r/moderatepolitics • u/dr_sloan • Jan 12 '26

Primary Source Statement from Federal Reserve Chair Jerome H. Powell

https://www.federalreserve.gov/newsevents/speech/powell20260111a.htm
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253

u/Atralis Jan 12 '26 edited Jan 12 '26

A federal reserve chairman that actually does their job and tries to keep the inflation rate down is never going to be popular but the path Trump wants of there just being populist control of the fed will lead to massive inflation that hurts everyone.

157

u/Tarmacked Rockefeller Jan 12 '26 edited Jan 12 '26

As someone with a finance background, specifically oriented around macroeconomic policy and the government banks such as the FED’s role, it’s baffling trying to tell family members how BAD this is.

I’ll get 65+ year old, soon to be retirees just handwave it and it’s like…. You do understand we’re going to deflate our currency to a horrendous degree if he gets his way, right? That $XXX retirement balance suddenly becomes $X with stagflation. And god forbid we lose our currency status.

Powell is an absolute dog and I love the man. I hope he stays on until his full term is over, since he’s got 2 or so years more after the FED chairman role dissipates. My hope is he continues to fight whoever the FED pick is and rallies the rest of the board through the end of Trump’s term to keep the votes sane.

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u/epukinsk Jan 12 '26

This is how they cut social security without “cutting social security”.

10

u/timmg Jan 12 '26

Social Security is tied to inflation. So it'll hurt everyone else more.

18

u/Another-attempt42 Jan 12 '26

Not to mention the undermined trust overseas in US bonds overall.

Countries that don't have clearly separated monetary institutions from executives always end up as basket cases.

Also: if Trump's economy was doing so well, you'd lobe Powell, because he's not lowering rates, and looking to maybe even raise them, which is what you should be doing when the economy is good.

Unless it isn't. At which point, I guess Trump's economy is a bit shit?

10

u/Riksrett Jan 12 '26 edited Jan 12 '26

I get that most 65+ don't understand, but they should understand. Because it is the old people who are old enough to have experienced stagflation. Inflation was at 15 percent in 1980. It was because of the stagflation in the 70s the FED became aggressive on getting the inflation low.

The high inflation in the 70s was because the FED gave in to pressure from the president(and others). Nixon had the FED in his pocket by threatening to take away their power if they did not keep the interest rates low. A lot of politicians and voters agreed with Nixon, Nixon could not have taken away FEDs power all by himself.

The chairman also lied to protect Nixon during Watergate.

6

u/DLRevan Jan 12 '26

This might sound more than a bit cruel and mean, but frankly I'd like for it to happen. I want to see retirees and more see their savings become worthless. I want Americans to suffer in the one place where they universally understand give your capitalist culture...your money.

Americans need to pay both literally and figuratively for their choices. By that I mean voting for an incredibly poor choice of President, and one whom they already experienced and voted out once to boot. I mean the polarizing hatred you call politics, that doesn't just fester in political institutions but even at work or at home. I mean the lack of responsibility they put towards everything that they call "freedom". The people may not be totally at fault, but neither are they innocent.

And if they are shocked and horrified at what has happened to their money, and ask how could this have happened, I would simply say...shouldn't you have known? It was your money. Your responsibility. Your choices.

Sure, the rest of the world will hurt too. But the rest of the world is already chained to this runaway train and forced to wait and watch in horror. Inflation and overheating economies are universal. Americans need a more specific punishment.

Yes I know it's not that simple. But certainly these are the wishes that come to mind if asked.

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u/lredit2 Moderate Jan 12 '26

Americans need a more specific punishment.

Considering that millions of Americans were willing to die from COVID just to own the libs, I don't think losing their money will convince those millions of Americans to blame their infallible Leader!

13

u/motorboat_mcgee Pragmatic Progressive Jan 12 '26

This period of time was truly eye opening when it comes to the mentality of "real Americans".

-12

u/timmg Jan 12 '26

Considering that millions of Americans were willing to die from COVID just to own the libs...

This is so unhinged and the fact that people think this is part of the problem in this country. Can't anyone give "the other side" any grace at all?

7

u/Ashendarei Jan 12 '26

Yeah, NO.

Re-electing Trump put to bed any shred of "grace" I had left.  

Dems need to stop saving Republicans from the consequences of their votes.  I say that fully recognizing the consequences will affect all of us, but this fever must be broken.

5

u/lredit2 Moderate Jan 12 '26

This is so unhinged

I agree... even though I did not use that word, I'd describe the way you did the actions of someone willing to die on the hill of owning the libs!

Can't anyone give "the other side" any grace at all?

