If You're Listening What happens if Trump takes over the Federal Reserve?
Oct 15, 2025
Donald Trump's threat to fire Fed Chair Jerome Powell sent shockwaves through financial markets. The importance of central bank independence is explored, highlighting past pressures from presidents like Nixon. The podcast delves into how interest rates control inflation and examines the consequences of politicizing monetary policy, using Turkey as a case study. The discussion also warns about the risks of sacrificing Fed independence for immediate gains like lower borrowing costs. Will history repeat itself under new leadership?
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Market Panic Over Powell Rumour
- On 16 July markets plunged after reports Donald Trump planned to fire Fed Chair Jerome Powell and replace him with a rate-cutting ally.
- The mere suggestion wiped about $200 billion from US equities in minutes, showing market sensitivity to Fed independence.
Nixon Pressured The Fed
- Nixon directly lobbied Fed Chair Arthur Burns to lower rates for political advantage, revealing presidential interference in monetary policy.
- Burns complied, helping Nixon win re-election but later contributed to runaway inflation and economic pain.
Monetary Versus Fiscal Roles
- Monetary policy controls money supply and interest rates, separate from government fiscal actions like taxes and spending.
- Central banks use interest rates to make borrowing cheaper or more expensive, which influences inflation and currency value.