“Tis in vain therefore to go about effectually to reduce the price of Interest by a Law; and you may as rationally hope to set a fixt Rate upon the Hire of Houses, or Ships, as of Money.”
– John Locke, 1691
The Subpoena Strategy
May 2026 cannot come soon enough for Federal Reserve Chair Jerome Powell. That’s when his term is up. He can hang around as a Fed governor until 2028. Though, in the past, most Fed chairs have stepped down when their term is over.
Perhaps he will get picked up by one of the big banks and get paid big bucks. Or maybe he’ll write a book and go on a speaking tour and collect big fees. Or, if he’s smart, he’ll go fishing, indefinitely. Who knows?
In the meantime, he’s got President Trump and the Department of Justice (DOJ) all over his backside. This past Friday, as you likely know, the DOJ served the Federal Reserve with grand-jury subpoenas.
On Sunday night, Powell did something central bankers almost never do. He got in front of a camera and went on the offensive.
The DOJ’s investigating Powell’s testimony from last June regarding the massive $2.5 billion renovation of the Fed’s headquarters. Critics in the administration, including the Office of Management and Budget’s Russell Vought, have been hammering Powell over pretentious costs. They’ve pointed to expensive marble, special elevators, and rooftop gardens.
In his video statement, Powell was blunt. He told the American public that this isn’t about marble or construction budgets. It’s about intimidation. According to Powell, the threat of criminal charges is the consequence of the Fed refusing to follow the President’s preferences on interest rates.
“This is about whether the Fed will be able to continue to set interest rates based on evidence and economic conditions – or whether instead monetary policy will be directed by political pressure or intimidation.”
From our perspective, the Fed shouldn’t exist in the first place. Powell and his cohorts at the Fed have no more clue what interest rates should be than the rest of us. Their intervention in credit markets is destructive and distorts prices throughout the economy.
Nonetheless, what’s Trump really up to? Is this all part of a strategy of maximum pressure to bring rates down to ease the burden of Washington’s massive debt?
Extreme Dollar Debasement
Trump has made no secret of his desire for much lower interest rates. He says this will fuel the “greatest economy in history.” But Powell, a man who pretends to do what’s right, has been moving cautiously. He’s concerned that inflation – boosted by recent tariffs – could flare up once again.
Still, Powell’s already initiated a rate cutting cycle. In fact, he’s slowly brought the federal funds rate down from 5.25 percent in August of 2024 to 3.5 percent today. But for Trump this is too little too late.
By sicking the DOJ dogs on Powell over building renovations, Trump is attempting to weaken Powell during the final months of his term. By sticking him with a potential indictment now, the administration paints him as a criminal.
At the same time, Trump is already vetting his shortlist for the next Chair. Names like Kevin Hassett (the frontrunner and loyalist), Kevin Warsh, and Rick Rieder are at the top.
It’s expected that whoever takes the seat in May won’t just continue Powell’s incremental rate cutting cycle. Rather, they’ll aggressively hack them. We’re talking about extreme dollar debasement.
If you care about the dollars in your savings account this is cause for concern. The Fed’s perceived independence is the only thing standing between the U.S. dollar and a full printing press mentality. If the new Chair (starting in May) comes in and aggressively slashes rates while the government is still running massive deficits and escalating trade wars, we are looking at another episode of runaway inflation.
When you lower rates while also increasing tariffs, the value of the currency drops. More dollars chasing fewer goods equals higher consumer prices.
What little remains of the Fed’s price stability mandate will be the first thing out the window come May.
The Ultimate Escape Hatch
When the Fed’s independence is openly undermined by the President, the markets get nervous. On Monday, gold and silver reacted by breaking above $4,600 per ounce and $84 per ounce, respectively. They both continued to rise from there as investors sought refuge from the growing dollar instability and geopolitical escalation in Iran.
If the Fed’s captured by politics, and is compelled to destroy the dollar, then precious metals are the ultimate escape hatch. Should the new Fed chair come in and cut rates by 50 or 75 basis points to show their loyalty to Trump, precious metals could go parabolic. This shift would signal the end of objective monetary policy, replacing data-driven decisions (which are bogus in their own right) with presidential mandates.
Conversely, the Dollar Index (DXY) is looking shaky. Foreign exchange investors are concerned the U.S. dollar will no longer be managed by a predictable, non-political institution.
If the world decides the Fed is just an arm of the White House, trust in the dollar vanishes. A weaker dollar makes imports more expensive, further fueling the inflation fire and eroding the purchasing power of every American household.
Lower rates are usually perceived as being good for stocks and housing because borrowing gets cheaper. However, if the market senses that the Fed is cutting rates for political reasons rather than economic reasons, we could see investors start to bail en masse.
The risk of a sudden, violent repricing of assets becomes unavoidable when the underlying currency loses its credibility. Who wants to buy into a bubble that’s being inflated by a subpoena?
If you thought monetary policy was bad under Powell, just wait until May. That’s when things will get absolutely mad, as the thin line between out-of-control fiscal spending and monetary printing disappears.
Countdown to May Madness
As the countdown to May Madness begins, sitting on cash is no longer a neutral position. It’s a guaranteed loss. To protect your wealth from a politically captured Fed and the resulting dollar debasement, it has never been more critical to shift from paper promises to hard assets and strategic hedges.
As noted above, gold and silver remain the ultimate anti-dollar. While gold at $4,600 and silver at $90 may seem high, it reflects the dollar’s shrinking value. Their recent rise has been fast and furious. Certainly, they’re both due for an abrupt and substantial correction. But what choice do you have?
Holding a foundation of physical bullion is essential. Unlike digital entries, physical metal cannot be printed into oblivion by a loyalist Fed chair. Once you have a solid footing of physical bullion you can consider some mining company speculations, including royalty and streaming companies.
The other thing to understand is that inflation is a transfer of wealth from lenders to borrowers. With residential real estate prices at what seem like extreme highs this may come with little consolation. But it is important…
Long-term financing at fixed interest rates is an advantage when the currency you’re borrowing in is being debased. By holding real estate with a long-term, fixed-rate mortgage, you are paying back the bank in cheaper dollars while the property value and rental income rise with inflation.
We don’t like it. We’d prefer a housing market that wasn’t so absolutely distorted by currency debasement. But this is the world we live in. It is important to place some chips accordingly. So, too, tax deduction allowances for rental property investors are also very rewarding.
A portfolio of high-quality stocks that compound faster than inflation is also essential. Don’t just buy the index. Buy individual shares of well managed companies. Avoid those with high debt and low margins. Instead, look for companies with a protective moat that can raise prices tomorrow if the dollar drops today.
The reality here is that May Madness is rapidly approaching. And when the printing presses go into overdrive, the exit door for wealth preservation will get very small, very fast.
[Editor’s note: Join the Economic Prism mailing list and get a free copy of an important special report called, “Utility Payment Wealth – Profit from Henry Ford’s Dream City Business Model.” If you want a special trial deal to check out MN Gordon’s Wealth Prism Letter, you can grab that here.]
Sincerely,
MN Gordon
for Economic Prism