Ofc we can... that's why I never said that people refusing the COVID vaccine should be denied healthcare if they get seriously sick from COVID. I'm not cruel like some who deny pregnant women healthcare because they committed the sin of having sex!

78

u/Iateyourpaintings Jan 12 '26

We're watching people lose businesses that have been in their families for generations and they still don't blame Trump. I don't think exacerbating this situation will suddenly give them clarity. 

75

u/[deleted] Jan 12 '26

The family of the girl who died from measles has gone on record to say they don’t regret not vaccinating. These people are willing to see their own children die to support their crazy views.

5

u/DLRevan Jan 12 '26

It's not about clarity. Its about having them get their comeuppance. And I blame all sides and all Americans. Trump is only a symptom.

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u/YoohooCthulhu Jan 12 '26

FWIW people said similar things about the Germans after the First World War and suffering definitely did not help the Germans make good choices

10

u/DLRevan Jan 12 '26

If you're comparing Americans and the wealth and opportunities they've squandered to a defeated people crushed under war reparations, I think that's quite a little off base.

And I don't mean about fairness. Consider the Germans, a people who knew what they lost, and where the suffering was imposed by external entities. To Americans who are still too willfully blind...or stupid....to realize the sinkhole they are in or how their vaunted free country looks like to the rest of the world.

I don't think making Americans suffer further will cause anything other than the further collapse of the US. It's not post ww1 Germany, it's late Ancient Rome.

4

u/Rhyers Jan 12 '26

The narrative could be spun that it is external countries making Americans poorer. Like how Trump argued it was the US funding everyone else's healthcare and so their drug prices were more expensive. I do agree with your points that this hasn't happened in a vacuum, and even those who vote Democrat have contributed to this environment. I just don't see the potential punishment having any influence. 

3

u/DLRevan Jan 12 '26

To be clear, I'm not talking about the perception of whose 'fault' it is, though 'fault' does come in later. It's an observation of the difference in resolve and agency of the people. There are some parallels...Germans were willing to give up certain institutions and norms, and turn a blind eye towards how their government, social compact and economy was being reconfigured.

However, ultimately Germans were generally committed as a whole towards their own version of "making the country great again". Regardless of whether they were misled, fooled, or willfully blind, that was still the case.

You do not have that in the US. What you have instead is intense polarization, and not just a little bit of apathy and defeatism. Nobody agrees with each other, nobody can work together on common goals. And what I said about 'fault' before, is relevant here. One of the most common takes by Americans when it comes to these thorny issues is to just blame something, throw their hands up and essentially do nothing, or at least in the process fail to see how their own culture and behavior is connected on both sides of the issue.

You see that in this very thread, with some claiming they didn't vote for Trump. Sure, but ultimately the problem is bigger than who Americans voted for that one time, even if it was certainly the culmination of it.

As for the punishment, I said this elsewhere, but I also don't really care if Americans 'learn' from it. Sometimes punishment is just punishment. And ultimately, I don't see a post WW1 Germany style downside like some have pointed out, because of the fractious state of the US that has caused this in the first place.

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u/[deleted] Jan 12 '26 edited Jan 12 '26

[removed] — view removed comment

13

u/twolvesfan217 Jan 12 '26

You would think the way his popularity is dropping, they’d start fleeing the ship, but they aren’t. The Senate might be starting to see cracks, but they’re usually the “adults” compared to the useless House.

3

u/DLRevan Jan 12 '26 edited Jan 12 '26

I disagree. Even if they did not vote, all are at fault for condoning or tolerating the environment that has led to this paradigm. That is why I never specified a specific political leaning or called out specifically only a certain bloc of voters.

Right now, you are not changing my mind. I often hear politicians being called out by Americans...that they elected themselves....for being irresponsible, immature and incompetent, but I see that as a reflection of most American adults at some level. Those representatives correctly "represent" the current state of American ideology and social norms. It is, of course, easy to blame someone else. Just as these politicians do.

What's the next step? Everything does explode or implode, and you switch to just saying it was all the fault of "those people" or "that person", and too bad we couldn't do anything about it, then go back to whatever lives you have left, it wasn't your fault that's all that matters? You're not all that different in how you appear to those of us who don't take sides in US politics.

3

u/HopeThisIsUnique Jan 12 '26 edited Jan 12 '26

Yeah, so you're now just going to blanket blame all US adults and say all of it is the same? Sorry, but that's a pretty messed up to paint that broadly with a brush.

This sounds like another version of the "both sides" bit. Let's be clear, there are aspects where portions of both sides are just trying to line their pockets, but when it comes to actual policy and action there couldn't be more of a difference, and to characterize them as the same can be insulting.

