Two people are openly campaigning to replace Powell. One is a proven liar.
Fed Chair Possibilities
What Firing Powell Mean
Greg Ip at the Wall Street Journal reports Firing Powell Would Shatter the Economy’s Inflation Defenses
I disagree with some of Ip’s assessment but his article contains some interesting quotes and ideas. Comments in braces [ ] are mine.
[Investors] instinctively assume that no matter the shock, the Federal Reserve is there to keep inflation low, like the brakes on a car. [I find that galling, but let’s continue].
If President Trump succeeds in forcing out Fed Chair Jerome Powell, that assumption will be shattered. The Fed would no longer be an independent check on the government, but just another part of that government with inflation subordinated to other priorities, such as the cost of the national debt. [Yes, this is a legitimate fear.]
This past week Kevin Warsh, a former Fed governor under consideration to succeed Powell, confidently declared the Fed’s next chair would be independent: “Independence in the conduct of monetary policy is essential.” Another contender, Trump adviser Kevin Hassett, said, “Everybody at the White House understands the independence of the Fed is super important.” [You should easily be able to spot the lie of the day.]
Trump said Wednesday that he wasn’t likely to fire Powell, but left open the possibility that Powell might have to “leave for fraud.” Trump officials appear to be trying to establish a cause for firing Powell based on expensive renovations at the Fed’s headquarters.
Trump’s concern over building project costs is selective. Take his wall on the southern border: During the 2016 election campaign he said it would cost $8 billion to $12 billion and Mexico would pay. Trump ultimately got $17 billion from taxpayers in his first term for the project, according to the Department of Homeland Security. It wasn’t finished and Mexico didn’t pay. Republicans in Congress have just allocated an additional $46.5 billion to complete the job.
So the Fed’s building is simply a pretext for what Trump really wants: replacing Powell with someone who will lower interest rates. If Trump succeeds in forcing Powell out over the building, he will assume he can find a reason to remove any Fed chair.
Whether Powell is forced out or finishes his term in May, his successor will be “damaged goods,” analysts at investment bank Piper Sandler wrote this past week. “No matter who gets the job, markets will have doubts about his independence.” They added: “The politicization of the Fed we are witnessing is a monumental development.”
In 2021 Turkish President Recep Tayyip Erdogan replaced the central bank governor with a loyalist who cut interest rates with inflation already at 15%. The currency plunged and inflation rocketed to 85% the next year.
The U.S. isn’t Turkey. Its financial system is the world’s most trusted, in great part because of the Fed. But there are hints that trust is eroding, such as a falling dollar and rising gold price.
The likeliest path for inflation in the near-term is down, thanks to a slack labor market holding down wage pressures. [Greg Ip has a lot more confidence on the direction of inflation than I do].
It’s when the economy heats up and price pressures emerge that the central bank’s freedom to set interest rates—no matter the president’s preferences—will have consequences.
And we won’t know the brakes have failed until it is time to stop the car. [100% spot on.]
Lie of the Day
Trump adviser Kevin Hassett, said, “Everybody at the White House understands the independence of the Fed is super important.”
Is that a hoot or what?
This Trump suck-up really wants the job.
Assessing the Odds
- Warsh is likely to be too independent for Trump.
- Bessent would be a good choice but he has two flaws, he would likely be too independent and he is needed as Treasury Secretary.
- Waller says he will dissent with the majority at the July 30 meeting.
Waller’s Likely Dissent
The Polymarket Bet
I don’t like the structure of it. It requires something happen by December.
But Bessent is very overrated. And the structure is favorable for a no vote. Even if Trump eventually named Bessent, it may not be by December.
Given Trump’s propensity to appoint loyalists, Hassent is very underrated at 12 percent.
So is Waller at 12 percent. But I don’t know about “by December”.
Kevin Warsh is historically a Fed hawk, at least relatively. I don’t know why (other than ego) he would want the job. If he thinks he can control Trump, he is a fool.
Related Posts
July 16, 2025: Betting Odds on Trump Firing Powell Surge on NYT Rumor, then Crash
Check out the Polymarket betting odds on Trump firing the Fed Chair.
July 17, 2025: GDPNowcast Declines Despite Strong Data, What Happened?
Industrial production and retail sales were both much stronger than expected.
July 19, 2025: Only Three of 12 Fed Regions Are Growing, Two Slightly
The Fed’s Beige Book shows a weakening economy
Economy at Stall Speed
I count three Fed regions up, and a fourth if you count Boston listed as “flat or up slightly”. Richmond was the standout. The Richmond area grew “moderately.”
New York and Philadelphia declined “modestly”
Add it all up and you have an economy at stall speed.
Grep Ip … seriously? 1) Greg Ip was Bernanke’s FED whisperer. 2) Its the WSJ.
