By Kumi Owusu-Ansah
“Off with their heads”—this is the phrase uttered by the Queen of Hearts, embodying monarchical whimsy in
Alice’s Adventures
in Wonderland
She has a fondness for enunciating words. She could potentially be amusing.
However, the truth is different. Across history, autocratic leaders have inflicted suffering on both their citizens and kin. Their palaces often serve as breeding grounds for flattery, nepotism, and graft. Such is the cost of unchecked tyranny.
The narrative of English-speaking individuals, encompassing those from the United States, at their finest, has involved curbing such unchecked authority.
The struggle was long and arduous, spanning from the signing of the Magna Carta in 1215 through the ousting of James II and the adoption of the Bill of Rights in 1689, including the tumultuous events of the English Civil War during the early part of the 17th century up until King Charles I’s execution in 1649.
Those who sentenced the deposed king to death correctly deemed him guilty of pursuing “unrestricted and despotic authority to govern as he pleased.”
The Declaration of Independence and ratification of the US Constitution were further steps in this war on absolutism. So, too, was the US civil war, which established the principle that nobody should be allowed to hold absolute power over another person.
What is happening today in the US is of historic and also global significance, because it is about whether constraints on the arbitrary exercise of power will endure. Nobody with any knowledge of the catastrophes of the 20th century can be unaware of the significance of this issue.
Substituting tyranny with governance based on the rule of law, where courts decide what this law entails and legislatures create it, aims at achieving both ethical and pragmatic objectives. It is only within such a state that individuals can feel secure from authoritarianism.
A regime that disregards limitations becomes a dictatorship. As noted by commentator Andrew Sullivan, “America revolves around lawful authority. In contrast, Trump focuses on brute force. The nation was established based on trust in rationality. However, Trump relies solely on his personal instincts.” This situation reflects an orchestrated attack on the very foundation of the republic.
Trump’s first 100 days back in the White House are an unravelled example of how rapidly a manic leader who surrounds himself with fools and fanatics can recklessly unravel a mighty country’s greatest strength.
So far, his actions have provided a clear example of the economic consequences. The trade wars he has initiated not only indicate his foolishness but also his most recent behaviors do the same.
soprano-
Attacks on Jerome Powell, who leads the U.S. central bank, the Federal Reserve, exemplify the risks involved.
The sole aim behind establishing the US Federal Reserve was to oversee, maintain, and regulate stability within the Treasury bond market. This market serves as the bedrock of the present economic and financial framework.
Should something go awry – such as a sudden increase in bond yields – it falls upon the Federal Reserve to step in. While public disputes between presidents and the U.S. central bank are uncommon, President Trump has been highly critical of the Fed’s chairperson.
What lies at the heart of this dispute? Early on, U.S. Treasury Secretary Steve Mnuchin under the Trump administration emphasized that maintaining low bond yields takes precedence over inflating the stock market. The reason for this focus is tied to the substantial amount of debt—approximately $28 trillion—that needs refinancing within the coming four years during the Trump administration’s tenure.
At present, the monetary base—the fundamental currency in the U.S., including cash circulating outside banks and reserves kept with the Federal Reserve—is valued at $6 trillion. However, there is also $100 trillion worth of debt expressed in dollars.
This includes $36 trillion US government debt, $50 trillion in U.S. private debt and $13 trillion in the Eurodollar market. Every president before Trump refinanced in a falling rate environment. Trump is the only president in 40 years who must roll over debt in a rising environment.
In order to accomplish this, the administration needs to implement significant import duties, trigger a downturn in the stock market, drive the economy into a recession, and compel the Federal Reserve to reduce interest rates—thereby decreasing borrowing costs universally.
Indeed, the market plummeted by almost 20 percent; however, bond yields rose—an unusual occurrence. Despite this, the Federal Reserve did not lower interest rates or address the market downturn. Compounding the issue, China—the United States’ top trading ally—resisted President Trump’s tariffs, further escalating market volatility.
To gain an advantage over China and secure a favorable agreement, the president required a steady marketplace. However, the truth is that Trump doesn’t possess the necessary resources—but Powell does. Given his prominent position in finance, Powell has the ability to reduce interest rates, increase liquidity, boost asset values, and calm the bond market.
However, Powell, who bears ultimate responsibility for overseeing both the U.S. dollar and, consequently, the international monetary system, declined to lower the Federal Reserve’s interest rate—the key short-term benchmark rate established by the Fed upon which all other borrowing rates are based.
The Federal Reserve chairman has insisted on the central bank’s autonomy. Powell, planning to serve his complete term as Fed chair lasting till May 2026, stated that the U.S. central bank’s authority to adjust interest rates independently is “legally mandated.” This stance irked Trump.
On Thursday, April 17th, Trump asserted his purported authority to dismiss Jay Powell, which has brought an almost ninety-year-old tradition safeguarding autonomous governmental bodies under intense scrutiny. During discussions at the White House, the President criticized the Federal Reserve Chair, stating, “He consistently acts too slowly.” In response to a journalist’s inquiry about potentially removing the head of the U.S.’s principal financial institution from office during a meeting in the Oval Office, Trump responded emphatically, “Should I decide to remove him, he will leave very quickly indeed, mark my words.”
Trump’s offensive has left investors and economists focused on a case now winding its way through the US courts, which involves his earlier firing of board members at another two independent agencies.
