent institutions, demonize the opposition, dismantle the rule of law and replace every aspect of government with a cult of personality. Variations of this story abound in recent human history, the end result is always the same, free and fair elections will soon be a memory in the US, just as they are in Venezuela, Turkey, El Salvador or Russia.
Looking forward to long winded speeches by Hakeem Jeffries, and a few sternly worded letters from Chuck Schumer.
Trump manages like no other US president because there is no team collaboration, just him dictating. He doesn’t try to get new information and work with others as a team. There is nothing to be developed or planned. His job is to say What and everyone else’s is to do it. He was stifled the first admin by experienced professionals though they were right wing. This go round there are only sycophants. We may still have a democracy (albeit on life support) but it’s being run by a dictator. On that there should be no confusion or doubt by anyone. Trump may be evil, but he’s no genius. Even if you’re on his side, that should scare the hell out of you.
It matters not that Trump is no genius. He delegates power to those who please and appease him; primary among those are Vought and Miller, and they have found likeminded minions to put in place below. From these come the designs and machinery of the takeover, while Trump takes the credit.