William Martin probably knew he was in deep trouble when he boarded the plane to President Lyndon Johnson’s Texas ranch.
As Chairman of the Federal Reserve, he had just warned that the US economy was overheating—and that the boom could end in a crash.
But he probably didn’t expect the visit to end in a physical altercation, with the President of the United States literally shoving him against a wall and shouting: “Boys are dying in Vietnam, and Bill Martin doesn’t care!”
It was 1965. The Vietnam War was raging. Johnson was desperate to keep funding the war effort and his expansive “Great Society” domestic programs. He needed low interest rates to keep the borrowing cost manageable and the economy growing.
Martin refused to play ball. So Johnson resorted to raw, personal pressure. He couldn’t fire the Fed Chair, but he could humiliate him, bully him, and try to bend him to his will.
That wasn’t even the first time a US president went to war with the central bank. The tradition goes all the way back to Andrew Jackson, who practically fought to the death against the Second Bank of the United States—and even believed an assassination attempt on his life was connected to his war against the Bank.
Now, here we are again.
Like Johnson, President Trump is a big personality with a big agenda. He wants to stimulate the economy. But more importantly, he wants to bring down the federal government’s interest expense, which is $1.2 trillion this fiscal year.
And rather than physically assaulting Jerome Powell, Trump has been figuratively shoving him around on social media, hammering the Fed for keeping rates too high, too long.
He’s also been turning to the hundreds of thousands of pages of US regulatory code to find ‘cause’ to oust sitting Fed officials—and replace them with loyalists committed to the cause of lower interest rates.
I predicted this two weeks ago.
And just a week later news broke that Federal Reserve Governor Lisa Cook had allegedly committed mortgage fraud. Today Trump attempted to fire her.
Suddenly it makes sense why another Fed official, Adriana Kugler, resigned without notice or explanation. The White House immediately filled her seat with a trusted insider: Stephen Miran, a Trump economic advisor and vocal advocate for a weaker dollar.
I also predicted the Fed would cave quickly under this pressure.
And after Chairman Powell’s speech on Friday at Jackson Hole, that capitulation is now a fait accompli. He didn’t cut rates yet. But he opened the door to a rate cut as early as next month.
But cutting rates won’t be enough. If the goal is to bring long-term interest rates—and with them, the average cost of federal borrowing—down to 2%, the Fed is going to need Quantitative Easing.
With a lot of help from Grok, we calculated the Fed would have to create roughly $10 trillion in new money to achieve that target.
And as we’ve argued many times before, that level of monetary expansion will be very inflationary.
But inflation doesn’t always show up the same way.
For example, from 2008 to 2015, the Fed printed trillions… and yet retail price inflation remained muted. Food, rent, and gas prices didn’t spike dramatically. Instead, we saw asset price inflation—stocks, real estate, crypto, even fine art soared to record highs.
Then came 2020 to 2022. The Fed printed again—this time even faster—and we got both asset inflation and retail inflation. Grocery bills skyrocketed. Rent exploded. Insurance premiums multiplied. All while stocks and housing hit new peaks.
And if you look back to the 1970s, monetary accommodation triggered mostly retail price inflation, while stocks languished for a decade in real terms.
So the big question now is:
Published on 9 hours ago
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