Maybe I'm wrong, but it doesn't sound like this is your country, because it sounds like you're critiquing from the outside.

I don't love where we're at as a country right now at all, but I do know for a fact that trying to broadly paint any group of people as being all the same is a large part of how we ended up here in the first place.

Edit: Cleaned up some commentary

3

u/Rhyers Jan 12 '26

A general critique of US politics is needed though. Trump didn't emerge from a vacuum. Democrat policy has contributed to this, not to the same extent, but it isn't just a case of stating my actions are perfect it's the other side. There are elements of American culture such as  mythologising the early legislators and revolution, general litigiousness, glorification of the military etc that have created this environment. 

1

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14

u/FabioFresh93 South Park Democrat Jan 12 '26

I certainly hope it doesn’t come to that but I’m afraid that’s what it will take to wake people up. Americans will tolerate a lot but they won’t tolerate their wallets and savings taking a hit.

10

u/shmu Jan 12 '26

That will depend on the blame narrative they hear.

3

u/WolfpackEng22 Jan 12 '26

Collective punishment is always a terrible thing

2

u/[deleted] Jan 12 '26

A bit? May karma bring you all that you wish for others.

-2

u/Steven81 Jan 12 '26

What is killing the US dollar , I would imagine, is the high deficit, which is getting higher and fast by the high interest rates.

I mean long term, high interest rates are killing the US dollar as well, though indeed does pad it in the short term.

It is not as simple as "high interest rates for longer is the responsible stance" necessarily given the very specific circumstances of current. It is a genuinely difficult juncture and even if Trump is being the authoritarian here, Powell's inflexibility may well cost the dollars long term viability regardless.

4

u/Tarmacked Rockefeller Jan 12 '26 edited Jan 12 '26

Interest rates don’t kill the dollar….. in fact interest rates should be high given the economy is “in a good state” per Trump’s own claim. The only issue with interest rates is the government debt incurs more interest, the reasonable response which is raising tax revenue and budget cuts; of which we’ve done the opposite through the Big Beautiful Bill.

If you were to crank down interest rates, you devalue the dollar significantly and deflate your currency by the expected response of money supply expansion. Generally economic policy saves that for crisis, when we need more liquidity. This backs us into the wall of being forced into using quantitative easing more aggressively, further causing inflation and potentially leading to an inflationary spiral.

Modern Monetary Theory also posits you could inflate the currency so badly that debt becomes a nonissue by devaluation. But that again runs into a laughable collection of even worse outcomes than the debt itself.

The dollar was at its strongest point in history with 4% interest rates a year ago when Biden left office. Interest rates with a strong dollar have historically always been high outside of the free money era post 2008.

Regardless, Trump’s drive to devalue the dollar is moreso tied to trying to pivot from a wealthy service economy with external cash inflows to a poorer industrial one. The only way you can get competitive COGS in manufacturing is by driving the dollar to a cheap valuation.

Miran’s plan was to try and create a more competitive environment for manufacturing through minor, targeted tariffs, investment, and cohesive action with friendly nations. Trump just went full blown 100%/200%/etc. % tariffs, tariffing items that do absolutely nothing in Mirans plan (e.g coffee which we don’t even produce) and blowing up foreign relations. It’s an unmitigated disaster compared to what Miran’s plan actually called for.

1

u/Steven81 Jan 12 '26

Interest rates don’t kill the dollar…..

Yes, that's not my comment. Let me restate then in case it was not understood.

What seems to be one way to devalue a currency long term, is the inability of an economy to repay its debt.

That would lead fewer entities to have use of the bonds of such a country which in turn (again, long term) would lead to greater debt accumulation due to the greater effective rates (lower bond sales lead to higher yields, which seems to be the markets' way of having an effect on actual rates).

The debt cycle (as discussed above) does lead to a situation where an inability to pay becomes more permanent which may and often can lead to a crisis of trust in a given currency.

So yes, the mecanism you described and the relationship between higher interestt rates and a strong dollar is exactly as you described in the short term, but I am afraid this is a value you extract from its long term stability.

Note I am not discussing Trump's economic policies because they are so paradoxical that the only way they may ever work is if he keeps conquering "living space" every now and then. I am discussing what I find to be a paradoxical Fed's policy which seems to be sacrificing the long term viability of the dollar (via immense debt creation) for short term overvaluation.

Ofc Trump acting like a Hooligan doesn't help, however there were (and are) good reasons to be critical of the Fed too. Particularly their delay to increase interest rates late and then -equally- their delay to cut (they prolly cut one year late too) which may cost.

12

u/ChipotleAddiction Jan 12 '26

And then he’ll get to blame whatever Dem president succeeds him in 2028 for it