RE: LeoThread 2025-07-12 13:33
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Trump is right about the Fed and interest rates. Central bank monetary policy is a nothing burger when the largest borrower is the government. Raising rates does not stop politicians from spending.
What it does is raise the amount required to service the debt. This is where Trump has a point. The Fed has no magic levers to implement policy that fixed the economy, they have proven that repeatedly.
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Feels like Trump is doing everything he can to force the FED to lower the rates. In his mind this is the only way to handle the debt crises
It will lower the servicing costs. They have to refi a large batch of bonds this year and higher interest rates only lead to more repayment costs.
And Jerome Powell is already considering to resign. That is what I read yesterday, what are your thoughts about it?
Rate cuts might happen soon, people are speculating that.
Personally I am of the interest rate fallacy mindset that Milton Friedman discussed. The reason why interest rates at a high level is not sustainable is because there isnt enough money (USD) out there for the global economy. People still look at things from a national level.
As for Powell, he doesnt have to resign since I dont think Trump can make the case that he was negligent in his duties. Policy disagreement doesnt meet that bar.
That said, if the entire political apparatus is turning against him, that is something to consider. The pressure could keep mounting if the business community starts to agree with Trump on rates.