On the grand chessboard of the global economy, every move by the Federal Reserve is like a key piece that profoundly affects the direction of the world economy. Recently, a controversy sparked by the renovation of the Federal Reserve building has pushed the conflict between Federal Reserve Chairman Powell and President Trump into the spotlight, while also putting the global financial markets on high alert.
Everything began with the renovation project of the Federal Reserve building. Originally budgeted at $1.5 billion, the costs soared to $2.6 billion. Such a huge cost overrun instantly ignited outrage from various sectors, with Trump being the most vocal. In his eyes, the renovation led by Powell was undoubtedly a tremendous waste of taxpayer money. Trump pointed out mercilessly that, given the complex economic situation, the Federal Reserve should focus on stabilizing the economy and promoting employment, rather than spending huge sums on such luxurious renovations. A formal letter from the White House clearly listed various issues with the renovation project: a cost overrun of $700 million, the presence of luxurious facilities inside, and office space that far exceeds standards, which is undoubtedly a squandering of public resources. Looking back in history, this is not the first large-scale renovation of the Federal Reserve headquarters; it underwent a similar renovation from 1999 to 2003, and now, with another massive financial investment, criticisms from the public naturally arose.
Faced with overwhelming criticism, Powell felt immense pressure. He explained that the cost overruns were due to many unexpected challenges during the renovation: the asbestos content in the building was far greater than expected, requiring more funds for safe handling; there were toxic pollutants in the underground soil, increasing cleanup costs; and high groundwater levels greatly hindered construction, leading to rising costs. However, these explanations did not completely quell external doubts. Under continued pressure from the Trump administration, Powell ultimately chose to resign as chairman of the Federal Reserve.
At the same time, Trump’s dissatisfaction with the Federal Reserve's interest rate policy has completely erupted. He strongly demands that the Federal Reserve lower interest rates by three percentage points, believing this is the key measure to stimulate further growth in the U.S. economy. Trump believes that while the current U.S. economy maintains a certain growth trend, it still faces many challenges. Lowering interest rates can reduce corporate financing costs, encourage companies to expand investment and production, create more job opportunities, and promote economic prosperity; it can also lessen the government debt burden, saving the country a substantial amount in debt repayment funds.
However, if Trump's demand is realized, it is likely to trigger a chain reaction in the global financial markets. If the Federal Reserve significantly cuts interest rates, the world may enter a massive monetary easing mode. Other countries will likely follow suit to maintain their economic competitiveness and stability, leading to a significant increase in global money supply, which could not only trigger global inflation but also greatly increase instability factors in global financial markets, bringing enormous uncertainty to world economic development.
Looking back at the history of the Federal Reserve, since 2000, 15 board members have resigned early. Behind this phenomenon are factors such as changes in economic conditions and policy differences, reflecting that the internal decision-making mechanism and personnel stability of the Federal Reserve are under severe test in a complex economic environment and under various pressures. Powell's resignation over renovation issues, combined with Trump's tough demands on interest rates, has placed the Federal Reserve and even the global economy at a new crossroads. How will the Federal Reserve adjust its strategy in the future? Where will the global economy head? Everyone is closely watching and waiting for the follow-up developments of this economic drama.