The two officials have much less public visibility compared to Powell, yet they benefit from the same 1935 Supreme Court ruling referred to as Humphrey’s Executor. On Wednesday, Powell mentioned that the Federal Reserve is “closely monitoring” this situation, which revolves around Trump’s removal of Gwynne Wilcox from her position at the National Labor Relations Board and Cathy Harris from her role as Chair of the Merit Systems Protection Board.
Amidst the confusion surrounding tariff policies at the White House, Trump is also eroding confidence in his nation’s currency. Following his comments about wanting to dismiss the “Dollar Master,” the powerful U.S. dollar dropped by 5.44 percent.
The DXY Index, which tracks the US dollar’s strength relative to six significant global currencies, dropped to 98 from its peak at 104—a decrease of 5.4%. A higher index signifies a robust US dollar capable of purchasing more internationally. Conversely, when the index drops, as it did here, the dollar weakens and has less international buying power.
It’s very unusual for a president to pressure the chairman of the Federal Reserve to cut rates. But the huge pile of debt is giving Trump sleepless nights. When government debt becomes too high, conventional monetary policy stops working.
At this stage, lowering interest rates emerges as the sole way ahead. To put it plainly, Rate Suppression involves maintaining low borrowing rates. Should these rates remain low, the government would be able to pay lesser amounts of interest and could consequently manage larger debts thanks to decreased borrowing costs. Thus, reducing rates marks the initial phase in rate suppression, with yield curve control (YCC) serving as the concluding measure.
Trump argues that energy costs are down, along with many everyday items such as eggs, and he believes inflation remains subdued. Despite this, the Federal Reserve has not reduced interest rates. Consequently, Trump feels that Powell should be replaced for this reason.
However, there’s an issue that the president overlooked: money functions as a network. Its worth stems from individuals’ belief in this system. Once people suspect manipulation within the network, they tend to distance themselves. As participants exit the network, the currency’s value plummets. This phenomenon explains the decline in the Dollar Value Index starting from January.
Initially, we have Trump’s “America First” principle coupled with his proactive economic involvement via tariff policies. Furthermore, his personal assaults on the Federal Reserve chairman are causing concern among those who rely on the dollar-centric system.
His attempt to oust the Fed chairman will also put to the test a landmark Supreme Court ruling from 90 years ago known as Humphrey’s Executor v. United States. This case supported William Humphrey, former chief of the Federal Trade Commission, against President Franklin D. Roosevelt’s choice to dismiss him in 1933 because of his stance on the New Deal policy.
Upon Humphrey’s death, his executor continued the legal battle to recover outstanding wages owed to the estate. The Supreme Court ruled that Roosevelt had unlawfully dismissed the commissioner without providing “cause,” which was broadly understood to encompass both illegal actions and severe misconduct. This decision has enabled autonomous bodies such as the Federal Reserve to resist political influence when formulating policies.
With each passing week of disruption caused by Trump, people are turning towards tangible assets such as gold instead of using dollars. This trend explains why the US dollar is weakening while gold prices are increasing. It’s important to keep in mind that platforms like Facebook or MySpace were not the initial social networking sites globally.
Gold was the pioneering global social network where individuals worldwide could store and transfer funds. Given that currency relies inherently on user participation for its worth, compelling or manipulating these users is counterproductive. Doing so would likely cause people to abandon that particular financial system in favor of a new, more open alternative.
During the 1970s, Congress imprudently gave the president the authority to levy taxes arbitrarily under the pretext of an “emergency,” real or imagined. This represents typical autocratic behavior. As expected, Trump is now using this power to instigate disorder. No one reasonably thinks this will lead to the re-industrialization of America. Instead, it will likely hinder businesses, drive up costs, and impede economic growth—inflicting greater damage upon the U.S. than it would on either China or Europe.
Preventing this kind of disorder was among the advantages of abolishing arbitrary authority. By the close of the 17th century, the British government gained the ability to secure large amounts of long-term loans at low costs. This stemmed from public confidence. Such trust formed one of the key pillars for the growth of financial markets during the 18th and 19th centuries. In turn, this development significantly fueled the Industrial Revolution and contributed greatly to increased economic well-being.
How Trump is conducting his trade war sparks greater apprehensions beyond those associated with protectionist economic policies. Indeed, tariffs serve as poor tools for governance since they favor domestic over foreign producers of tradable items and subject exporters to substantial taxes—both implicit (through an increased real exchange rate) and explicit (by raising input costs). This oversight becomes particularly worrying when considering that the U.S., despite having just 4 percent of the world’s populace, accounts for 25 percent of worldwide output consumption.
As Martin Wolf pointed out last June, “While Biden may be old, Trump is crazy, and unfortunately, his craziness isn’t entertaining but rather perilous. His inclinations mirror those of a dictator.”
Ever since the tariff announcement on April 2, countries worldwide have expressed disapproval. Following his electoral win, Canada’s Mark Carney has taken up the challenge.
Britain’s Kier Starmer would rather avoid the issue, but Prime Minister Boris Johnson will need to exercise caution when dining with Trump during his second state visit to the United Kingdom.
Japan and South Korea are at the forefront of efforts to establish a bilateral agreement. Meanwhile, Germany, with an Atlanticist stance, asserts that Europe should chart its own course independently. Despite their shared dismay over Donald Trump’s undermining of the liberal international order, America’s traditional allies disagree on the most effective way to react.
We ought to be cautious about choosing sides — both the fighters and peacemakers make valid points. However, praise typically goes to those who dare to confront “the bully.”
Provided by Syndigate Media Inc. (
Syndigate.info
).
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