Warsh has been a conservative dissenter at the FED. It still is more or less controlled opposition. Independent, yeah no. Only in smoke and mirrors is the FED independent.
I would say that Powell has been a disaster. Completely missed inflation. Blamed pandemic and supply chains. He was way late in recognizing inflation. The September cut before the election didn’t make sense. It was a political move.
The Fed is stuck with group think. The Fed needs change. My choice would be Warsh. I listened to him. He may actually be able to reform and change the Fed.
The Fed’s already compromised. It’s impossible for the Fed to stay completely independent as long as Congress keeps running continuous deficits: the money must flow.
Stagflation will rage if/when Trump replaces Powell with another of his sycophants.
God help us if the world banking system turns on America.
We live in interesting times!
Meanwhile Trumps team is destroying or scrubbing all of the Epstein evidence it declared it had ~ and was entrusted with.
Trump IS The Swamp”
>
I also watch the Federal Reserves balance sheet and the withdrawal of liquidity has slowed to a crawl over the last seven weeks.
Watching closely, because liquidity is one powerful tool!
There must be other copies, or they would have done that already.
So they fall back to calling something fake that they were promoting a few months ago. Looks like some of their morons woke up and peeled off the moron mass.
Good for them. Maybe you CAN fix stupid.
The thing that no one EVER discusses is that the ENTIRE MARKET STRUCTURES are all dependent on manipulating the cost of money.
It is discussed in some circles. Mostly by the banking institutions themselves or sharp observers of fiscal policy and the results of said policy.
You need a fairly stable base cost for all of the leverage on top. Trillions upon trillions.
Correct! As stable as can be in a changing world.
My thoughts are that the Fed is a dampener for fiscal policy. It has only three tools.
I am in the minority here in that I think an independent Fed is a good thing. Our banking system is what keeps our world as stable as it is and allows the US to dominate financial markets. The Fed protects the banks while providing a relatively safe environment for saving and the building of equity.
I particularly enjoy the remarkable liquidity of the US dollar. It is good everywhere on earth and in most countries is better than the local currency.
If you think banks are bad? Try living without them…
There is always a chance enough Republican Senators will vote “nay” on Bessent to prevent his confirmation.
In Aug TACO will impose tariffs. In Oct Trump will meet Xi on the way to APEC summit in S. Korea.
Fed firing is old news. I couldn’t find anything about Tulsi. Mish, please explain:
is Obama coupe attempt is a diversion from Epstein.
Is Obama coupe attempt a diversion from Epstein?
Yes & No. I think the administration has planned to release coup attempt information, but its timeline moved forward to take the heat off the Epstein debacle. The problem, of course, is many of the suspicions about unreleased Epstein document are never going away. It’s will become our modern JFK assassination.
Of course Obama coupe attempt is more important. It’s a rhetoric question.
The fact that Trump is a pedophile and sexual predator is relevant to his performance today. You can watch him with Epstein at multiple events and you can watch and listen to him say “you can grab them by the pussy” and know that he is an active abuser of women and power.
Trying to spin some fantasy coup attempt is just another “hey look over here” attempt to distract the public from Trumps mental illness.
Sorry for the MAGA faithful that they are lock step behind a pervert and malignant narcissist. Trumps January 6th insurrection (attack on our nations capitol) and Trumps statement that he would be “Dictator on Day One” also demonstrate his clear unfitness for office.
Perhaps Trump really will attack Canada or Greenland as his next diversion?
Trump is an actively putrefying stain on our nations history, credibility and legacy.
>
It’s been obvious to all but the most willfully blind for 9 years that Obama and his crew of crooks (Brennan and Clapper most notably) were behind the Russiagate de facto coup attempt. It goes without saying that the First Black President can never be prosecuted. Gabbard is bringing this up now to get on Trump’s good side and retain her job. Hopefully she’ll be able to pull him back from the precipice of neocon warmongering insanity that he’s been careening toward lately.
Obama isn’t above the law. To prevent chaos and riots he will escape jail. Trump DOJ will nail Merric Garland, Comey, Clapper, and Brennan, Lisa Page and Strzok…white dems. Trump’s policy: prepare for a war
to avoid a war. He isn’t a neo.
Hopefully Trump will ignore Netanyahu and Linda Graham who want to pull the U.S. into wars with Iran and Ukraine respectively.
Bibi told Trump: we can blow up Fordo without u. It will take longer, but we can do it. Within 24 hours Trump ordered a B2 strike on Iran. Bibi is a a sick old man. He agreed to a 60 days ceasefire. His legacy: 6:0 with Hamas. Hezbollah, Iraq, Syria the Hoothies and Iran. He returned most of the hostages. He will retire soon as a winner. Within a decade or two, there will be one democratic, free and flourishing state between the River and the Sea, thanks to Bibi. Israeli Arabs will do well bc the Gulf states will deal with people like them.
