The dangerous fantasy of ousting Jerome Powell from the Federal Reserve

The idea of ​​removing Jerome Powell as chairman of the Federal Reserve has resurfaced with force in certain political and media circles. Beyond the legitimate criticisms of his management, the proposal to remove him abruptly or prematurely represents a direct attack on one of the last bastions of institutional independence still surviving in the United States. And that should concern us far more than it seems to excite his detractors.

The Federal Reserve is not a perfect institution. It has made serious mistakes: it underestimated inflation in 2021, kept interest rates too low for too long, and contributed to the largest transfer of wealth to asset owners in decades. However, these errors—as serious as they may be—do not justify destroying its independence. The economic history of the 20th century is full of examples of what happens when governments take direct control of monetary policy: chronic inflation in Latin America, hyperinflation in interwar Germany, decades of bank zombification in Japan, and monetary collapse in Zimbabwe and Venezuela. In every case, the central bank's subordination to the executive branch was a key factor.

Jerome Powell is neither a saint nor a genius. He is a pragmatic, conservative technocrat appointed by Trump who, paradoxically, has been tougher on inflation than many of his Democratic predecessors. His cardinal sin, for some, is not technical incompetence, but his refusal to become a political tool at the service of whoever occupies the White House at any given time. This resistance, far from being a flaw, is precisely the virtue the system needs to preserve.

Replacing Powell through extraordinary means (massive public pressure, expedited legislative changes, or even attempts at impeachment for "cause") would send a devastating message to the markets, foreign investors, and future generations: in the United States, central bank independence is no longer an untouchable principle. That precedent would be worth far more than any one-off adjustment of interest rates or any campaign promise of "cheap money."

Democracy needs checks and balances. And in monetary policy, the most important counterweight we have left is a central bank that can say “no” to political power when it demands financing unsustainable deficits by printing money or artificially maintaining growth with zero interest rates for decades. Removing Powell to replace him with someone more compliant wouldn't strengthen the economy; it would weaken it structurally for decades.

Criticizing the Fed's management is healthy and necessary. Destroying its independence to punish those who don't dance to our tune is, quite simply, a strategic blunder with unpredictable consequences.

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