Donald Trump has made it clear: his top economic goal is to bring interest rates down. But his main obstacle isn’t Jerome Powell, as he often claims — it's the deeper structural challenges within the U.S. economy: soaring debt, widening deficits, and shrinking global savings caused by demographic shifts.

📊 Debt, Deficits, and Retirees: The Hidden Forces Driving Rates Higher

According to Bloomberg Economics, the 10-year Treasury yield — a key benchmark that influences mortgages and business loans — is more likely to stay above 4.5%, regardless of who chairs the Fed.

For thirty years, America lived in an era of cheap money. The government could spend freely, asset prices soared, and borrowing was easy. That era is over. Today, the U.S. faces a reality where interest payments on debt exceed the entire Pentagon budget. Mortgage rates hover around 7%, and the housing market is stalling. Yet Trump seems to believe that simply replacing the Fed chair will fix everything — it won’t.

🧮 Trump Wants Control, But Global Savings Are Drying Up

Trump is reportedly planning to replace Powell with a loyalist who will swiftly cut rates. The departure of Fed Governor Adriana Kugler gave him an opening.

He's also publicly lashed out at Powell, calling him "TOO ANGRY, TOO DUMB, AND TOO POLITICAL." But even if short-term rates are cut in September — amid signs of a cooling job market — it won’t stop long-term rates from rising.

Why are they rising? Because the global savings pool is shrinking. Baby boomers are retiring and spending their savings. China has reduced its reserves from $4 trillion in 2014 to $3.3 trillion today. Saudi Arabia is redirecting its capital from U.S. Treasuries into mega-projects like Neom. And after the $300 billion in Russian reserves were frozen in 2022, many countries now see U.S. debt as politically risky.

🏛️ The Fed’s Independence Matters — Investors Don’t Trust Political Interference

For decades, U.S. presidents — from Reagan to Obama — respected the Fed’s independence. That gave investors confidence. No one wants to put their money into a central bank that looks like a political puppet.

📉 The Low-Rate Era Is Over — And Conditions Have Reversed

From the 1980s to 2010, interest rates steadily fell due to a global surplus of savings. Boomers were saving for retirement. China and other surplus nations bought Treasuries. Oil exporters did the same. Tech was cheap. Growth was slow. The result: a declining natural rate of interest — from 5% in the 1980s to 1.7% by 2012.

Today, everything has flipped. Boomers are retiring, China no longer needs to defend its currency, and Saudi Arabia is investing in its own future, not in U.S. debt. The forces that pushed rates down are now pushing them up.

📈 Exploding Debt and Rising Defense Budgets Push Rates Even Higher

U.S. federal debt is now approaching 100% of GDP, compared to just 30% in 2001. Defense spending is also rising. After Russia invaded Ukraine, NATO members agreed to raise their defense budgets to 3.5% of GDP.

Bloomberg Economics estimates this will add $2.3 trillion to European debt over the next decade. And since global investors are starting to favor European bonds over Treasuries, that too is pushing U.S. rates higher.

🧠 AI Boom Adds Even More Pressure

Investments in AI infrastructure — data centers, power grids, supply chain overhauls — will require massive capital. Governments are now competing with businesses for money, while saving habits are fading. This pushes up the natural growth rate of the economy.

Bloomberg now estimates it at 2.5% today, potentially rising to 2.8% by 2030. That could keep 10-year Treasury yields between 4.5% and 5%, even in a best-case scenario. If things worsen, rates could spike to 6% or more.

❌ Trump Can’t Solve This With Personnel Changes

Trump can appoint a new Fed chair and publicly pressure for rate cuts. But he can’t reverse demographic trends, can’t force China to buy Treasuries, and can’t convince Saudi Arabia to return to parking cash in Washington.

The structure of the global economy has changed. So have interest rates. And that’s not something Trump can fix just by replacing one person.

#TRUMP , #FederalReserve , #Inflation , #Powell , #USPolitics

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