What The Hell America!

Of course, firing Powell won’t accomplish that. Trump himself can’t be chair, and there is no guarantee that a new chair appointed by him would do what he wants, which is to slash interest rates—or, for that matter, that slashing interest rates would improve the economy in the short term, let alone stave off a recession. Trump could remove Powell, in other words, and nothing much would change. Even if a new chair was determined to try to soften the blow of Trump’s tariffs—Fed board member Kevin Warsh, a loyalist and trade war enthusiast, has been floated—the larger economic situation is so bad it’s possible there would be no substantive result. Even if the Fed did lower interest rates, there’s no guarantee that other rates would fall—or, for that matter, that doing so would offset the damage of Trump’s ongoing trade war. The yield curve is just that bad right now.

Powell is currently holding onto his job in part because of the perilous position that Trump has put the economy in. The market plummeted when it seemed likely that Powell would get the ax, and most reporting suggests that the president is holding off solely because he can’t stomach another sell-off right now. But make no mistake: Trump very much wants to get rid of Powell, and he almost certainly will do it the moment he thinks he can get away with it.

I can’t speculate what the long-term effect of firing Powell on the markets or the economy would be. But even if it is minimal, which seems more than possible, the fact that Trump has looked at the gyrations of the last six weeks and decided that he should have more power and control over the economy should be alarming for everyone. Having experienced the profound fallout from leveling a massive, apparently ChatGPT-generated series of tariffs on nearly the entire world, Trump has come to the conclusion that the real problem with the economy is the chair of the Federal Reserve.