Less than a year ago, in the midst of the 2024 presidential race, Senator Elizabeth Warren, John Hickenlooper, and Sheldon Whitehouse wrote Jerome Powell at the Federal Reserve to demand he lower interest rates by 75 basis points.
Powell and the Fed were endangering the economy and unnecessarily slowing economic growth, they argued.
Sound familiar? President Trump is doing something similar by pressuring the Fed to lower interest rates.
Elizabeth Warren, Sept 16, 2024: “Fed must cut by 75bps on Sept 18” (the Fed cut by 50bps two days later)
Elizabeth Warren, Sept 4, 2025 to Stephen Miran: “What you are doing (by pushing for lower rates) will take an axe to Fed independence” pic.twitter.com/cCDyLtnxWF
— zerohedge (@zerohedge) September 4, 2025
In the first case, Warren was using her influence to save the American economy. In the second, she argues that President Trump is endangering the economy by undermining the Fed’s independence.
The difference is who is in the White House, not whether politicians try to influence the Federal Reserve.
I’m not going to gaslight you: all politicians jawbone the Fed, for obvious reasons. The Federal Reserve has extraordinary power over the US economy by influencing the money supply. The reason for this is that the money supply is directly correlated, for obvious reasons, with the rate of inflation (and economic growth), for good or ill.
The theory is that without technocratic control by the Fed, the economy will be subject to greater volatility and vulnerable to inflation, deflation, market bubbles, and chaos. The “independence” of the Fed is supposed to be a bulwark against politicians manipulating the economy for political gain. The goal is to avoid inflation and bubbles.
It’s a nice theory, if rather questionable for a variety of reasons. It assumes that technocrats can anticipate economic activity through some magical interpretation of the voodoo data the government collects, and that the Federal Reserve governing board is wise, prescient, and apolitical.
Yeah, right. If you believe that, I have a mask and a COVID vaccine to sell you. Apolitical technocrats are a myth, and The Science™–political, economic, or even, it seems, medical–is ultimately driven by blind prejudice.
But it seems to be a nice idea, right?
Experience shows that the Federal Reserve is extremely powerful, but not especially prescient. Nor is it apolitical. It is, after all, staffed by human beings who believe that the government should run the economy, at least at a macro level. And, of course, the Chairman of the Federal Reserve is appointed through a political process.
I don’t pretend to know what the appropriate cost or quantity of money should be. Nor do I believe that the market would make infallible choices. Recessions have occurred both before and after the creation of the Fed, although it is shocking to remember that the value of a dollar has fallen 96% since the creation of the Federal Reserve, indicating that it kinda sucks at preserving its value.
But I, and the rest of us, can be certain that Democrats complaining about Trump’s jawboning the Fed are grandstanding. Especially given that, in this case at least, Trump is likely more in the right than not. Powell has been warning about a burst of inflation that has, at least, yet to arrive.
With that said, I don’t assume that Trump’s estimation of the right interest rate is correct either, because I am skeptical that human beings have a good grasp of economic trends and that the statistics upon which the models are based are accurate.
Everybody is being more than a bit hypocritical.
I am sympathetic to the “end the fed” argument, but admittedly a little squeamish about the instability the transition would create. Better the Devil you know and all that. But I suspect that once the transition were complete, the economy would be a bit more volatile as well as a lot more growth-oriented.
Janet Yellen on inflation…
Feb: nothing to worry about, spend more.
Mar: small & manageable.
May: only temporary.
Jun: could reach 3% but just transitory.
Oct: higher, but just for next several months.
Oct: trillions more in spending will lower prices.
Dec: it’s not transitory. pic.twitter.com/cOU9ysUcPh— Charlie Bilello (@charliebilello) December 10, 2021
The Fed is not particularly effective in its role. We have had a lot of inflation under it, as well as economic bubbles. Its second mandate–ensuring maximum employment–has also shown mixed results.
So spare me the defense of the Fed’s independence. The idea is based on a falsehood — that the Fed is doing its job well.
I don’t think the market would be perfect, nor do I think politicians are competent to do it either. But geez, man, pretending that it is an apolitical, competent technocratic institution is a joke.
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