Cogito Ergo Non Serviam
DoJ Investigation Threatens Fed Independence
The Department of Justice (an Orwellian name these days) has decided to start a criminal investigation of Federal Reserve Chairman Jerome Powell over the renovations to the headquarters of the Fed. This is obviously nonsense. Mr. Trump has been after Mr. Powell for a couple of years now, and this is just the latest in a series of actions designed to make the latter lower interest rates for the benefit of the former. The truth is that if Mr. Trump succeeds in putting his own minion in the chair, the halcyon days of the dollar are over. The independence of the Fed is that important.
The idea that a public official cannot be held accountable is abhorrent. If Mr. Powell were pilfering money from the Treasury under the guise of renovating the building, this journal would be in the front row demanding his resignation and prosecution. That is not who Jerome Powell is. Foisting criminal liability onto him for simple cost over-runs is silly. Cost over-runs are part of business because people are imperfect at forecasting the future. Criminal prosecution of such would stop American business in its tracks. Indeed, cost over-runs were part of what brought the Trump casinos in Atlantic City to bankruptcy.
Instead, the White House and DoJ are playing politics with the law. As the late unlamented Chekist Lavrenty Beria said, Show me the man and I'll show you the crime." In other words, the government needs a pretext to do what it wants, which is force him out of office. And this is particularly stupid because his term ends in a few months anyway. Mr. Trump and his frail ego, though, demand this action despite that.
What Mr. Trump wants is for Mr. Powell and the other Fed governors to lower interest rates. This will benefit him personally as the president carries a lot of debt as part of his fortune-seeking grift. But whether that is best for the economy is another matter. The Fed has been slowly lowering rates to help support job growth, but slashing them as Mr. Trump wants would spark inflation. Mr. Trump does not care.
If the thought experiment of politically determined interest rates is too ethereal to follow, a concrete example will help. In 2021, President Erdogan of Turkiye fired the head of that country's central bank Naci Agbal for not toeing the presidential line. That was in March 2021. Justin Wolfers, who is a University of Michigan economics professor noted that Mr. Erdogan did the same thing Mr. Trump wants to do, lower interest rates despite inflation. Professor Wolfer said, “Well, he [President Erdogan] tried that policy. and what happened was inflation in Turkey went from very normal rates up to over 80%. and it’s now back down to something around the mid 30s. It’s a terrible, terrible outcome.” As of this morning, the rate was 38%.
The Bank of England did not get operation independence from Her Majesty's Government until 1997. Prior to that, the Chancellor of the Exchequer (a member of Parliament and the cabinet as head of the treasury) set them. This lack of independence led to a great many miscues under both Labour and the Conservatives over the years. One of the effects of this was the UK struggling to keep the pound in the European Monetary System, which was costly and a failure.
If the Fed should be seen as less independent that it is now, there will be less investment in the US from abroad. There will also be less use of the dollar in international trade as nations settle in euros, yen, yuan or some other currency; that removes US political risk from the trade. That will mean greater inflation in the US, which cannot be tackled by raising interest rates because the president does not want to do so.
The decline under the Trump administration continues to accelerate.
© Copyright 2026 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Ubuntu Linux.
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