Recently, the power game between the Federal Reserve and the Treasury Department has become increasingly interesting, and we ordinary people need to see it clearly. On May 15, Powell's speech appeared to be a policy adjustment, but in reality, it was a subtle struggle with the Treasury. The consequences of the crazy money printing during the pandemic are now fully evident; the monster of inflation cannot be contained at all.
The latest data is clear: prices are skyrocketing like a rocket, and the CPI has exceeded expectations for three consecutive months. Powell is still pretending to be calm, but the market has long seen through everything — achieving 2 out of the 6 rate cuts predicted at the beginning of the year would be a blessing.
Yellen talks about a "soft landing" every day, but just look at the mess of $34 trillion in national debt; the interest alone burns through $10 billion a day! Anyone in the position of Treasury Secretary would be frantic. But the question is, does the Federal Reserve dare to cut rates easily? This is no joke.
Actually, this contradiction has long been foreshadowed. When Silicon Valley Bank collapsed last year, the Treasury rushed to save the market while the Federal Reserve secretly tightened the money supply. Now one side wants to step on the gas to stimulate the economy, while the other insists on hitting the brakes to control inflation — isn’t that a standoff?
The most unfortunate ones are still us ordinary people. Right now, loans are ridiculously expensive, mortgage rates have surged to 7%, and supermarket prices are breaking records every day. The Trump administration wants to gain votes by cutting rates, but the Federal Reserve does not dare to let its guard down against inflation.
To be honest, this game of chess is likely to end in mutual destruction. Continuing to raise rates will ruin businesses, while cutting rates too soon will definitely trigger a rebound in inflation. The Federal Reserve is currently playing a delaying tactic, but the longer it drags on, the worse the problem will become.
In my opinion, in the end, either the Federal Reserve will buckle under pressure and yield, or the Treasury will have to admit defeat. Who do you think will compromise first? Feel free to discuss. If you think I make sense, remember to follow me, and we can exchange more on such topics in the future.
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