"There’s a plausible scenario wherein even as a Trump-driven Fed is lowering rates, markets could push hard in the other direction." - could you elaborate on that a little? Do you mean raising the yield at a treasury auction? At what point will an auction effectively fail? And what happens because of that?
Yes, raising yields at auctions due to higher risk and term premiums, driven up by worries about inflation, the dollar, and the lack of credible Fed. I’d argue we’ve already seen a little of this since Trump started w the tariffs.
While Trump's actions appear nonsensical from an "old-world" liberal democratic perspective, it certainly makes sense from a competitive authoritarian standpoint.
Kudos to Powell for going on the offensive and speaking truth to power in the face of blatant political interference from the White House. The moment demands it, and he rose to the challenge. Trump is clearly desperate and flailing, and with this absurd "investigation" he's finally crossed a line that even many Republicans in Congress won't abide.
Applying economic theory to explain this situation (or any of Trump's policies) is futile because of the faulty assumption of a sane and thoughtful foundation.
Trump believes tariffs are hurting other countries, and no fact will alter this belief.
The same is true for interest rates. If the rates are lower, then money will flow into everyone's pockets magically, like water from a giant spigot in Canada will wash away SoCal fires. No fact is going to change Trump's mind.
Moreover, this time around (2nd term), Trump owns the DOJ outright. *His* attorneys will attack without question any random target.
No guardrails means Trump's impulses are established policy. That ICE guy who murdered an unarmed lady motorist for the unpardonable sin of laughing at him a couple of days ago? That brave officer is actually in the hospital right now, fighting for his life.
What is so crazy (surreal) is that Republicans can stop this madness RIGHT NOW, and no one expects them to lift a finger to *literally* save the country from this deranged toddler-man.
Everyone,*including those Republicans*, is waiting for mid-term upsets so that the Democrats can take care of this mess.
Jared needs to study what is behind almost everything Trump does: White Christian Nationalism, Christian Dominion Theology, and the 7 Mountains Mandate. Nearly everything Trump has done can be found in Project 2025 and the vast trove of supporting documentation behind Project 2025 which directly derives from that foundation. In CDT and more importantly the 7MM Christian Dominance over all 7 pillars of society is required by God. As David French (NYT) has noted Trump is a messianic figure to much of his Christian base fulfilling Gods plan. This plan explicitly includes Christian dominance over businesses and economics (and the law and legal system) This really has almost nothing to do with interest rates, it is about Dominance. The reason the charges are absurd is the point! Dominance requires the absurdity: if the government can use phony charges to go after highly visible people (who like Powell and Comey can afford the best legal representation) they can go after anyone for any reason. Vought wrote extensively about this and stated he had thousands of pages of EO’s and policy planning ready to go when interviewed in 2024. If Jared would read the WCN, CDT, 7MM literature he would understand what is happening. Nearly everything Trump has done can be found in that literature. Trump doesn’t plan and is incapable of rational thinking, but Vought and others know how to control Trump to follow their extensive planning (to overthrow the US and become a Christian Theocracy). Give Trump something or someone to hate and he will follow the plan.
I think it's time that someone sent Trump to Minneapolis for a photo op with his goons there. They could let him hold one of their pistols -- and he could shoot himself in the foot on camera. Metaphorically speaking, of course, because he keeps metaphorically shooting himself in the foot, doesn't he? Somebody should tell him what a great PR move that would be.
Trump’s actions are rational: chase out Powell as soon as possible, set an example for other fed governors (You may be next!) drive down interest rates and control the flow of economic data.
Either control elections, troops at polling places or use the Insurrection Act to postpone elections. Putin and Xi have given a quiet thumbs up to T, we’re returning to a Royalist system… royal families, currently the autocracies, are assuming their thrones
That assumes the Fed controls rates other than the fed funds rate. They don't as far as I know. . From what I understand, other rates follow the fed funds rate because of the trust in the independent Federal Reserve. If it loses independence, there is (IMO) no guarantee that consumer/business rates will follow fed funds rate. If inflation spikes, consumer & business interest rates will spike as well.
Yes and no. The Fed controls only the overnight rate of reserves (now implemented through interest paid on reserves but achieving the same outcome). Fed Funds rates have decreasing impact as terms increase, specifically FFR actions since mid 1980’s have weak correlation with 10yr TSY yields. But they do impact very short maturity TSY debt, including the 2yr TSY. Bessent statements make clear the plan to move US deficit/debt funding to very short term TSY instruments. This is classic authoritarian thinking and it fits perfectly with Vought’s strategy to create the Christian theocracy he desires. If the Executive controls all spending (what Vought argues as the basis for his massive efforts to withhold funding from everything from Universities to Blue states) then it can use this, with the current huge deficit spending to control which companies and institutions survive. The gap between private market rate funding and government supplied deficit funding will increase. Building housing will be more expensive, but the Trump admin has almost $200Billion to build gulags for Brown people financed by deficit spending. The drive for lower interest rates is purely a drive for authoritarian control.
I have the same request, to please elaborate on the “plausible scenario”. Do you envisage foreign and domestic investors dumping treasuries? Or that the overnight rate just becomes irrelevant and banks set rates independently of any signal from the Fed?
"There’s a plausible scenario wherein even as a Trump-driven Fed is lowering rates, markets could push hard in the other direction." - could you elaborate on that a little? Do you mean raising the yield at a treasury auction? At what point will an auction effectively fail? And what happens because of that?
