Brothers, today we will analyze the life-and-death game between Trump and the Federal Reserve—do you think changing the chair can lead to aggressive interest rate cuts? Wake up, Powell has built a high wall with the independence of the central bank, and Trump's '1% interest rate dream' is about to be shattered by reality!
1. Cut interest rates by 1%? Are you crazy!
Trump has recently been madly demanding interest rates be slashed below 1%; they are currently at 4.25% - 4.50%! Historically, such extreme actions have only been used during wars and financial crises; currently, the unemployment rate is 4.1%, inflation is 2.5%, and GDP growth is 2%, which does not support such economic data. Even more absurdly, he is simultaneously increasing tariffs and pressuring the Federal Reserve to cut interest rates—it's common sense that tariffs push up inflation, right? Even Federal Reserve Governor Waller admitted that 'tariffs will temporarily raise inflation'; this operation is pure self-slapping!
2. Dismiss Powell? First, ask if the law allows it
Trump recently used the $2.5 billion renovation budget overrun at the Federal Reserve headquarters as an excuse to threaten to fire Powell. But the legal red line has long been drawn: the president can only dismiss the Federal Reserve Chair for 'misconduct'; policy disagreements do not count! The Supreme Court just reaffirmed this point in May.
Even more extreme is that Powell's chairmanship term ends in May next year, but his term as a board member continues until 2028. Even if he is removed from the chair position, he can still vote on the FOMC to annoy Trump for four more years! The White House is now frantically searching for evidence of 'renovation corruption', but anyone with common sense understands that this is just leverage to force Powell to surrender on interest rate cuts.
3. Change of leadership next year? The FOMC remains a 'roadblock' to interest rate cuts
Even if Trump appoints one of his own as chair next year, the voting power structure of the FOMC is the real boss. When the list of voting members for 2026 is revealed, two hawks will be in charge:
Cleveland Fed President Harker
Dallas Fed President Logan
Both of them voted against interest rate cuts this year, and are likely to continue to do so next year. Data from Deutsche Bank directly contradicts this: 7 current officials clearly oppose interest rate cuts, and changing the chair won't change the outcome.
4. Debt interest crushes the White House, interest rate cuts become a lifeline
The core of Trump's urgency is just two words: debt!
By 2025, federal interest expenses will account for 24% of fiscal revenue
In June, net interest expenses amounted to $81 billion for the month, second only to Social Security expenditures
Bank of America estimates that reducing interest rates to 3.25% could stabilize debt; slashing to 2% could save $200 billion. But the risk of aggressive interest rate cuts is explosive—the long-term yield on US Treasuries could rebound, causing government financing costs to spiral out of control.
5. The economy takes another hit
Trump's (Great America Act) crazy crackdown on immigration:
Visa fees for entering the US surge by $250
Goal to expel 1 million people in a year
Former Federal Reserve economist Claudia Sam characterized it directly as 'economic poison'! The Dallas Fed estimates that the stagnation of immigration directly lowers this year's GDP growth rate by 0.8 percentage points; if expulsion standards are met, it could drag down to 1.5 percentage points by 2027. The labor shortage cannot be compensated for in the short term by AI and robots!
6. Wall Street surrenders first? Bubble self-rescue techniques
People in the crypto circle should pay close attention to this! Bank of America's chief strategist Harnett stated: Wall Street wants to 'surrender' before the Federal Reserve! The logic is very tricky—
1. Preemptively hype the narrative of 'nominal GDP prosperity': betting on a shift to 'low interest rates + tax cuts' in the second half of 2025
2. Use stock market bubbles to hedge policy risks: go long on gold/cryptocurrency + short 30-year US Treasuries + long on tech stocks
3. If Trump aggressively fires Powell, the market will instantly read it as a 'dovish shift', accelerating the bubble
Finally, let me say something heart-wrenching
Politics can be gambled on, but the independence of the central bank is the last line of defense for the US dollar. Nixon pressured the Federal Reserve to cut interest rates, which directly triggered the massive inflation of the 1970s and the collapse of the Bretton Woods system. If Trump were to forcibly dismantle the Federal Reserve today, the global crisis of trust in the US dollar would be a nuclear-level disaster.
What should people in the crypto circle do? Focus on the inversion of the US Treasury yield curve, bet on the volatility index (VIX), and hoard BTC/gold—these are the bloody chips in chaotic times. As for interest rate cuts? Let's wait for the FOMC internal struggle to yield results; the probability of a rate cut in September has already fallen below 6%!
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