You are here
Ambrose Evans-Pritchard: Fed independence is already dead, and Trump will get his monetary bailout
By Ambrose Evans-Pritchard
The Telegraph, London
Tuesday, July 1, 2025
Central banks have no God-given right to independence. Nothing in the US constitution authorises the US Federal Reserve to act as a shadow government, and nor should it have such powers under any theory of accountable democracy.
... Dispatch continues below ...
... ADVERTISEMENT ...
Blue Lagoon Resources Added to CSE25 Index,
Is Among 25 Largest Companies on the Exchange
Company Announcement
Thursday, June 26, 2025
VANCOUVER, British Columbia, Canada -- Blue Lagoon Resources Inc. (CSE: BLLG; OTCQB: BLAGF; FSE: 7BL) is pleased to announce that it has been added to the CSE 25 Index, the Canadian Securities Exchange's benchmark index that tracks the top 25 issuers by market capitalization.
The CSE 25 Index is a subindex of the CSE Composite Index and includes the largest companies by market capitalization on the exchange. Inclusion in the index represents a significant achievement for Blue Lagoon, reflecting its growing market capitalization and strong shareholder support, and providing increased visibility among institutional investors.
"Being added to the CSE 25 is a meaningful indication of the progress we have made," said Rana Vig, president and CEO of Blue Lagoon Resources. "With a fully permitted project, funding in place, and gold production expected to begin this summer, our inclusion in the index is a reflection of both market confidence and the strength of our strategic execution." ...
... For the remainder of the announcement:
https://bluelagoonresources.com/wp-content/uploads/2025/06/News-Release_CSE25.pdf
One can admire the gentlemanly altruism of Fed chairman Jerome Powell, and one can deplore the motives and methods of Donald Trump, while also conceding that Trump is accidentally right on the perils of overmighty technocrats. The Fed has slipped its leash.
It is not alone in that. Central bankers have been calling the shots across the advanced democracies over the last 30 years, elevating this priesthood to the status of Nietzschean rock stars.
Sir Paul Tucker argues in his expose, "Unelected Power: The Quest For Legitimacy in Central Banking," that they have become the "third great pillar of unelected power," akin to the judiciary but without the constraints.
The Bank of England veteran says the fraternity has strayed a very long way into "quasi-fiscal" intervention, picking winners and losers in what amounts to a revolution in the system of government.
There is a case for zero rates and quantitative easing in a crisis, but these policies were pursued for too long and have led to a vast transfer of wealth from wage workers to the owners of capital. The central banks unwittingly became agents of extreme inequality.
Trump has purged the top echelons of the US military, the CIA, the NSA, the FBI, the justice department and every agency that stands in his way. It would be out of character if he spared the Fed.
His war of words against Powell is in full flight: "Low IQ ... a very stupid person, actually ... terrible ... a major loser ... Mister Too Late ... a total and complete moron."
Needless to say, Trump's determination to get his hands on the machinery of interest rates and bond purchases is an admission that his "big, beautiful bill" is pushing the limits of US debt sustainability.
The Congressional Budget Office (CBO) says the draft will add $3.3 trillion (£2.4 trillion) to deficits by 2034, mostly from rolling over the Trump 1.0 tax cuts that were never affordable in the first place.
The US is in a runaway debt compound trap. The budget deficit is 6.7% of GDP at full employment. The next recession will push it into double digits.
Interest costs were 1.6% of GDP in 2018, during those halcyon days of free global money. They are 3.2% this year and rising fast. "The federal budget has become highly sensitive to interest rate dynamics," said James Knightley, from ING.
The US is also about to breach the Niall Ferguson rule: that great powers go into terminal decline once interest costs exceed military spending as a share of GDP.
Net public debt was 54% of GDP at the turn of the century. It is now 121pc, rising by two points a year even in good times, and heading for 140% in short order.
This is partly because US demographics have turned bad and middle-class welfare is out of control. But it is no coincidence that this drastic deterioration has happened during the era of independent central banks.
These econometric presbyters have made grave and repeated monetary errors, in thrall to a "dynamic stochastic general equilibrium" model with a bias towards debt creation and a refusal to let Schumpeterian creative destruction run its course.
They targeted consumer price inflation -- just as China was jamming the signal by flooding the world with cheap goods -- and let asset inflation and debt bubbles run rampant instead, until the experiment blew up in their faces in 2008.
