Fed independence is already dead. Trump is accidentally right on the perils of overmighty technocrats.
Central banks have no God-given right to independence. Nothing in the US constitution authorises the US Federal Reserve to act as a shadow government, and nor should it have such powers under any theory of accountable democracy.
Sir Paul Tucker argues in his exposé, Unelected Power: The Quest For Legitimacy in Central Banking,
Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State - PaulTucker
that they have become the “third great pillar of unelected power”, akin to the judiciary but without the constraints.
There is a case for zero rates and quantitative easing in a crisis, but these policies were pursued for too long and
have led to a vast transfer of wealth from wage workers to the owners of capital. The central banks unwittingly became agents of extreme inequality.
Needless to say, Trump’s determination to get his hands on the machinery of interest rates and bond purchases is an admission that his “big, beautiful bill” is pushing the limits of US debt sustainability.
The budget deficit is 6.7pc of GDP at full employment. The next recession will push it into double digits.
Fed targeted consumer price inflation – just as China was jamming the signal by flooding the world with cheap goods – and let asset inflation and debt bubbles run rampant instead,
until the experiment blew up in their faces in 2008.
The European Central Bank is in a class of its own, a sort of Vatican City answerable to no one, in the words of Lord Skidelsky.
It pushed half the eurozone into an avoidable debt crisis by overtightening into the downturn, causing Europe’s lost decade.
It used instruments of financial torture to topple two elected governments – Greece (2010) and Italy (2011) – parachuting in nomenklatura stalwarts to take over.
Trump will in the end compel the Fed to buy debt and suppress yields.
But that way lies a collapse of the dollar and the path to perdition. /a state of punishment that goes on for ever, believed in some religions to be suffered by evil people after death/
Remember the Rudi Dornbusch rule: “Crises take longer to arrive than you can possibly imagine, but when they do come, they happen faster than you can possibly imagine.”
Ambrose Evans-Pritchard Telegraph 1 July 2025
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