Trump's playing with fire at the Fed

This particular crusade against institutional norms could be especially ... costly

If it weren’t so dangerous it might be funny: the Trump Administration, in its ongoing mission to upend every guardrail of governance, is reportedly floating the idea of installing the Treasury Secretary as Federal Reserve Chair — at the same time.

According to Bloomberg, Trump’s advisers have discussed the possibility of Scott Bessent, hedge fund manager turned Treasury Secretary and one of Trump’s relatively few non-absurd Cabinet appointments, serving concurrently as head of the US central bank. It’s an idea not seriously entertained since the Great Depression. In fact, Congress separated the two roles in 1935 precisely to prevent the White House from hijacking monetary policy for political ends.

The White House has since denied the concurrency idea, but only a fool would assume honesty from that quarter. And in any case, even if Bessent were to leave his current role to take up the new one, putting someone who has just served as a top political appointee in charge of the Fed raises questions about loyalty, objectivity, and pressure from the White House — which are bad for the economy,

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Trump’s war on the Federal Reserve’s independence is not new. Over the years, he has berated Fed Chair Jerome Powell in public and private, demanded interest rate cuts regardless of inflation, and even mused in public about firing him. The latter, especially, is banana republic territory (of the non-capitalized variant).

Weeks ago he summoned Powell to the White House to urge him to lower rates, despite the Fed’s neutral stance. The message was to cooperate or risk replacement.

Powell’s term as chair ending in 2026 (though he can legally remain on the Fed board until 2028), but Trump wants someone in place who will cut rates quickly and without resistance. Cue the Bessent idea, which would collapse the firewall between the executive branch and the institution meant to serve as a check on it. It would turn the Federal Reserve into a political tool that could be manipulated to serve short-term electoral goals rather than long-term economic stability.

The Fed and the Treasury have fundamentally different roles. The Treasury is part of the administration, responsible for implementing fiscal policy. The Federal Reserve is supposed to be independent, with the authority to keep inflation in check and promote full employment. Blurring the lines between the two (as Trump does with public pressure) or eliminating them (which would be the meaning of a concurrent Bessent role) is not just unconventional but dangerous. The person responsible for managing the nation’s money supply should not be the same person who’s borrowing and spending on behalf of the government.

That would open up the door to debt monetization (when a country's central bank finances government spending by creating new money, rather than the government borrowing from the public through bond markets), inflation (which Trump voters hate but which is what can happen when money is too cheap via low rates), and erosion of financial credibility (as the markets perceive that an economically ignorant political shyster is messing with the dollar).

Investors take central bank independence seriously. If they begin to suspect that interest rate decisions are being made for political reasons, confidence in the economy erodes. That means higher borrowing costs, a weaker dollar, and reduced foreign investment. In a worst-case scenario, it could ignite the kind of inflation spiral that is extremely difficult to stop once it begins.

Trump might want a cheap dollar to stimulate exports, which is one of his obsessions. But someone really oughta explain to him the downside. This is how countries lose control of their economies.

Want some examples? AQL is here to serve:

• Zimbabwe (2000s–2009): Under President Robert Mugabe, Zimbabwe’s government began printing enormous amounts of money to fund unsustainable state spending, including land redistribution and payouts to war veterans. The central bank, stripped of independence, became a direct tool of the regime. As agricultural output collapsed and foreign investors fled, the government continued to flood the economy with cash. The result was one of the worst hyperinflation crises in history. At its peak in 2008, inflation hit an incomprehensible 89.7 sextillion percent — prices doubled roughly every 24 hours. Citizens abandoned the Zimbabwean dollar altogether, turning to US dollars, South African rand, and even barter. The country ultimately had to scrap its own currency.

• Weimar Germany (1921–1923): In the aftermath of World War I, Germany faced massive reparations payments under the Treaty of Versailles. The Weimar government, unwilling to raise taxes and politically unstable, chose to print money to finance both war debt and domestic obligations. As confidence in the currency eroded, inflation fed on itself. By 1923, a loaf of bread cost hundreds of billions of marks. The German middle class saw their life savings vanish overnight. The economic chaos and humiliation of this period laid the foundation for deep political unrest and the eventual rise of Adolf Hitler. It remains a defining case of how fiscal irresponsibility can destroy both economic and democratic institutions.

• Argentina (1970s–2000s): Argentina’s modern history has been marked by repeated episodes of inflation and default, largely due to the government’s reliance on money printing to fund deficits. Populist administrations pressured the central bank to prioritize short-term political goals over long-term stability. Inflation soared to over 20,000 percent in the late 1980s. Attempts to stabilize the currency through dollar pegs failed because the underlying fiscal behavior didn’t change. The Argentine public lost faith in both the banking system and the peso, prompting capital flight, foreign reserve depletion, and recurring economic crises. Even today, inflation remains a persistent problem in part because credibility has never fully been restored.

• Venezuela (2010s–present): Under the inept populist Nicolas Maduro, Venezuela pursued a disastrous combination of populist spending, strict price controls, and mass money printing. With oil revenues collapsing and the central bank fully under political control, the government printed ever more bolivars to cover deficits. This triggered hyperinflation that surpassed 1,000,000 percent in 2018. Basic goods disappeared from shelves, and hunger and medical shortages became widespread. Over 7 million people fled the country. Even after partial stabilization, the economy is a shadow of what it was, and the bolivar remains essentially unusable.

• Hungary (1945–1946): After World War II, Hungary experienced the worst recorded hyperinflation in human history. The government, facing wartime destruction and economic collapse, printed vast quantities of its currency, the pengő, to fund rebuilding efforts. By mid-1946, prices were doubling every 15 hours, and monthly inflation reached 41.9 quadrillion percent. The currency was so worthless that workers were paid multiple times a day, and prices were recalculated by the hour. The only solution was to scrap the currency entirely and introduce the forint, along with strict monetary controls. It took years to restore public trust and economic functionality.

In each of these cases, political authorities overrode central bank authority for political reasons. These decisions were often framed as necessary or patriotic but quickly led to spiraling inflation, collapsing currencies, and deep economic harm. Once the bond of trust between a nation’s monetary institutions and its public is broken, the damage is profound and long-lasting. For this to happen to the world’s major reserve currency would be a global catastrophe.

Note to Trump and the world’s other scheming authoritarians: in a democracy that runs a capitalist economy, the government is not in charge of everything just because it was elected.

And if you're wondering whether Trump understands any of this, just look at what he said this week. He bragged that his tariffs have brought in “hundreds of billions” in revenue — continuing to appear blissfully unaware that tariffs are taxes paid by American companies and consumers. It is basic economic illiteracy that should trouble anyone who cares about the US economy.

If Trump succeeds in stacking the Fed with loyalists — or worse, merging it with his Cabinet — it won’t just undermine monetary policy. It will signal the breakdown of a core American institution.

Past presidents have sometimes grumbled about the Fed, but Trump’s reckless dimwittery is of a wholly different level. He is not only making clear that he doesn't respect the Fed’s independence but showing that he doesn't understand the basics of how tariffs, interest rates, or inflation work.

The problem is that he seems to not listen, holds on to idees fixe, is surrounded by toadies afraid to correct him, doesn’t read, and thinks he’s brilliant. The saving grace is his short attention span. Perhaps someone can wave something shiny at him, if possible on Fox News.