Trump is pressuring the Fed to cut interest rates and fired the head of the Bureau of Labor Statistics so he could create his own unemployment numbers to give the appearance of and economic bump before the midterms – all to keep his obedient Republican majorities in Congress. Tragically, though, he doesn’t care that inflation will follow, that the cost of essentials and mortgage rates will surge, the economy will fall into recession, unemployment will climb and the dollar will lose value.
There’s a compelling lesson from history that central banks must be independent to immunize monetary policy from irresponsible spending for political purposes. Sadly, but not surprisingly, Trump ignores or is ignorant of it.
President Richard Nixon pressured Fed Chair Arthur Burns to keep interest rates low going into the 1972 presidential election. The Fed succumbed, the economy had a spurt, and Nixon got reelected. Predictably, four years after his presidency, inflation rates hit 15%, and the dollar lost 12 percent of its value.
It took painful interest-rate increases under new Chair Paul Volker to get it under control. In 1980, the Fed raised rates to a record high of 20 percent. Inflation still shot up to 11.6 percent in March and sent the economy into a severe recession and the jobless rate continued to rise. High mortgage and car borrowing rates made homes and cars unaffordable for most Americans.
In January 2007, Argentina’s President Christina Kirchner displayed a striking similarity to Trump. She didn’t like her experts’ consumer price index numbers, so she fired them, replaced them with political appointees and threated prosecution against independent economists who published higher CPI estimates.
Argentina’s CPI first started climbing back in 1946 when President Juan Peron nationalized the central bank which, in turn, took control of Argentina’s banking system. Peron had the bank expand the money supply to accommodate aggressive public spending, and the annual inflation rate reached 18.74%. By the end of 1951, the CPI surged to 50.21%. The accumulated inflation rate in just six years reached 297.57%. Clearly, the main cause of Argentina’s hyperinflation was its central bank’s enabling of political profligacy
Turkey’s another example. Its inflation rates have been in double digits for years since Trump’s authoritarian idol, President Erdogan, appointed a central bank head to lower rates. Although it eventually raised rates, annual price gains were still around 40% as of January 2025.
These are examples of politicians seizing control over central banks for their own political gain while their countries to bear the pain of higher inflation.
Back in May of 2021, U.S. Treasury Secretary Janet Yellen told a House subcommittee. “No one wants to see that happen again.” So, it’s imperative that the Fed hold its ground against Trump, perhaps even raise rates if Trump’s policies stoke inflation. More importantly, to contain the reckless and damaging chaos Trump wreaks on America, his Republican toadies must be replaced by Republicans who are not subjugated by Trump, or by Democrats.
