“Tis in vain therefore to go about effectually to reduce the price of Interest by a Law; and you may as rationally hope to set a fixt Rate upon the Hire of Houses, or Ships, as of Money.”
– John Locke, 1691
The Subpoena Strategy
May 2026 is a pivotal month for Federal Reserve Chair Jerome Powell, marking the end of his term. Although he could remain as a Fed governor until 2028, former Fed chairs have typically stepped down once their term concludes.
His future options could include landing a lucrative position at a major bank, writing a book, embarking on a speaking tour, or perhaps enjoying some leisure time fishing. The possibilities are intriguing.
Currently, however, he finds himself under scrutiny from both President Trump and the Department of Justice (DOJ). Recently, the DOJ delivered grand-jury subpoenas to the Federal Reserve.
In an unusual move for a central banker, Powell took to the camera that Sunday night to present his side of the story.
The DOJ is probing Powell’s testimony from June regarding the $2.5 billion renovation of the Fed’s headquarters. Administration critics, including Russell Vought from the Office of Management and Budget, have criticized Powell for what they perceive to be excessive costs, citing lavish marble, specialized elevators, and rooftop gardens.
During his address, Powell was forthright, indicating that the issue at hand was not materials or budget overruns, but rather a matter of intimidation. He asserted that the looming threat of criminal charges arose because the Fed has resisted the President’s preferences regarding interest rates.
“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.”
From our perspective, the existence of the Fed is questionable. Powell and his colleagues are no more equipped to determine interest rates than the average citizen. Their interventions in credit markets tend to be harmful, leading to distorted economic signals.
But what are Trump’s true intentions? Is he employing a strategy of pressure to lower rates and alleviate Washington’s enormous debt burden?
Extreme Dollar Debasement
Trump has been vocal about his desire for significantly reduced interest rates, believing this would spark “the greatest economy in history.” On the other hand, Powell has proceeded with caution, wary that rising tariffs could reignite inflation.
Nonetheless, Powell has already embarked on a rate-cutting path, bringing the federal funds rate down from 5.25 percent in August 2024 to 3.5 percent today. However, for Trump, these moves may be seen as insufficiently aggressive.
By directing the DOJ to investigate Powell over costly renovations, Trump seems to be attempting to undermine Powell as his term draws to a close, effectively branding him as a criminal.
Simultaneously, Trump is considering candidates for the next Chair, with names like Kevin Hassett, Kevin Warsh, and Rick Rieder rising to the forefront.
The expectation is that the new Chair won’t simply continue Powell’s gradual rate cuts; rather, they will implement significant reductions, leading to extreme devaluation of the dollar.
If you’re concerned about the value of your savings, this should be alarming. The current perception of the Fed’s independence is the sole barrier between the U.S. dollar and rampant monetary expansion. If the new Chair aggressively cuts rates amidst soaring deficits and escalating trade tensions, the nation could face rampant inflation.
Lowering rates while simultaneously increasing tariffs only devalues the currency. More dollars in pursuit of fewer goods will lead to increased consumer prices.
The Fed’s mandate for price stability may be jeopardized come May.
The Ultimate Escape Hatch
As the President openly undermines the Fed’s autonomy, market anxiety grows. Recently, gold and silver surged, breaking above $4,600 and $84 per ounce, respectively. Investors are seeking safe havens amidst currency instability and rising geopolitical tensions in Iran.
Should politics capture the Fed, resulting in deliberate dollar destruction, precious metals become vital refuges. If the new Fed Chair demonstrates loyalty to Trump with drastic rate cuts, precious metals could experience unprecedented gains. This shift would mark the end of objective monetary policy, replacing data-driven decisions with political directives.
Meanwhile, the Dollar Index (DXY) appears unstable. Foreign exchange investors are wary that the U.S. dollar may no longer be governed by a stable, non-political body.
If the world begins to view the Fed as an extension of the White House, faith in the dollar could dissipate. A weaker dollar will lead to higher import costs, exacerbating inflation and diminishing the purchasing power of American families.
While lower rates are generally seen as favorable for stocks and real estate due to cheaper borrowing, if the market perceives these reductions as politically motivated, investors may rapidly withdraw.
A sudden collapse in asset pricing becomes increasingly inevitable when a currency’s credibility falters. Who would invest in an inflated bubble born from a subpoena?
If you believe monetary policy under Powell has been problematic, brace yourself for May, when the precarious balance between reckless spending and monetary policy may unravel completely.
Countdown to May Madness
With the countdown to May Madness underway, holding cash is quickly becoming a detrimental choice. To shield your wealth against a politically influenced Fed and ensuing dollar devaluation, converting paper assets into tangible resources has never been more crucial.
As previously mentioned, gold and silver are the ultimate safeguards against the devaluation of the dollar. While prices such as $4,600 for gold and $90 for silver may seem steep, they reflect the dollar’s diminishing value. Their rapid increase has been striking, and while they may face corrections, the alternative is bleak.
Maintaining a foundation of physical precious metals is critical. Unlike digital currencies, physical bullion cannot be artificially inflated by a compliant Fed Chair. Once you establish a secure base of physical assets, consider branching into mining stocks and other investment opportunities.
Moreover, inflation essentially transfers wealth from lenders to borrowers. Even with soaring residential real estate prices, there are advantages. Long-term financing with fixed interest rates becomes beneficial in a depreciating currency situation. Owning real estate under a fixed-rate mortgage allows you to repay the bank in devalued dollars while simultaneously benefiting from rising property values and rents due to inflation.
While it’s undesirable that the housing market is so affected by currency debasement, it is a reality to navigate. It’s wise to invest accordingly. Tax deductions for rental property investors also offer considerable benefits.
A portfolio containing high-quality stocks that can outperform inflation is vital. Focus on individual shares from well-managed companies rather than just purchasing the index. Seek those with robust fundamentals and a protective moat, ensuring they can raise prices as needed in a declining dollar environment.
The reality is that May Madness is approaching rapidly. When the printing presses begin to churn, opportunities for wealth preservation will diminish quickly.
[Editor’s note: Join the Economic Prism mailing list to receive a free copy of a significant special report titled, “Utility Payment Wealth – Profit from Henry Ford’s Dream City Business Model.” For a special trial offer of MN Gordon’s Wealth Prism Letter, check it out here.]
Sincerely,
MN Gordon
for Economic Prism