It won’t be a democratic state but a theocracy similar to Iran, just with a different religion.
Good luck with that. All they have to do is tell him what a macho man he is, and he rolls right over for them.
There will be no prosecution of Obama. If they prosecute, Obama’s lawyers would destroy them. This whole thing is goofier than Rudy’s, paraphrasing, we have a theories of wrongdoing, we just don’t have any evidence.
Trump needs to explain who recommended Barr, Wray and Haspel to him in the first place. Kush?
Thanks Mish. It will certainly be interesting to watch as there is not enough information all the way around to make any bets on the direction.
I would bet against bessent right now. He is definitely overpriced at 19%.
But US cannot bet on Polymarket
Hoover accepted Roy Archibald Young resignation the Fed governor in 1930. He lost his grip after the flyover bankers and the Anglophiles divorced. Eugene Mayer replaced Him. He resigned in May 1933 to buy WAPO. Buffett saved WAPO to buy influence in DC.
Definitely Kevin Hassett. He has proven to be a hack whose only skill is parroting whatever Trump wants him to say. Seems like that is the only criteria for any job in the administration. Hopefully, this won’t happen until next May.
Erdogan increased spending on: modern army, killing opponents, social programs to support poor voters, to dig a canal, jail opponents and build a palace over the Black Sea. Iran spent to fulfill the Ayatollah dream to build a Shia empire and to wipeout Israel,
LBJ killed opponents, spent on social programs, housing, Vietnam and on moon landing. In 1967 the Suez canal was closed for ten years. In the seventies the Saudis imposed an oil embargo to confiscate ARAMCO. RR unleashed Saddam to punish Iran. Scud missiles blew up Tehran. The dems along with the reps gang on Nixon bc he was a pinocchyo. Tulsi: the dems herd together against Nixon II using the FISA court bc he is a threat to our democracy.
Did LBJ fund the Kubrick space movie? No, not the one with the apes and computer, the other one with the astronauts.
He was also responsible for Valerian.
I’m recalling the last time a US president arm-twisted a Fed chair: Nixon and Arthur Burns. That went so well: Nixon got his reelection, and we got a decade of inflation. There was also the lesser time when Trump leaned on (an earlier version of) Powell publicly: it teed us up for bigger problems, depriving us of legitimate dry powder, when the unexpected (pandemic) hit. It troubles me that I would be sticking up for Powell, but that is the surreal world we are in.
Don’t forget Lyndon Johnson pushing his Fed Chair up against a wall and threatening him…
At the time LBJ was recovering from gallbladder surgery. That’s back when they cut big holes in person’s body wall. I don’t think LBJ was slamming anybody up against a wall. But, the same guy, Martin, longest serving Fed Chair, knocked Nixon out with his tennis racket when Nixon started pushing Martin around for raising rates. He played tennis every day. Always had his racket with him. Had a mean serve. Boink. Out. With some more evidence, credible.
If Trump pulls this off, the bond market freaks, at a historic scale. Look also at the severe existential distress of anyone on fixed income. Who knows what weird gyrations the global economy goes into, much less the USA’s position in it. This is the Trojan horse of a hidden default on US debt, the backbone of the planet’s finance. I realize Trump has some concern about US debt. but why, then, back the Big Beautiful Bill? Why not face things in an institutionally legitimate way? Even trying to fire the Fed chief over headquarters building squabbles? Really? Is the US public that flaccid and stupid?
“Is the US public that flaccid and stupid?”
Having just spent the weekend on a family reunion at a busy tourist area, from my observations of a few hundred people, I can say with some certainty that they are even dumber than that.
I think I’ll start a cult.
“The likeliest path for inflation in the near-term is down, thanks to a slack labor market holding down wage pressures.”
Should have led with this, so I could have stopped reading.
AI is data driven. The FED is data driven. Surprisingly, noone thought of combining the two, although JP’s statement seem to be generated by AI.
/s
Trump is not going to fire Powell, that’s all theater.
Whoever gets the Fed job next year will be there long after Trump is gone.
Powell is right not to cut b/c inflation remains too high. He is right not to raise because labor market is cooling off and inflation isn’t out of control.
Turkey is an industrial hub. Turkey has the second largest army in NATO. After the
fall of Assad Erdogan rules Syria. Golani is a terrorist with a tie. Mamdani is a Muslim Bros + LBGT. In 2008 bazooka saved the banks. Thereafter Obama’s cancer stem cells spread. Debt metastasized to: $36.5T. Pharma kills cancer cells and healthy cells. It will take time to cure debt. A dynamic Fed will cut first, for a lever, before hiking the front end above the long duration. If Erdogan will lose the next election the new CB will try stop inflation. Same for Iran.
Totally agree. How can you trust TACO or any of the candidates mentioned. Would likely to be a disaster.