Trump vs. Powell --> market turmoil

Investment Analysis Clubs Macro Economic Trends and Risks
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Politics is banned on METAR. But when a politician strikes at the bedrock of America’s economic system it becomes a critical issue for investors.

Donald Trump has a long history of pressuring and personally insulting Federal Reserve Chair Jerome Powell to try to force Powell to reduce the fed funds rate in 2019. Powell caved under this assault, cutting the fed funds rate in 2019 and then cutting to zero in 2020 during the Covid pandemic. This wasn’t a problem since inflation was low.

https://www.thestreet.com/markets/here-are-all-the-insults-trump-has-tweeted-about-his-own-federal-reserve-chief-15070289

Trump is now seeking to terminate Jerome Powell as Chair of the Federal Reserve. Powell will fight this all the way to the Supreme Court.

If You Care About Your Savings, Pay Attention to Trump’s Attack on The Fed

The New York Times, April 18, 2025
By Chris Hughes

Chris Hughes is the chair of the Economic Security Project.

“Powell’s termination cannot come fast enough!” President Trump wrote Thursday morning on social media, a day after Mr. Powell said that the Fed may need to postpone cutting interest rates, thanks to Mr. Trump’s tariff policy.

This was not another impulsive social media post. Since returning to the White House, Mr. Trump has been laying the groundwork to fire Mr. Powell, discussing the idea repeatedly with close advisers. This latest escalation brings us even closer to a full-blown crisis over Fed independence.

Mr. Trump’s dislike for Mr. Powell is more than a personal spat. It’s a direct challenge to the economic foundation that has helped make America prosperous for generations…

Markets understand Mr. Trump’s threat intuitively. Investors are already dumping Treasury debt in anticipation of potential Fed politicization. If Mr. Trump were to gain direct control of monetary policy, global financial markets would enter a state of shock as investors lost confidence in the central bank’s commitment to price stability. The U.S. government would face significantly higher borrowing costs on the trillions it needs in coming years. Household budgets would be hit by higher borrowing costs, too, and by rising inflation… [end quote]

The Wall Street Journal joined the New York Times in warning Trump to keep hands off the Fed.

https://www.wsj.com/opinion/donald-trump-jerome-powell-federal-reserve-interest-rates-tariffs-8ef4a95e?mod=hp_opin_pos_1

The Lesson of Trump vs. Powell

Their dispute is a reminder that monetary policy can’t make up for economic policy errors like tariffs.

By The Editorial Board, The Wall Street Journal, Updated April 17, 2025

President Trump’s tariff war isn’t going well, with market ructions and evidence of a slowing economy. So it was probably inevitable that Mr. Trump would demand that the Federal Reserve ride to his rescue by cutting interest rates. The President took to social media Thursday morning to blast Fed Chairman Jerome Powell with his familiar nuance.

“Jerome Powell of the Fed, who is always TOO LATE AND WRONG, yesterday issued a report which was another, and typical, complete ‘mess!’ Oil prices are down, groceries (even eggs!) are down, and the USA is getting RICH ON TARIFFS,” Mr. Trump wrote. “Too Late should have lowered Interest Rates, like the ECB [European Central Bank], long ago, but he should certainly lower them now. Powell’s termination cannot come fast enough!”…

The President often talks in private of firing the Fed Chairman, who wouldn’t go quietly. This would tee up a protracted legal fight, with market turmoil to match as investors awaited a Supreme Court ruling on the legality of dismissal. … [end quote]

If Trump seriously tries to fire Powell the markets will react badly. If Trump vs. Powell forces a Supreme Court case the uncertainty will make the markets even more risk-averse. If Trump were to win and dismissed Powell the entire world would dump Treasury debt and interest rates would spike.

Financial stress is already rising fast.

If the Fed cuts the fed funds rate prematurely inflation will spike as it did when Fed Chair Arthur Burns cut under political pressure in the 1970s. That would cause bond traders to demand higher yields from all kinds of debt, including Treasuries.

The combination of high uncertainty and higher interest rates could set off a financial crisis where lenders refuse to lend and banks fail because their supposedly safe Treasury assets suddenly lose value so they become insolvent. (That’s what sunk Silicon Valley Bank.)

A financial crisis is different from, and far worse than, a mere stock market rout – but that would happen also. The economy would also crash because interest rates would spike.

Hold onto your hats, folks!

Trump vs. Powell will make the WWF look tame. The turmoil would spread around the world.

Wendy

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Powell today is saying the FED won’t save the markets.

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Wendy, as you may have noticed, that horse left the barn while you were in the hospital and recovering. :frowning_face:

DB2

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Dear Bob,

Interesting I can think of whose fault that is.

