Tonight, in what can only be called a shocking move, President Trump put down the Diet Coke, apparently, and went fully leaded which of course led to entertainment for all as he took to Truth Social tonight:
To say markets have had a negative reaction to this action is an understatement. The dollar has dumped, gold has rallied and as this is being typed up around 9 p.m. ET, equity futures have done a full u-turn to the downside.
There is a larger issue that President Trump’s recent rantings and ravings will require addressing and unfortunately for him, history not always so kind to the Executive Branch even when they control both houses of Congress. This course of action, which in this author’s opinion is premature as the party being fired, Federal Reserve Governor Lisa Cook, has not even had a chance to answer the allegations against her.
Make no mistake about this one fact however. I found Lisa Cook totally unqualified for this job when she was nominated. I’m not going to defend the person but the office and simply point out the consequences of what this action might bring about both from a political and economic perspective.
The Backfire
President Trump could probably activate an alien reincarnation machine in Area 51 to bring back Paul Volcker to nominate to replace Ms. Cook and he probably would not be seated as a Federal Reserve Governor in 2025.
The unfortunate side to the irrational behavior and rash actions of the President is that some actions actually follow the law of physics, generating an equal and opposite reaction. The US Senate is not like the House of Representatives where individual members can be bullied into accepting whatever edicts the President mandates (unless that Congressman is Thomas Massie from Kentucky who still believes in the Constitution).
This firing might finally unify the freak show known as the Democrat Party into a course of action the create a major pain for Majority Leader John Thune along with creating roadblocks on every course of action, every nomination, and every piece of appropriations legislation that comes before the body.
Oh, and did I mention that this might just piss off the Federal Reserve Board and unify them also to block any rate cuts until the vacant positions are filled?
Remember, just because Jay Powell showed a moment of weakness at Jackson Hole, the cards are stacked against President Trump when it comes to a prolonged conflict with the Federal Reserve as an independent institution.
Trump might have just sealed his own short term economic fate by once again attempting to intimidate the Board of Governors and worse, stuff the ballot box with his own hand picked replacements to create an easy money policy which would obviously stimulate inflation and not the economy. The most important fact to remember tonight is that financial markets abhor instability and uncertainty. President Instability has brought that by the truckload much to the chagrin of traders and citizens alike.
The next ninety days in the Senate and the US financial markets are going to be absolutely insane.
Got gold?