🚨 Why are the U.S. President and the Federal Reserve Chairman always at odds over interest rate cuts?

Since taking office, Trump has basically wanted to push Powell down and rub his face in it, with only one demand—

The Federal Reserve should implement large-scale interest rate cuts, reducing the current rate of about 4.25% down to 1%.

However, old man Powell is not an ordinary person; under pressure, he remains calm and collected, neither resigning nor cutting rates.

In fact, looking back at past presidents and Federal Reserve chairmen, there have been significant disagreements on the topic of "interest rate cuts." Let's first review a dark chapter in the history of the Federal Reserve—

In the early 1970s, then-President Nixon was very anxious as the U.S. economy was mired in stagflation, with an unemployment rate of 6.1% and inflation exceeding 5.8%.

Under normal circumstances, achieving re-election with such results would be nearly impossible. The complex solutions had too many variables, and time was running out, so a drastic measure was needed—forcing the Federal Reserve to quickly cut interest rates to create a short-term illusion of prosperity to aid the election.

During that time, Nixon did the same thing as Trump; the two met up to 17 times a quarter, each time with intense and blatant pressure on Federal Reserve Chairman Burns, such as:

Saying, "If we lose the election, this will be the last time Washington is governed by conservatives";

Publicly refuting Burns' technical analysis, claiming he was talking nonsense;

Warning Burns that he had no authority to nominate Federal Reserve board members;

Ultimately, Burns chose to compromise, and in 1971, the Federal Reserve slashed interest rates from 5% to 3.5%, with M1 money supply growth soaring to a post-World War II peak of 8.4%. Nixon got his wish and successfully secured re-election, becoming the first sitting U.S. president to visit China in 1972.

But Burns was branded with a mark of shame—

After a brief period of prosperity, compounded by the oil crisis, inflation in the U.S. exploded, the dollar index plummeted, gold prices skyrocketed, and the U.S. economy collapsed. For this, Burns bore a lifetime of blame, and his name became synonymous with "the central bank losing its independence."

Later generations evaluated Burns: he survived, but his reputation was ruined; he kept his position but lost to history.

So you can see that after the passage of the "Great American Rescue Plan," the Trump administration wanted to expand debt by several trillion dollars, and with midterm elections coming up next year, Trump was in such a hurry to cut rates.

But Powell is as stubborn as a mule, determined not to become the second Burns.

"I'll resign; you can do whatever you want," but as long as I'm still in office, I at least want to ensure I won't be remembered with disgrace!

With 10 months left in his term, Trump is now changing strategies, targeting Powell personally, feeling that facing a rogue like Trump, old man Powell's compromise is only a matter of time!

Image From: Jinshi

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