Trump’s Persecution of Jerome Powell Is Even Crazier Than It Looks
The Trump administration is carrying out a corrupt prosecution of Federal Reserve chair Jerome Powell, according to the man himself. In a video posted to official Fed social media accounts on Sunday, Powell said: “This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings … Those are pretexts. The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.”
Powell is obviously correct. For one thing, Donald Trump is the most corrupt president in American history, using his position to collect bribes from all over the world, and to reward favored insiders. It beggars belief that this man could be honestly concerned about a modest alleged budget overrun in a Federal Reserve construction contract—not least because the budget for his hideous Trump ballroom that he illegally tore down the East Wing of the White House to construct, which is openly funded by corporate bribes, has doubled over the last few months. If Powell just gave in to Trump’s bullying, these fake charges would quite obviously go away.
Trump later claimed he had nothing to do with the prosecution. It reportedly might have been a freelance effort from Federal Housing Finance Agency head Bill Pulte and U.S. Attorney for D.C. Jeanine Pirro. It’s one of the classic questions of the Trump regime: Is the president lying, or is one of the television hosts with a drinking problem he appointed to high office “working toward the Führer”?
Yet there is an odd background to the Get Powell effort that is going underdiscussed—the politics of inflation.
Trump plainly wants interest rates to go down, which is widely assumed to be politically beneficial to him. Lower interest rates theoretically make it easier for businesses to invest, which can boost the economy. And if it’s cheaper to finance a car or a mortgage, people may directly benefit as well. But lower interest rates are liable to spark higher prices, and just a few years ago we saw that Americans, along with most people around the world, absolutely despise inflation. As the Financial Times points out, every single governing party in the rich world lost vote share in 2024—the first time that had ever happened. Most analysts agree inflation was the single biggest factor in this trend.
This contradicts the traditional economic argument for central bank independence. The idea is that if politicians have direct control of central bank policy, then they will drive interest rates too low in order to boost growth and job creation, and while they may win the next election, inflation will eventually ensue. Central banks therefore need to be politically insulated, so that they can make the tough choices necessary to keep prices stable. They need to be ready “to take away the punch bowl just as the party gets going,” as the saying goes.
You can hear this conventional wisdom all over the place. The economist Paul Krugman referenced it in a recent article: “Why put this tool in the hands of technocrats rather than directly under the control of the president? Because cutting interest rates is easy and pleasant—too easy and too pleasant.” The streamer Atrioc, coming from a very different place in the media landscape, said much the same in a recent video: “Central banks are independent in every developed country the world over, because the choice on whether to raise or lower interest rates should not be in the hand of a government that would benefit from this short-term bump because they have every incentive to not care about the long-term problem.”
The difference here is that we’re already in a period of excess inflation, which has become the biggest problem facing policymakers. Failing to reckon with inflation has already led to immediate losses at the ballot box for Trump’s party. If the population can be expected to punish the president for making prices go up, as Joe Biden was punished, there is no need for the central bank to be politically insulated. A president won’t cut rates to excess, because it would demonstrably blow up in his face. Only a fool would do it.
Even before the post-pandemic inflation surge, this traditional argument for central bank independence was weak. The most independent central bank in the world is the European Central Bank, and in the years after the Great Recession, its record was practically unbroken calamitous failure. The eurozone as a whole did not match its 2008 GDP level until 2015, the whole time badly undershooting its inflation target. In Spain and Greece, the ECB conspired to cause a Great Depression–scale catastrophe as a way of laundering responsibility for large bailouts of French and German banks that had lost their shirts investing in American subprime mortgages. Even after some recovery has happened, the eurozone has been dramatically outpaced by U.S. growth, which itself wasn’t all that impressive.
Incidentally, some years ago I actually ran some numbers comparing the level of central bank independence with rates of unemployment, inflation, and growth in many countries, and found little aside from a very rough correlation indicating more independence means fewer jobs.
That said, Trump’s actions suggest that at least some central bank independence might be a good idea, just for different reasons. Trump isn’t the first leader who has tried to take direct control of interest rates. In Venezuela, for instance, former dictator Nicolás Maduro took control of the central bank (along with the rest of the government) and ordered massive money printing that stoked hyperinflation and economic collapse. In Turkey, Recep Erdoğan—not a dictator, but definitely a man with authoritarian tendencies—pressured its central bank to keep interest rates low even as inflation soared into the high double digits (though he later reversed course).
A great many authoritarians are like this: people bent on finding a quick fix to stoke their popularity, who hate being told no for any reason, and who have crackpot economic ideas, particularly about money. Central bank independence might be seen as a bulwark against authoritarianism. You would have to be a reckless fool to make prices go up when inflation is already stubbornly stuck at about 3 percent and looking likely to rise further, but that’s Trump for you.
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