BlockBeats News, November 19th, the U.S. monetary system is facing a new round of political turmoil. Trump’s confrontation with the Federal Reserve has escalated from a war of words to a substantive power struggle. He is attempting to remove Governor Powell and install economic advisor Milan to the FOMC, aiming to create a “supermajority” supportive of significant interest rate cuts. Several economists have used models to predict that if monetary policy falls under political control, the U.S. will initially experience a brief prosperity of growth and low unemployment. However, it will then face the structural consequences of inflation resurging, nominal interest rates rising, and economic growth slowing down, reminiscent of the stagflation risks of the 1970s. The analysis also points out that politically-driven rate decisions are often closely tied to the electoral cycle. While short-term stimuli may create surface-level prosperity, the cost is uncontrollable inflation and subsequent deep adjustments. If Trump successfully reshapes the Board before 2026, the Fed’s independence may be eroded, and the reserve status of the U.S. dollar and long-term borrowing costs could be repriced by the market.
Bitunix Analyst View: From historical examples to current tactics, Trump’s strategy clearly aims at direct intervention in the interest rate path, the consequences of which will not be short-term fluctuations but rather a systemic-level credit markdown. If the Fed is forced to make a drastic turn to dovishness before inflation is under control, the U.S. economy will enter a typical cycle of “first prosperity, then stagflation.” For global capital, the real risk is not Trump himself but the U.S. monetary policy losing its final line of defense.
