“You’re fired”. The two words that helped propel a publicity-hunting property developer to national celebrity and eventually the White House. Yelling at quivering job applicants on a national television show is one thing, taking on the chairman of the Federal Reserve Board, the world’s most important central bank, at a time when the world is wading in the wreckage created by his global trade war is quite another.
But not for Trump. He nominated Jerome Powell to head the central bank’s board of governors on November 2, 2017, and has been ruing the day ever since. Now he wants to be rid of the meddlesome banker who stands between him and the lower dollar and lower interest rates that he believes will Make America Great Again. He has announced, “Termination cannot come fast enough…. If I want him out, he’ll be out of there real fast.” Many lawyers are not so sure.
This is part of the President’s broader plan to prove he has the power to dismiss any federal employee. While Elon Musk turns his chain saw on tens of thousands of government workers, Trump is aiming his wrecking ball at the directors of the agencies that employs them, in part to appoint loyalists in their place, in part to prove he can tell them “You’re fired”. Treasury secretary Scott Bessent warned Trump that “monetary policy is a jewel box that has to be preserved”, that Powell’s head is one too many to add to his Mar-a-Lago trophy room, and that the bond markets would collapse if Trump becomes the de facto designer of monetary policy. Powell is calmly going about his business of seeking a balance between the need to fight inflation and the need to avoid a recession.
Meanwhile, the trade war plunges on, with Trump receiving delegations of supplicants bearing gifts of fairer trade with America. The most intense battle is being fought between the world’s two largest economies. One country has prospered by breaking all the trading rules governing world commerce: subsidies, theft of IP, currency manipulation discrimination against American companies. The other is led by a man who has spent 40 years railing against such unfair trading. Both Xi Jinping and Donald Trump have collected grievances over the years, Xi for centuries of “humiliation” of his country by the West, Trump for China’s “theft” of American jobs and factories.
They are circling each other like boxers in an early round. Each demands the “respect’ of the other. Each has a plan, but as Mike Tyson memorably put it, “Everyone has a plan; until they get punched in the face.” So far, neither has launched such a punch because both fear the effect of complete “decoupling” on their economies. Uncertainty has businessmen delaying planned investments, investors in a sell, sell mode, ordinary folks wondering what has become of their once-adequate pension plans.
JPMorgan Chase CEO Jamie Dimon sees a recession as “the likely outcome” of rampant uncertainty: his economists put the odds at 60 per cent, about where Larry Summers has it, and not far from the 62 per cent probability CEOs assign a recession or slowdown in the next six months. Economists from Morgan Stanley and Goldman Sachs think 40 per cent and 45 per cent, respectively, are better numbers.
I am inclined to go along with the American Enterprise Institute’s Matthew Continetti, writing in The FREEPRESS, “The guessing game is a Socratic exercise . It’s a test in intellectual humility. The winner is the first person to shrug his shoulders and admit ignorance.” With a bow to Ayn Rand, I shrugged.
That is not to say we know nothing. We know that much of the world sees America as an untrustworthy, hostile nation, with border-entry rules that make detention a risk, and one to which visiting officials must carry the sort of anti-spying cell phones used when visiting China and Russia. We know, too, that our allies, unable to coordinate a response to Putin’s revanchist policy, continue to concede, reluctantly, that America is the “essential nation.”
We know that consumers report themselves gloomier than in decades while at the same time Amex reports that first quarter spending jumped 6 per cent as its credit-card customers are “eating out and enjoying life.” Go figure.
We know that the President hopes to move some of the burden of financing the government from taxes on incomes to tariffs on consumption, a long-held goal of conservatives. And that he believes millions of brawny workers are eager to tend fiery blast furnaces, and miners can’t wait to go back underground. The source of his polling data on those preferences remains obscure.
What we don’t know is how voters in the midterms, a mere 18 months hence, will balance the increased difficulty of filling their supermarket carts with enough cash left over for their kids’ school supplies, against the comfort from seeing the border closed, the bad guys deported (constitutional guidelines are for wimps), woke expunged from their kids’ schools.
And how they feel about a surprise with every morning cup of coffee.