UBS On-Air: Market Moves UBS On-Air: Paul Donovan Daily Audio 'Scapegoating the Federal Reserve'
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Aug 26, 2025 A surprising letter from President Trump attempts to dismiss a Federal Reserve Governor, raising questions about the Fed's independence. The discussion dives into 'scapegoat economics', highlighting how public and market perceptions are shaped by attributing complex economic issues to specific figures. The podcast also examines recent inflation trends and upcoming durable goods reports, illustrating the broader economic implications of labeling the Fed as a scapegoat for various economic challenges.
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Unprecedented Attempt On Fed Independence
- Trump issued a letter claiming to fire Fed Governor Cook, an unprecedented move with disputed legality.
- Investors will view this as an assault on Fed independence despite legal and institutional checks.
Checks Can Limit Immediate Market Shock
- There are institutional checks: Trump appointed many governors, the Senate confirms successors, and regional Fed presidents vote on policy.
- Faith in these checks may limit immediate market fallout even if confidence erodes over time.
Scapegoat Economics Drives Political Targets
- 'Scapegoat economics' simplifies complex economic problems by blaming a single target like foreigners or the Fed.
- This narrative fuels populist demands for political control and prolongs attacks as economic conditions worsen.