The European Central Bank is in a class of its own, a sort of Vatican City answerable to no one, in the words of Lord Skidelsky. It pushed half the eurozone into an avoidable debt crisis by overtightening into the downturn, causing Europe's lost decade.
It used instruments of financial torture to topple two elected governments -- Greece (2010) and Italy (2011) -- parachuting in nomenklatura stalwarts to take over. It forced Greece's Syriza government to its knees in 2015 by pre-emptively draining bank liquidity. It issued secret letters ordering Spain to change its constitution, and Italy to change its labour laws.
The Fed, the ECB and the Bank of England all made a hash of Covid inflation by pushing QE after recovery was under way. It is not clear to me that this credentialed elite have made a better fist of matters than the lesser mortals before them.
The Fed has not been independent for most of its 111-year history. It met in a borrowed room in Alexander Hamilton's treasury building until 1937, and not much changed after that. Former chairman Marriner Eccles bemoaned that he was a cypher who "merely executed treasury decisions".
President Harry Truman harassed Eccles' successor for refusing to soak up federal debt and hold down bond yields, ultimately forcing him into the Fed-treasury accord, i.e. into total subjugation. This accord wiped out much of America's war debt by means of financial repression and double-digit inflation. It expropriated creditors.
Truman ultimately forced the poor wretch to resign, saying "his services were no longer satisfactory". First he accused him of serving Stalin's interests, a trick that Trump might find irresistible. Just replace Stalin with Xi Jinping.
Even Paul Volcker, slayer of the great inflation, was bullied shamelessly, writing in his memoirs that Ronald Reagan's chief of staff ordered him in 1984 "not to raise rates before the election".
Edoardo Campanella, director of Unicredit's Investment Institute, says Trump is merely "turning back the clock" to the historical norm. Furthermore, the Democrats are complicit in eroding Fed autonomy since many have been trying to draft it to curb CO2 emissions and fight social injustice.
Legally, the president can terminate the 14-year term of the Fed's seven board members only "for cause", usually malfeasance or neglect. But Trump has fired a dozen top officials at federal agencies with the same protection.
Powell's term ends in May 2026. Trump can either sack him before that by conjuring a fictitious emergency or emasculate him by appointing a "shadow chairman", a rate-cutter waiting in the wings.
Trump would also have to purge the board one by one. A team of his loyalists have already thought of that. They drew up a secretive 10-page report before the election proposing a series of radical steps to break all resistance.
It is an open question whether Fed capture would deliver the benefits Trump craves. Bond vigilantes rebelled when he talked of firing Powell in April. It was his Truss moment, pushing up the long-term yields that set US mortgage rates and corporate borrowing costs.
A global "deep state" trumped Trump himself, demonstrating that a collective force of global wealth funds is more powerful even than an American president.
Yields on 10-year treasuries have since settled down to 4.26% and are 50 points lower than in April. Either investors have been lulled by the lack of inflation so far or this may be the calm before the next storm.
The tariff price shock hits with a lag. Importers are exhausting the large inventories built up to beat deadlines.
Berenberg Bank says shipments from China take 30 days to reach Los Angeles, 45 days to reach Chicago, and 55 days to reach New York. It then takes weeks before they end up on the market. Some companies have swallowed the initial cost of the import taxes, hoping that there will be trade deals.
They will not endure losses for long.
The Fed is right to delay cuts until it can see through the tariff fog and make a judgment on the stagflationary costs of mass deportation. There may yet be a global exodus from US debt markets if Trump forces through Turkish-style monetary expansion against fundamentals.
Trump has an answer for that, too: he will in the end compel the Fed to buy debt and suppress yields. But that way lies a collapse of the dollar and the path to perdition.
Remember the Rudi Dornbusch rule: "Crises take longer to arrive than you can possibly imagine, but when they do come, they happen faster than you can possibly imagine."
* * *
Support GATA by purchasing
Stuart Englert's "Rigged"
"Rigged" is a concise explanation of government's currency market rigging policy and extensively credits GATA's work exposing it. Ten percent of sales proceeds are contributed to GATA. Buy a copy for $14.99 through Amazon:
* * *
Help keep GATA going:
GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:
To contribute to GATA, please visit:
Donations of $250 will entitle the donor to a 1-ounce silver round commemorating GATA's work:
https://www.gata.org/sites/default/files/GATA-silver-round-front.png
