Spiegel International economics writer Tim Bartz reports President Donald Trump is close to replacing U.S. Federal Reserve Chair Jerome Powell with a MAGA “lackey,” bringing the nation closer to “a political takeover by an autocratic MAGA kleptocracy.”
“Congress, the Republican Party, the Supreme Court, the Attorney General, the FBI, Immigration and Customs Enforcement (ICE): All of that is already firmly under Trump’s control,” writes Bartz. But the MAGA-fication of the Fed will mean something different, and it will likely hit everybody’s wallets very quickly.
“Should Trump gain control, U.S. monetary policy would become dependent on the moods of an egomaniac – and the credibility of the U.S., already on shaky ground, would erode even further,” said Bartz.
READ MORE: 'Texas Republicans have lost their damned minds': Outrage as GOP employs 'Jim Crow playbook'
Ferguson’s Law argues that large powers that must spend more money servicing their debt than they do on the military are doomed to fail, and Bartz said the U.S. has already “zoomed past that tipping point” in 2025. The U.S. government is expected to spend $952 billion on bond interest, while the military budget is $895 billion. Add to this the possibility of a presidential flak mismanaging the Fed and the possibilities are endless.
U.S. presidents have tried to instrumentalize the Federal Reserve for political aims before, Bartz argues. Harry Truman, John F. Kennedy and Lyndon Johnson all tried to convince Powell’s predecessors to ignore inflation. But when Turkish President Recep Tayyip Erdoğan tried to counter rampant inflation with lower interest rates, Bartz said the result was an inflation rate that climbed into the high two figures, making the populace poorer.
Richard Nixon appointed economist Arthur Burns to the Fed chairmanship. And when oil prices skyrocketed in 1973 because of the Yom Kippur War, Burns “simply removed energy products from the consumer price index to make inflation appear lower than it was,” said Bartz. When food prices kept climbing, Burns tried to manipulate the market again by striking them from inflation calculations.
And it kept going, said Bartz.
READ MORE: buckle up: Former Trump attorney Alina Habba may be in office for awhile
“Homes, used cars, children’s toys, even women’s jewelry: Almost everything that was driving up inflation was removed from the consumer price index. By 1975 – Nixon had resigned by then – Burn had removed two-thirds of all products that were producing undesirable inflation numbers. He could not, however, prevent a reality in which prices were increasing at a double-digit pace. When Burns finally had to leave office in 1978 the inflation rate in the U.S. was above 7 percent.”
Having a fed chair at your beck and call is not the way to run an economy, said Bartz, and some of Powell’s potential replacements “would be a minor catastrophe for the markets.” This includes Trump economic adviser Stephen Miran, who Bartz calls a tariff and “blackmail” enthusiast. Other like Fed board member Christopher Waller voted to give Trump what he wants by artificially lowering interests rates this year.
Other Trump supporters could get onboard with the president’s plan to create a “digital dollar,” which Bartz says would rob the Federal Reserve of its monopoly on money creation and create a kind of free-for-all.
“These are, to be sure, crazy scenarios. But crazy is the new normal in the Donald Trump era,” Bartz said.
READ MORE: 'Not going to act like everything’s hunky-dory': Intraparty feud threatens GOP in Virginia
Read the Spiegel International report at this link.