The Breakdown Brazilification Risk and the Fight for Fed Independence
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Aug 28, 2025 A dramatic week unfolds as President Trump fires a Fed Governor, stirring fears about the independence of the central bank. The discussion dives into the vulnerabilities of global financial systems, using Turkey as a cautionary tale. There’s a critical look at government intervention in private enterprises, particularly Intel's struggles with the AI boom. The potential for government equity stakes raises important questions about national security and the future of independent financial institutions.
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Fed Independence Under Direct Threat
- The firing of Fed Governor Lisa Cook signals a new, riskier phase in the administration's attacks on Fed independence.
- Markets and commentators are now reconsidering how far the White House might go to influence monetary policy.
Path To Seizing Control Of The Fed
- The White House may try to stack the Board and then replace regional Fed presidents to control the entire Fed system.
- That maneuver would break longstanding precedent and could pierce a key firewall protecting Fed independence.
Market Complacency Amid Big Risks
- Many financial commentators warn markets are complacent about the risk to Fed independence despite clear plans being discussed.
- If credibility erodes, inflation expectations, borrowing costs, and the dollar could all suffer materially.