Yes, raising yields at auctions due to higher risk and term premiums, driven up by worries about inflation, the dollar, and the lack of credible Fed. I’d argue we’ve already seen a little of this since Trump started w the tariffs.
Anything to distract from the Epstein files and now the ICE homicide of Renee Goode.
While Trump's actions appear nonsensical from an "old-world" liberal democratic perspective, it certainly makes sense from a competitive authoritarian standpoint.
Mad men don’t improve. Only one direction. Assuming otherwise is waste of effort. Rational arguments - meaningless.
A cornered animal will do anything to avoid "losing"
Kudos to Powell for going on the offensive and speaking truth to power in the face of blatant political interference from the White House. The moment demands it, and he rose to the challenge. Trump is clearly desperate and flailing, and with this absurd "investigation" he's finally crossed a line that even many Republicans in Congress won't abide.
Applying economic theory to explain this situation (or any of Trump's policies) is futile because of the faulty assumption of a sane and thoughtful foundation.
Trump believes tariffs are hurting other countries, and no fact will alter this belief.
The same is true for interest rates. If the rates are lower, then money will flow into everyone's pockets magically, like water from a giant spigot in Canada will wash away SoCal fires. No fact is going to change Trump's mind.
Moreover, this time around (2nd term), Trump owns the DOJ outright. *His* attorneys will attack without question any random target.
No guardrails means Trump's impulses are established policy. That ICE guy who murdered an unarmed lady motorist for the unpardonable sin of laughing at him a couple of days ago? That brave officer is actually in the hospital right now, fighting for his life.
What is so crazy (surreal) is that Republicans can stop this madness RIGHT NOW, and no one expects them to lift a finger to *literally* save the country from this deranged toddler-man.
Everyone,*including those Republicans*, is waiting for mid-term upsets so that the Democrats can take care of this mess.
Bernstein: "The only king he reminds one of at this point is King Lear." Trump antics also remind me of Emporer Nero.
https://substack.com/@globalupdates/note/p-184302257?r=6zautq
Jared needs to study what is behind almost everything Trump does: White Christian Nationalism, Christian Dominion Theology, and the 7 Mountains Mandate. Nearly everything Trump has done can be found in Project 2025 and the vast trove of supporting documentation behind Project 2025 which directly derives from that foundation. In CDT and more importantly the 7MM Christian Dominance over all 7 pillars of society is required by God. As David French (NYT) has noted Trump is a messianic figure to much of his Christian base fulfilling Gods plan. This plan explicitly includes Christian dominance over businesses and economics (and the law and legal system) This really has almost nothing to do with interest rates, it is about Dominance. The reason the charges are absurd is the point! Dominance requires the absurdity: if the government can use phony charges to go after highly visible people (who like Powell and Comey can afford the best legal representation) they can go after anyone for any reason. Vought wrote extensively about this and stated he had thousands of pages of EO’s and policy planning ready to go when interviewed in 2024. If Jared would read the WCN, CDT, 7MM literature he would understand what is happening. Nearly everything Trump has done can be found in that literature. Trump doesn’t plan and is incapable of rational thinking, but Vought and others know how to control Trump to follow their extensive planning (to overthrow the US and become a Christian Theocracy). Give Trump something or someone to hate and he will follow the plan.
It makes sense because Powell stood up to trump and called out trump’s lies
I think it's time that someone sent Trump to Minneapolis for a photo op with his goons there. They could let him hold one of their pistols -- and he could shoot himself in the foot on camera. Metaphorically speaking, of course, because he keeps metaphorically shooting himself in the foot, doesn't he? Somebody should tell him what a great PR move that would be.
Trump’s actions are rational: chase out Powell as soon as possible, set an example for other fed governors (You may be next!) drive down interest rates and control the flow of economic data.
Either control elections, troops at polling places or use the Insurrection Act to postpone elections. Putin and Xi have given a quiet thumbs up to T, we’re returning to a Royalist system… royal families, currently the autocracies, are assuming their thrones
"drive down interest rates "
That assumes the Fed controls rates other than the fed funds rate. They don't as far as I know. . From what I understand, other rates follow the fed funds rate because of the trust in the independent Federal Reserve. If it loses independence, there is (IMO) no guarantee that consumer/business rates will follow fed funds rate. If inflation spikes, consumer & business interest rates will spike as well.
Yes and no. The Fed controls only the overnight rate of reserves (now implemented through interest paid on reserves but achieving the same outcome). Fed Funds rates have decreasing impact as terms increase, specifically FFR actions since mid 1980’s have weak correlation with 10yr TSY yields. But they do impact very short maturity TSY debt, including the 2yr TSY. Bessent statements make clear the plan to move US deficit/debt funding to very short term TSY instruments. This is classic authoritarian thinking and it fits perfectly with Vought’s strategy to create the Christian theocracy he desires. If the Executive controls all spending (what Vought argues as the basis for his massive efforts to withhold funding from everything from Universities to Blue states) then it can use this, with the current huge deficit spending to control which companies and institutions survive. The gap between private market rate funding and government supplied deficit funding will increase. Building housing will be more expensive, but the Trump admin has almost $200Billion to build gulags for Brown people financed by deficit spending. The drive for lower interest rates is purely a drive for authoritarian control.
I have the same request, to please elaborate on the “plausible scenario”. Do you envisage foreign and domestic investors dumping treasuries? Or that the overnight rate just becomes irrelevant and banks set rates independently of any signal from the Fed?