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I have noticed that she hasn’t stepped back to the status quo ante.

DB2

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Dear Bob,

I was talking an oversized outside force.

You need to NOT blame Wendy.

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This board has become very political; and that’s fine if that’s the way Wendy wants it. Her board=her rules.

What I have observed here over the past few months is how a person’s emotions can impact their thought process. There are a lot of very smart people here. It’s one of the reasons why I have always read this board. But the postings of their hatred for the current administration have gone far beyond the old Metar topics. It is my opinion, and only my opinion, that there are only 2 or 3 posters here who lean or are liberal and still post good information. Most of the other posts I just skim over.

I’m sure this post may cause a swarm of responses, or it may not. Either way, it’s a beautiful day here in Kansas and the lawn needs mowing.

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I’m remembering “all the best people”, and now I remember that Powell was appointed by Trump .

It’s so odd that he would change his mind, eh?

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I think it is impossible at the moment. Every board from Reddit to TMF where politics is banned or off topic is currently infused with politics. The global economic order as we know is being upended. You can’t discuss what is happening economically without discussing politics.

Best we can hope for, and should strive for, is to keep it civil. Especially towards each other.

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@gcr2016 METAR is an investment board. I still flag posts that have no economic/ investment salience.

I have monitored this board since 2008. Previous administrations did not meddle directly in the economy. At most, they would send suggestions to Congress which were often declared “dead on arrival.” It was rare for a president’s economic agenda to be passed by Congress.

Because of this, it was relatively easy to keep politics off METAR. Congress would negotiate on economically-impactful laws but only after the President signed it into law would the economy be impacted.

The Trump administration, unfortunately, is meddling directly in the economy. It’s simply impossible to discuss economics and investing without discussing Trump.

I don’t want METAR to become a political board. I want it to remain an investment board as it always has been. Like you, I skip over posts that don’t have investment information.

Wendy

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@DrBob2 I will still flag political posts that do not have economic or investment content. Like one you posted yesterday.
Wendy

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Wendy, this is your board, and you can define what is appropriate and what is not.
But out of curiosity, what investment information could I receive out of the thread below? This is just one example of what I see here daily.

Ul·tra·crep·i·dar·i·an

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…although the word is horribly applicable to modern politics, the word is most relevant to the pure functioning of METAR as a space of “civil communication”, as key topics under discussion here, often on complex matters, come with strong temptations to (from Wiktionary):

Give opinions on something beyond their knowledge or expertise.

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Hatred? Or legitimate criticism of a very dangerous POTUS and administration? One should be angry at what is happening to our country.

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We have all been investing during times where we were looking for the returns ON our investments.

It seems we may be entering the time where we need to be more focused on the return OF our investments.

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@gcr2016 first, interesting off-topic posts (such as novel words) have always been a feature, not a bug, of METAR.

Second, I’m not sure that this word is off-topic for the METAR board anyway since it’s a gentle reminder that quality posts are based on data which should be shared with all (and not comments pulled out of thin air). Personally, I go to a great deal of effort to seek out and share links to data which I hope will be useful in our investing.

Wendy

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Constitutional scholars believe it would be difficult to remove the Fed chair, which would almost certainly end up being resolved by the Supreme Court. The current Supreme Court will allow that the Office of the Presidency has Supreme Power over appointed offices, that, in turn, will lead to the disbanding of the supreme court. This is what the american people voted for. Only thirty five percent of americans polled support the supreme court’s power to rule on the presidential actions.

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Without continuing to read past this statement, everything to follow and reply is likely to be political

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This will be my last post on this subject.

I lump the poster’s here into 4 categories.

I respect and agree with a poster’s position on policies. They present their arguments without demeaning or name calling of other people with different opinions.

I respect but disagree with poster’s position on policies. Like the first group, they present their arguments intelligently and without ridiculing others. @albaby1 is a great example of such a poster.

I don’t respect but agree with the poster’s position. They use inflammatory statements when trying to get their message across.

I don’t respect or agree with the poster’s position. Like the person above all they have is rhetoric. They follow rule 5 in the Rules for Radicals. " 5. “Ridicule is man’s most potent weapon. There is no defense.” And yes, I know DT is bad about this.

So in closing, none of the posts here are bad if you are wanting to discuss politics. Great subjects for a political board. It’s just not what I want to read on an investment board. Fortunately I belong to some great investment boards that have continued discussing current events without bringing in political opinions. I will still cruise through this board. There is still the occasional “nugget” of good information.

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Wendy puts way too much work and research into what she does here not to respect her. So I don’t know why you would draw that conclusion to what I posted

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