By Graham Summers, MBA
It’s time to permanently dispel with the myth that the Fed is politically independent.
First and foremost, the Fed’s own monetary policies disprove this. As Peter St Onge, Ph.D. recently noted on X (formerly Twitter), throughout its 112-year history, Fed policy has favored Democrat Presidents. Specifically, Democrat administrations have experienced real rates of 0.7% while Republican administrations have experienced real rates of 3.1%.
There is no arguing this. For all its claims of political independence the Fed has given Democrat administrations a significantly lower cost of capital than that which it has given Republicans. Again, this is not during the last decade… it’s throughout the entirety of the Fed’s112- year history!
Secondly, Fed officials favor Democrat politicians with their own capital. As Stephen Moore notes on X, during the 2024 Presidential election cycle, 92% of political contributions made by Fed employees went to Democrats.
Not, 51%, not 75%, 92%.
Again, Fed political independence is a myth. The Fed’s own monetary policies and political contributions prove this. And it’s setting the stage for a MAJOR showdown between the Trump administration and the Fed.
It is no secret that President Trump and Fed Chair Jerome Powell HATE each other. And as I’ve noted previously, the Powell Fed has openly acted in a political fashion.
Some of the Powell Fed’s more egregious political acts include:
- Raising rates aggressively while running large-scale Quantitative Tightening (QT) programs in 2018 while ignoring numerous signals that doing this would result in catastrophe. Later, former Vice Chair Stanley Fisher would admit in an interview that he believed the Fed did this to hurt the Trump administration’s economic agenda.
- Proclaiming inflation to be “transitory” throughout 2021 until Fed Chair Powell was nominated for a second term by then-President Biden… at which point the Fed pivoted and dropped the word transitory from Fed language within a week.
- Cutting rates by 0.5% within 60 days of the 2024 Presidential election… then turning around and refusing to cut rates once Donald Trump won the election, despite inflation being lower and unemployment being higher than it was at the time the Fed implemented the 0.5% rate cut.
- Openly criticizing the Trump administration’s trade war/ tariff policies after refusing to criticize the Biden administration’s extreme fiscal policies which added nearly $10 trillion to the debt in four years.
- Criticizing the Trump administration’s trade war/ tariff policies at a time when the stock market was collapsing and the financial system was looking for reassurance, thereby violating the Fed’s goal of maintaining financial stability.
The above items alone strongly suggest Fed Chair Powell is unfit to lead the Fed. But his decision to renovate the Fed’s DC offices to the tune of $2.3 BILLION (with a B) might have given the Trump administration “cause” to have him removed.
As Awakened Outlaw pointed out on X, for the $2.3 billion that Jerome Powell is spending renovating the Fed’s DC headquarters, you could have built THREE Dallas Cowboys stadiums.
Even by DC standards, that’s an excessive amount of waste. And it’s EXTREMELY politically tone deaf given the state of Americans’ pocketbooks courtesy of the Fed’s actions (by keeping rates high the Fed is hurting housing, as well as consumer debt).
Indeed, National Economic Council Director Kevin Hassett told ABC news, the Fed’s renovation is “the most expensive project in D.C. history — $2.5 billion, with a $700 million cost overrun…”
The President is allowed to fire the Fed Chair if there is cause. And it is clear that political momentum is building for Powell to resign… or be fired. Indeed, some Trump administration officials like FHFA Bill Pulte are calling for Powell to be investigated. Given that the Powell Fed has already had plenty of scandals, it is unlikely Powell would wait for this to start.
The stage is set for a political showdown… and given how critical the Fed is to financial stability there is the potential for a market meltdown if this situation comes unhinged.
If you find yourself worried about another crash, or bear market hitting, we have a proprietary signal that you can use to insure you get out of the markets well before a collapse hits.
This signal has accurately predicted every major market collapse in the last 40 years. And we detail it, how it works and what it’s saying about the markets today in a Special Investment Report How to Predict a Crash.
Normally we’d sell this report for $499, but in light of what’s happening with the Fed today, we’re making just 99 copies available to the investing public.
To pick one up…
Graham Summers, MBA
Chief Market Strategist
Phoenix Capital Research
