Trump’s War on the Fed Risks Economic Chaos
Trump’s attacks on the Federal Reserve threaten its independence and America’s economic future.
The Rise of a Dangerous Pattern
In moments of political instability, the institutions designed to safeguard public trust become targets. In the United States, one of those institutions is the Federal Reserve, the country’s central bank, whose job is to keep the economy stable by managing inflation, interest rates, and the money supply. It’s supposed to be independent of the president and Congress, free to act in the long-term interests of the economy without political interference.
That independence is now under serious threat.
President Donald Trump has renewed his attacks on Federal Reserve Chair Jerome Powell. In a social media tirade on Truth Social, Trump called Powell a “fool” who “doesn’t have a clue,” blaming him for not moving quickly enough on monetary policy. Though laced with sarcasm, “Other than that, I like him very much!”, the message was clear: Trump wants Americans to believe that Powell is to blame for any economic trouble on the horizon.
This is not a new tactic. Trump has a well-documented history of pressuring the Fed to lower interest rates during his presidency. Now, Trump appears to be laying the groundwork for a more dangerous goal: seizing control of the central bank, bending it to his political will, and scapegoating it when the economy falters.
What Is the Federal Reserve and Why Does It Matter?
To understand the threat, it’s worth understanding what the Fed does. Established in 1913, the Federal Reserve is the central bank of the United States. It’s responsible for setting monetary policy decisions about interest rates and the money supply that influence inflation, employment, and economic growth. The Fed also supervises banks and serves as a lender of last resort in times of financial crisis.
Critically, the Fed operates independently from the executive and legislative branches. This is not a quirk of history. Central banks must be insulated from short-term political pressures so they can act in the long-term interest of economic stability. If politicians could control monetary policy, they’d be tempted to keep interest rates low and spending high to win elections, regardless of the consequences. That’s how you get inflation, debt crises, and economic collapse.
Why Trump’s Attacks on Powell Matter
When Trump publicly insults Powell or demands lower rates, it’s not just undignified, it’s destabilizing. Financial markets interpret these attacks as signs of potential interference. Investors lose confidence in the Fed’s independence. The global economy, which relies on the US dollar as a reserve currency, begins to wobble.
Trump’s criticisms came shortly after Powell announced the Fed would keep interest rates steady. Powell also said the Fed needed more information before responding to Trump’s proposed tariffs, which economists warn could raise prices and slow growth. Rather than respecting this caution, Trump ridiculed him again.
Trump is positioning himself to blame Powell for any coming economic hardship, whether recession, inflation, or market instability. At the same time, he’s sending a message to loyalists: he will try to replace Powell with someone more obedient, someone who will put politics over prudence.
Can Trump Replace Powell?
Not easily. The Chair of the Federal Reserve is appointed by the president but must be confirmed by the Senate. Replacements usually come from the existing Board of Governors, a group of officials who serve staggered 14-year terms. To appoint an outsider, Trump would first have to nominate them to the board and then have them confirmed, no small feat unless the Senate is stacked with loyalists.
Even then, the Chair alone cannot set interest rates. Monetary policy is decided by the Federal Open Market Committee (FOMC), which includes members from both the Board of Governors and regional Federal Reserve Banks. Decisions require a majority vote. So Trump would need to replace a majority of the committee with handpicked loyalists before he could exert full control.
Nonetheless, the point isn’t whether Trump can do it; it’s that he wants to. He has already shown a willingness to test the limits of presidential power. Few constraints would prevent him from stacking the board with sycophants or ignoring norms altogether. With enough political cover, even legal obstacles can be bulldozed.
What Happens When Central Banks Lose Independence?
Look to Venezuela. Executive control over the central bank led to unchecked spending, massive currency printing, and hyperinflation. The result was economic collapse, food shortages, and a refugee crisis.
If the United States goes down a similar road, the consequences will ripple across the world. The US dollar’s role as the global reserve currency depends on economic stability and trust in American institutions. If those institutions are hijacked for political gain, foreign governments and investors may begin to look elsewhere. Trade relations will suffer. Inflation may rise. The “golden age” of American economic dominance could end.
This is not just a hypothetical. Already, authoritarian-leaning regimes are watching the erosion of democratic norms in the US with keen interest. If the world’s largest economy can’t guarantee the rule of law and institutional independence, it opens the door for others, like China or Russia, to rewrite the rules.
What Can We Do About It?
Restoring faith in institutions begins with understanding what’s at stake. Americans and allies abroad must be clear-eyed about the risks of politicizing central banking. This isn’t about partisan differences. It’s about whether the world’s largest economy can remain stable in an age of growing authoritarianism.
We must talk openly about what is happening. We must defend the independence of institutions like the Federal Reserve. We must vote for leaders who respect those institutions and appoint officials based on competence, not loyalty.
We must also prepare ourselves for what may come. The current Trump presidency is more radical, more vengeful, and more unchecked than the first. Knowing how he undermines norms and why will help us resist those efforts.
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