【Boss Economics World】Trump's Plan to Seize the Fed, The Crisis That Will End the US Dollar

what is up my fellow financial gladiators and economic Jedi's welcome back to Boss Economics World the only channel that peels back the layers of the economic onion until you're crying either from the truth or from your portfolios performance today we're dialing the time machine forward to the glorious not at all dystopian future of September 17 2025 and boy oh boy the swamp in Washington DC hasn't been drained it's been turned into a hot tub and everyone's jumping in the headline hitting the terminals is this The Senate Banking Committee in a move of shocking well completely unshocking partisan unity just jammed through the nomination of one Stephen Muran to be a Federal Reserve governor the vote was 13 to 11 straight down the party line a perfect reflection of our politically induced sociable schizophrenia now who is Stephen Muran is he some obscure Nobel laureate in waiting a monetary policy ninja pulled from the ivory towers of academia not quite he's Donald Trump's top economic advisor the chair of the White House Council of Economic Advisers and he's being rushed onto the Fed board faster than a high frequency trading algorithm sniffing out a market order why the hurry because the Federal Open Market Committee the high council that decides the fate of your mortgage rates is meeting this week and they're expected to cut interest rates the timing is so subtle it's like performing brain surgery with a jackhammer let's dissect this gem of a situation Miran isn't getting a full 14 year term the kind of tenure designed to outlast the political whims of any single president oh no that would be too independent he's getting a short term post and to take this job he's going on an unpaid leave of absence from his White House gig let that sink in an unpaid leave this isn't like a professor taking a sabbatical to write a book this is the economic equivalent of your boss telling you go work for our biggest competitor for a few months don't take a salary from us but your old desk with that nice corner view we'll keep it warm for you just you know make sure the competitor doesn't do too well the Democrats LED by the ever blunt Elizabeth Warren are calling this arrangement ridiculous and servitude and for once the political hyperbole machine might actually be underselling the problem Warren nailed it he knows that every vote he takes will determine whether he gets to return to his prestigious powerful and presumably very well paid White House job this isn't a nomination it's a leash Miran won't be a Federal Reserve governor he'll be the president's governor at the Federal Reserve it's a Trojan horse being wheeled right into the heart of the Echles building filled not with Greek soldiers but with political I O U S and this is all happening against the backdrop of Trump trying to fire an actual sitting governor Lisa Cook a move so brazen it's currently tied up in court so that's the point a political operative is about to get a vote on monetary policy a day before a critical meeting but as we do here at Boss Economics World we don't just look at the point we zoom out to see the whole terrifying surface for anyone who's ever cracked open a Macro Economics 101 textbook the first concept you learn after supply and demand is the sanctity of central bank independence it's the bedrock of stable modern economies the idea is simple the people who control the money printer should be insulated from the people who need to get reelected why because politicians have the attention span of a goldfish on espresso they think in two year and four year cycles they want the economy booming right before an election consequences be damned they'll always scream for lower interest rates more stimulus more free money the economic equivalent of giving a toddler candy for breakfast lunch and dinner it feels great for a little while until the inevitable crash the cavities and the hyperactive screaming fits an independent central bank is supposed to be the adult in the room the designated driver their job is to take away the punch bowl just as the party is getting good their job is to make unpopular decisions like raising interest rates to fight inflation for the long term health of the economy even if it causes short term pain and cost some politician an election this credibility is everything when the market believes the central bank will do whatever it takes to control inflation inflation expectations stay anchored businesses and consumers can plan for the future it's the trust that the US dollar won't become the Argentine peso overnight what we're witnessing in 2025 is the systematic dismantling of this principle it's not a bug it's a feature of this political strategy we have a mountain of recent horrifying evidence of what happens when this wall is breached exhibit a Turkey look at what President Erdogan has done for the past decade he has subscribed to the unorthodox and frankly insane economic theory that high interest rates cause inflation he fired a series of central bank governors who dared to disagree and raise rates the result the Turkish lira has lost over 90 percent of its value against the dollar in the last 10 years inflation in Turkey didn't just rise it went supernova hitting peaks above 80 percent in 2022 this is what happens when the central bank becomes the president's personal ATM exhibit B The United States 1970s we don't even need to look abroad we can just look in our own rearview mirror in the early 70s President Nixon put immense pressure on then Fed Chair Arthur Burns to keep monetary policy loose to ensure his 1972 reelection Burns caved the result combined with the oil shocks was the Great Inflation a decade of economic misery stagflation and a loss of faith in American institutions that took the brutal recession inducing rate hikes of Paul Volker in the early 80s to finally break the Miran nomination is a speed run of the Nixon Burns playbook but with even less subtlety it's an explicit declaration that the Fed is no longer an independent institution of technocrats but an extension of the West Wings political agenda so the leash is on but what is the dog being trained to do that my friends brings us to the grand old tradition of the political business cycle this isn't some conspiracy theory it's a well documented phenomenon the theory championed by economists like William Nordhaus posits that incumbent politicians will manipulate economic policy to juice growth employment and feel good vibes in the 18 months leading up to an election cut rates increase government spending hand out checks whatever it takes to make the voters feel prosperous on their way to the ballot box the subsequent inflation debt and necessary