{"text":[[{"start":7.03,"text":"Unscheduled weekend statements from the Federal Reserve are, to put it mildly, not generally a good sign."}],[{"start":15.52,"text":"In the past couple of decades, they have been rare, and have come only in response to dire emergencies: the collapses of Bear Stearns and then of Lehman Brothers in 2008, the Covid pandemic of 2020 and the failure of several US regional banks in 2023."}],[{"start":36.5,"text":"On each occasion, the US central bank has scrambled together a statement to show leadership and action before markets open in response to a serious crisis."}],[{"start":47.24,"text":"It is well worth viewing Sunday’s video from Fed chair Jay Powell through that lens. The Fed is under attack. This is not a drill."}],[{"start":57.27,"text":"The news itself, that prosecutors have opened a criminal investigation into Powell over renovations to Fed property, should not come as a huge surprise to those who have been paying attention to the increasingly tense relationship between the central bank and the new political regime. US President Donald Trump has long spoken in thuggish terms about Powell and the Fed chair’s reluctance to slash interest rates as fast as he would like. "}],[{"start":88.46000000000001,"text":"But name-calling has escalated to legal threats over the past few months. The only change now is that these threats appear to be crystallising, and that Powell is biting back. "}],[{"start":102.36000000000001,"text":"Trump himself denies any involvement in the Department of Justice investigation, and says it has nothing to do with the Fed’s rate policy. But no serious person believes any of this would have happened with a different president in the White House, just like the efforts to remove Fed governor Lisa Cook from her role, or the appointment of super-dovish Stephen Miran to the Fed’s rate-setting committee, or the ejection of Erika McEntarfer from the Bureau of Labor Statistics. (Her mistake, seemingly, was to oversee the publication of less-than-sunny employment data.)"}],[{"start":140.71,"text":"For months, market participants have been obsessing over who will replace Powell when he is due to step aside in May. Which Kevin will be the new chair? Hassett or Warsh? How many slivers of percentage points would one be likely to cut rather than the other? Oh, the suspense! All the while, the risk of a profound reworking of the world’s most important financial institution has been bubbling up. We really do not need to talk about Kevin."}],[{"start":173.81,"text":"Investors already think and talk about US markets and rate-setting policy in radically new terms. Members of the rate-setting committee are now considered in buckets depending on which president was in charge when they were nominated, much like members of the Supreme Court. This has never happened before, now it is routine. Money managers are trying to diversify in debt markets other than US Treasuries, to reduce their reliance on loopy shifts in US policy. Again, new but routine. And they are increasingly doubtful that monetary policy from the Fed will be sensible enough, in the long term, to really justify the crucial role that US government bonds and the dollar occupy in global finance."}],[{"start":220.2,"text":"The latest clear, bright sign that the new political masters in the US mean business when it comes to greater control over the Fed takes this further, however. The next Fed chair will, in everything but name, be Donald Trump, with all the adventures in rate policy and regulatory supervision that entails. Good luck to us all."}],[{"start":244.33999999999997,"text":"So, why are markets not freaking out? For one thing, markets specialists are still clinging to the hope that, somehow, this will all work out OK. Speaking at an event in London on Monday, just hours after the latest Fed drama, Jan Hatzius, chief economist at Goldman Sachs, stressed that US monetary policy is set by committee, not by just one person. “I have no doubt that [Powell] in his remaining term as chair will make decisions based on the data,” Hatzius added. “My expectation again is that the committee will continue to make decisions on the back of their mandate and the economic data.”"}],[{"start":283.46999999999997,"text":"Hatzius may be right. The checks and balances really could kick in, and we should hope they do. Looking at Venezuela, Greenland and beyond, I am not so sure. We should be mindful, also, that markets professionals are straining every sinew to appear politically neutral and not to upset Trump. Finance bigwigs should be providing a full-throated defence of Fed independence at this point, but don’t hold your breath."}],[{"start":312.35999999999996,"text":"Second, remember that the big risk here is that the Fed lets the US economy, and inflation, run hot. All things equal, in the short term at least, that is positive for stocks, rather than negative. There’s no good reason for stocks to collapse on this news, and hence they have not. On bonds, sure, this is a horrible risk for the long term, but for now, with the US economy losing some momentum, some rate cuts are likely called for anyway. The new record-breaking ascent in the price of gold is the best measure of alarm we have for now. "}],[{"start":350.44999999999993,"text":"But this is clearly Trump’s market now. He wants to cap credit card rates, he wants to block certain companies from paying dividends to their shareholders, he wants to force US oil companies to extract oil from Venezuela that they don’t want. He expects companies to do his bidding."}],[{"start":369.0999999999999,"text":"Next, he wants the Fed. We have to assume a large risk at this point that he’ll get it."}],[{"start":383.5199999999999,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1768375976_8094.mp3"}