If I understand the situation correctly, yesterday President Trump flashed a letter in front of Congressional visitors that he said was his termination notice to Fed Chair Powell.
What I find most interesting about this is the reaction of financial markets as they learned of this. According to Bloomberg, within a half-hour:
–the S&P had fallen by 1%,
–the dollar dropped by 1.2%, and
–the 30-year Treasury yield rose by 0.1%.
So investors factored this news into prices by selling stocks and the dollar. Bonds, however, remained virtually unchanged.
This isn’t what I would have expected, since I think that while the near-term result of an unnecessary rate cut might be a boost to local economic activity, the ultimate result would be to raise the rate of inflation. Of all the asset classes, this would have, I think, the most negative effect on bonds.
One possibility is that it’s easier/cheaper for traders to express their worry through stock and currency derivatives than through bond market instruments. More likely, though, is the belief is that Trump’s plan (assuming there is one) is to debase the currency, thereby repaying government borrowings with in effect 75 cent dollars. So hedging that risk is the appropriate response.
In any event, this is what Wall Street is doing.
Two other thoughts:
Although Trump appears to me to be obsessed with what he regards as the shortcomings of Powell, who he now says never should have been appointed, he has apparently no memory of the fact that he, Trump, appointed Powell in the first place
Another oddity: Trump also told a story about how his MIT professor uncle John told him about teaching the unibomber, Ted Kaczynski. Apparently, though, Kaczynski didn’t go to MIT and Prof T. retired while Kaczynski was still in high school
Looks to me like a replay of the Biden decline and a replay of the partisan effort to conceal this increasing incapacity.