Trump launched another verbal attack on Federal Reserve Chairman Powell on Monday, with the 'Sell America' trade heating up.
Overnight, the US dollar, US stocks, and US bonds fell consecutively. Today, the Asian market continues to decline, with gold breaking above $3450, and the alarm has not been lifted. The market's decline can be seen as a distress signal from the Federal Reserve—because the more the market declines, the less likely Powell is to be fired.
Regardless of whether Trump has the legal right to take action against the Federal Reserve, this dispute undermines the foundation of the Fed's independence, putting the financial markets in jeopardy.
Chicago Federal Reserve Chairman Goolsbee (who has voting rights this year) made two appearances in a row, warning first against undermining the independence of the Federal Reserve, and then continuing to imply that there would be no rate cuts.
Goolsbee stated on CBS's (national) program on Sunday that the independence of monetary policy is crucial. Without this independence, inflation rates will rise, economic growth will slow, and the job market will deteriorate.
And on this Monday, Goolsbee appeared again on CNBC. He stated that the Federal Reserve needs to wait and see, but if the impact of tariffs does not extend beyond the 11% of imports that make up the economy, then the impact may be relatively small. Unless it jumps out of its own 11% lane, the effect of tariffs on the macro economy may be minimal.
Goolsbee's frequent statements are not only a strong counterattack against Trump's pressure but also a necessary repair of market confidence, as well as a reaffirmation of the 'data-driven' policy framework.
Trump assured that tariff negotiations are making progress, but this has not boosted optimistic sentiment, as concerns grow that he may be preparing to fire Powell.
1. The sentiment on Wall Street has shifted from optimistic to a 'Sell America' mode, which is a subconscious response from the market.
2. Next, people will reassess the assets that are crucial to the dominance of the US economy. It will no longer be a simple reaction to 'rate cuts' or 'tariffs', but a rapid repricing of risks in US-dominated assets under the double pressure of 'political intervention' and 'institutional risk'.
3. If Powell is fired, the initial reaction will be severe fluctuations in the financial markets, along with the largest possible capital withdrawal wave that people can imagine. Not only is the independence of the Federal Reserve clearly threatened, but the prospects of de-dollarization and escaping American hegemony are also becoming increasingly realistic.
