Trump’s threat of firing Fed Chair Powell is just noise | Forexlive

Yesterday, we got a news saying that a senior White House official revealed that Trump was planning to fire Fed Chair Powell. The reaction in the markets was the one I laid out here, that is lower dollar, lower bonds, lower stocks and higher gold.

The moves were eventually erased as Trump denied the news and said that it was ‘highly unlikely’. In reality, it’s almost impossible because such an event would have enormous negative repercussions on the economy for years. This Trump firing Powell thing is just noise.

I touched on the consequences of such a move here back in April. Inflation expectations would de-anchor immediately, even if actual
inflation stayed the same. The government would certainly pursue
expansionary policies and that would increase inflation.

The US Dollar and US Treasuries would be avoided like the plague. Gold
would literally rise “to the moon”. The stock market would experience
the worst bear market in history. And the great recession and depression
would be seen as nice periods in comparison.

The US Congress would never allow this to happen because there’s even no
way back. There would be always the spectre of this happening again and
the damage would be everlasting.

In another article here, I also explained what would change if Trump nominated a lackey as Fed Chair. Long story short, not much because monetary policy is decided by a committee on a majority vote basis.