The Fed Is The Bright Red Line

 Trump's spurious prosecution of Jerome Powell is both deeply chilling and unlikely to work. The Federal Reserve was specifically constructed to avoid political pressure. They have to make the hard choices that presidents and congressional members cannot. Paul Volcker purposefully forced the country into a brutal recession from 1979-1983 in order to kill the inflation that had curdled the American economy. Powell has skillfully navigated the post-Covid inflationary period to quell inflation without forcing us into a deflationary recession.

As Krugman notes, this is part of Trump's overall assault on anyone with the temerity to not kiss his ass. He is so ensconced in sycophants that he cannot be contradicted, cannot be defied, and Powell wouldn't cut interest rates. (By the way, why now? Why launch a prosecution now? I have to wonder if they are seeing some flashing red lights on the economy and are that desperate for a rate cut.)

Last year, the Sycophantic Six on the SCOTUS basically allowed the president to fire anyone at any agency, even if it had been set up to be beyond the reach of presidential firings. They specifically said that this does not apply to the Federal Reserve. The reason is that the Court ultimately works for the Money. Yeah, they may secretly thrill to Trump's attacks on Democrats or minorities, but their real purpose was to overturn Chevron and gut the regulatory state. 

The broadest trends in macroeconomics are fuzzy at the moment. The tariffs have not really been universal and the effects have not been as profound as the published rates. There is still some hope that the Court will overturn them, for the same reason that they might protect Powell. The economy is soft, but not receding, and that softness has largely come from Trump's erratic policy making. No one knows what he might do with tariffs or punishing a specific industry from one day to the next. No one wants to go into Venezuela because he might simply walk away from it and stare out the window at his construction project in the old East Wing. 

The economy is frozen in uncertainty, even as Trump guts regulatory oversight and funnels money to the rich. Attacking the Federal Reserves' independence is unlikely to sooth markets and allay the concerns of business.