If you had any doubts as to what Donald Trump wants in a Fed Chair, I don’t know why. Why you had any doubts, I mean.

As Trump (allegedly) told Jim Comey, “loyalty” is the most important character trait for anyone serving in any capacity in a Trump presidency. Loyalty not to the country, nor to any founding documents, but rather to Trump himself.

Above all else, he wants that from a Fed Chair. Indeed, he “expects” that, to quote again from Comey’s account of an infamous run-in with Trump early in his first term. But he also wants rate cuts, he wants them “NOW” and he wants them in size. Ideally then, Trump needs a Fed Chair who’ll parrot the party line while supporting heavy-handed easing.

Given that, it’s no surprise that Trump’s reportedly considering Jefferies David Zervos for Powell’s position. I was going to quote from some of Zervos’s recent notes, but frankly, they’re so over-the-top in terms of MAGA bias that it’s hard to understand them as anything other than propaganda. David’s MAGA enthusiasm makes Rachel Maddow’s anti-Trump bias look weak-willed by comparison. His cheerleading’s nothing short of enraptured.

I don’t think he’ll ultimately get the job, but whoever does will need to cut rates to the bone to satisfy Trump. This has surely occurred to folks like Zervos, Kevin Warsh and so on, but a Trump Fed Chair will very likely be called upon to buy bonds in the event rate cuts aren’t enough to cap yields from the belly on out the curve.

Rate cuts for the hell of them against a deteriorating fiscal trajectory and amid concerns (justified or not) about the rule of law, are a recipe for an unanchored long-end. At the very least, that combination — pro-cyclical, overtly political rate cuts, unfunded tax cuts and mounting evidence of rapid institutional decay — will likely mean un-administered US rates are higher than they would be otherwise. In a deep recession, I assume (I hope) USD duration would regain its haven appeal, but short of a sharp downturn, the market will want extra compensation for the myriad and proliferating risks associated with US government debt.

So, if the goal is to cap bond yields such that, for example, mortgage rates come down and the government’s debt service burden doesn’t continue to spiral, you may well end up needing yield-curve control. That’s not lost on professional investors, more than half of whom expect the next Fed Chair to engage in YCC, according to this month’s installment of BofA’s global fund manager poll (figure on the left, below).

The figure on the right gives you a sense of why this is important, or why it’s important if you think that “exorbitant privilege” or not, something’s gotta give when it comes to the spiraling cost of servicing the debt burden.

Five-year yields are 3.85% or so currently. According to BofA’s calculations, the US needs those closer to 3% in order to stop the spiral. In addition to “short-circuit[ing] labor market weakness,” Fed cuts are seen by investors as a “bailout for the US Treasury,” Michael Hartnett wrote, in the latest installment of his popular weekly “Flow Show” series.

To reiterate: Rate cuts on their own may not work to bring down yields further out the curve and could in fact work to put a floor under longer-end yields given the read-across for institutional credibility and thereby the outlook for inflation, particularly when coupled with Trump’s inclinations to economic populism. As Nomura’s Charlie McElligott put it this week, “In a world already drunk on fiscal dominance, you can see why the global long-end remains without many friends, and why yield curves globally continue to steepen.”

That’s where YCC comes in, and if you ask Hartnett, the risk is additional dollar downside. There are “new debates on Fed independence,” he wrote, suggesting the Fed’s tolerance for inflation could be higher going forward and citing YCC as an example of developments which, if realized, could drive further dollar weakness.

The likes of Zervos — and other Trump-friendly Fed candidates — have talked up the merits of a “balance sheet/rate trade-off path,” wherein rates are lowered to account for the tightening effect of a balance sheet which, while obviously still enormous by pre-pandemic standards, is at least in the ballpark of 2019 levels when expressed as a share of nominal US GDP.

There’s a lot to like about such arguments when considered in an apolitical context, but it’s difficult to assess them on the merits when they’re being employed in the service of goal-seeking the rate cuts Trump wants, particularly considering the very high likelihood that i) Trump will demand bond-buying from his next Fed Chair, and ii) the Chair will doubtlessly oblige, ballooning the Fed’s balance sheet anew.