Yes. Obviously. I’ve been saying this since 2007.
Adam Tooze, the Columbia historian, published an analysis Sunday night asking whether the attack on the Federal Reserve represents “The Big One”—the crisis that finally brings the weight of global bond markets down on what he calls “Trump 2.0’s radical MAGA experiment.” He spends several thousand words hedging, qualifying, and wondering aloud. Allow me to save his readers some time.
Yes. This is it. The fed independence crisis I have been warning about for nearly two decades is now unfolding in real time. The timeline has accelerated.
What Powell Actually Said
Tooze, to his credit, highlights the extraordinary statement Fed Chair Jerome Powell released Sunday. The key passage deserves reproduction: “This new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings. Those are pretexts. The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President.”
Powell continued: “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.”
I have been warning about political capture of monetary policy since before most current market participants had trading accounts. Powell has now confirmed, publicly, what I have been saying privately for years. The pretexts do not matter. The renovation scandal does not matter. What matters is control.
The Becket Parallel
Tooze cites a remarkable comparison from Jacobin, of all places, likening Powell to Thomas à Becket—the archbishop appointed by King Henry II who was subsequently murdered in his own cathedral when he failed to serve the king’s interests. “In the struggle between clerical and secular power,” the analysis concludes, “the latter has always come to prevail.”
I would not have thought to look to Jacobin for monetary policy analysis. But even a stopped clock, as they say. The medieval parallel is apt. Powell is being told, in effect: serve the king or face consequences. The investigation is the message.
Tooze profiles Russell Vought, the Office of Management and Budget director widely considered one of Powell’s most determined opponents. Vought has stated publicly that “we want the bureaucrats to be traumatically affected. When they wake up in the morning, we want them to not want to go to work.” He describes a struggle between defenders of a “post-constitutional order” and “radical constitutionalists” fighting to destroy what he calls “the deep state.”
The Federal Reserve, in this framework, is simply another bureaucracy to be traumatized into submission.
Gold Knows
Here is where Tooze’s analysis becomes useful despite his hedging. He notes that “debasement” talk has surged online. He observes that gold and silver are rising while bitcoin—the supposed digital alternative—remains twenty percent off its peaks.
This is not surprising to anyone who has been paying attention. I have never trusted bitcoin. It is a speculative instrument dressed in libertarian clothing. Gold is money. Gold has been money for five thousand years. When institutional confidence collapses, gold does not ask permission to retain value.
The smart money is not in cryptocurrency. The smart money is in the asset that cannot be printed, cannot be debased, and cannot be intimidated by a Department of Justice subpoena.
The Nihilism Tell
Tooze’s most interesting observation is one he seems to find troubling: the Treasury market barely reacted. He calls this “sheer nihilism”—a sign that institutions no longer matter to elites, that “all that matters are the flows of money and power.”
I interpret this differently. The bond market has not yet woken up. It will. It always does, eventually. The fact that it has not reacted is not evidence of sophistication. It is evidence of complacency. These are the same markets that did not see 2008 coming until Lehman was already falling. These are the same analysts who assured us that subprime was contained.
Senator Thom Tillis, a Republican, has vowed to oppose any Fed nominees until the matter is resolved. “If there were any remaining doubt whether advisers within the Trump Administration are actively pushing to end the independence of the Federal Reserve, there should now be none,” he said. Tooze notes, correctly, that Tillis is not running for reelection. That is the only reason he can speak freely.
Tooze asks whether this is “The Big One” or merely “another moment of American nihilism.” He does not commit to an answer. He is a careful academic. I understand the instinct.
But I am not a careful academic. I am someone who has been watching these fault lines develop since before the 2008 crisis, who warned about institutional fragility when everyone else was celebrating the Great Moderation, who has been called a pessimist and a doom-monger for nearly twenty years.
The timeline has accelerated. I’m buying gold. This is it.
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