(Trigger) When the year-on-year CPI increase in July was fixed at 5.7%, the century-old credibility of US monetary authorities faced its most severe test since the Nixon shock in 1971—this power struggle between the presidency and the Federal Reserve is essentially the ultimate rehearsal for the reconstruction of the global monetary order following the collapse of the Bretton Woods system.
[Three Dimensions of Power Struggle]
Ⅰ Institutional conflict: According to Section 2A of the (Federal Reserve Act), the Federal Reserve must maintain a balance between "price stability" and "full employment". However, the tariff escalation promoted by the Trump administration has created a chaotic situation of both imported inflation and the return of manufacturing. Data shows that the new tariff policy has raised the core PCE price index by an additional 0.3 percentage points per month.
Ⅱ Theoretical Route Struggle: The White House economic advisory team is secretly promoting practical solutions for "Modern Monetary Theory (MMT)" in an attempt to directly monetize the fiscal deficit through the Treasury. Meanwhile, Powell's adherence to the "Phillips Curve" control model is becoming a laughingstock in academic circles against the backdrop of persistently low labor participation rates.
Ⅲ Personalization of confrontation: Trump publicly stated at a campaign rally in Ohio that "interest rate policy should be decided by elected officials", which directly violates Article 10 of the (1913 Federal Reserve Act) regarding the independence of the central bank. Legal scholars point out that this statement constitutes a substantial violation of the constitutional order.
[Historical Reflection: The Millennial Cycle of Monetary Sovereignty]
Comparing the power struggle over silver control between the Ministry of Revenue and local warlords during the Wanli period, the current dilemma faced by the Federal Reserve is strikingly similar:
• Inflation triggered by the capitalization of silver (prices rose by 320% from 1578 to 1582)
• The coinage power struggle between central finance and local forces
• Economic collapse during the Little Ice Age caused by monetary credit crises
The rise of digital currencies today is reminiscent of the monetary revolution triggered by the influx of silver from the Americas during the Wanli period. Powell's dilemma lies in his need to counter the White House's "modern mercantilism" while also guarding against the "digital silver shock" that Bitcoin poses to the fiat currency system.
[Market Impact: The Prisoner's Dilemma of Global Capital]
According to Bloomberg's economic model simulation, if the Federal Reserve succumbs to political pressure and lowers interest rates prematurely:
The US dollar index will break below the critical support level of 95, triggering a "competitive devaluation wave" among emerging market currencies.
Gold/Bitcoin prices may break through psychological barriers of 2,500/150,000.
The real yield on 10-year US Treasuries will historically turn negative, leading to a repricing of the global $27 trillion fixed income asset.
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