economic tightening that's a problem for after the election the scenario in our 2025 story is a textbook example the FOMC is already expected to cut rates because of weakening job growth now this might be a legitimate reason but with a presidential loyalist being parachuted in at the last second the entire motivation is tainted is the job market truly weak or is it just not booming enough for an election cycle that will be kicking into high gear soon for 2028 a 0.25% rate cut might now become a 0.5% shock and awe cut a single cut might become a promise of a series of cuts the official justification will be the data but the political calculus will be undeniable look at the data from the past studies from the National Bureau of Economic Research NBR have shown a clear correlation between pre election economic performance and incumbent victory according to analysis by political scientist Larry Bartels a dollar of income growth in an election year has historically had about four times as much impact on the vote as a dollar of growth earlier in a president's term the market knows this the professionals watching this video know this the game is to create an economic sugar high the Maran appointment is just ensuring there's a dealer on the inside ready to supply the cheap stuff right on schedule okay so the politicians get their pre election boom who cares we should all care because the market isn't stupid and when the market loses faith it exacts a terrible price in the short term stocks might rally on the news of a rate cut the market is a sugar addict and the Fed just promised a lifetime supply of cheap candy but the bond market the so called smart money operates on a longer time scale the bond vigilantes are watching when they see a central bank being co opted by politicians they do two things one dot they assume future inflation will be higher because no one will be there to apply the brakes to dot they demand a higher risk premium for holding that country's debt because the institution backing it is no longer credible this means that even if the Fed cuts the short term federal funds rate the interest rates that actually matter for the real economy like the 10 year and 30 year Treasury yields that influence mortgage and corporate borrowing costs could actually go up we have a perfect spectacular recent case study of this the United Kingdom's mini budget crisis in September 2022 the new government of Liz Trust driven by political ideology rather than economic orthodoxy announced a massive unfunded tax cut they essentially told the market we're flooring the fiscal accelerator and we don't care about the consequences the markets reaction was swift and brutal the value of the British pound plummeted to a record low against the dollar the yields on UK government bonds gilts skyrocketed so fast that it nearly bankrupted British pension funds forcing the bank of England to launch an emergency bond buying program to prevent a full blown financial meltdown the government's borrowing costs soared its credibility was incinerated and List Trust became the shortest serving prime minister in UK history that is what happens when you spook the bond market that is the price of lost credibility by turning the Fed into a political plaything the White House in our 2025 scenario is running the exact same playbook they're chasing a short term political win at the risk of a long term systemic financial crisis the very rate cuts they are trying to engineer could be completely negated by a revolt from the bond vigilantes leading to higher borrowing costs for everyone this is the big one the endgame all of this the political appointments the loss of independence the market volatility threatens the single most valuable economic asset The United States possesses the US dollar's status as the world's primary reserve currency why does the world use dollars it's not just because our economy is big it's because for 80 years the United States has been seen as the bedrock of global financial stability we had deep liquid capital markets the rule of law and crucially a predictable and independent central bank nations corporations and individuals hold their savings in dollars because they trust that the US will not arbitrarily devalue its currency for short term political gain that trust is the source of America's exorbitant privilege it allows us to borrow cheaply and run massive trade deficits it gives us immense geopolitical power through sanctions it is the foundation of our global economic dominance and we are putting a sledgehammer to it every time a story like the Miran nomination hits the wires central bankers in Beijing Riyadh and Brazilia take note the slow moving but undeniable trend of de dollarization gets another shot of adrenaline for years it's been a fringe topic but it's gaining mainstream traction the Brits Brazil Russia India China South Africa and now an expanded cohort are actively exploring ways to trade in their own currencies central banks around the world have been steadily increasing their gold reserves a classic hedge against fiat currency debasement let's look at the numbers at the turn of the century the US dollar accounted for over 71 percent of global foreign exchange reserves according to IMF data as of early 2024 that number had fallen to around 58 percent the trend is slow but it is clear and moving in one direction incidents like the weaponization of the dollar against Russia in 2022 and now the overt politicization of the Fed in this 2025 scenario are powerful accelerants we are giving our geopolitical and economic rivals the perfect marketing campaign don't trust your savings to the dollar they can say their central bank is now just another branch of their political circus its value is subject to the winds of their election cycle this isn't about one man getting a temporary job this is about the potential unraveling of the post World War II global financial order an order built on the bedrock of trust in US institutions we are trading a century of credibility for a few positive headlines before an election it is the most catastrophically stupid economic bargain in modern history so as you watch the confirmation hearings and see the markets flicker remember what's really at stake it's not just about whether we get a quarter point rate cut this week it's about whether the world's most important financial institution can survive being turned into a political puppet because if the feds independence dies the credibility of the US dollar will be right behind it in the funeral procession keep your heads on a swivel watch the data not just the drama and understand the difference between a short term market pop and long term systemic rot stay cynical stay solvent this is boss economics world peace out