Mike Munger tweets: (HT Scott Lincicome)
Your choices are:
A. The Fed sets policy
B. Donald Trump sets policyThat’s it, that’s all. There is not going to be a market framework for interest rates; it’s too tempting to meddle.
B is Zimbabwe. The Fed is better, by quite a bit.
The Federal Reserve’s independence and the public’s perception of that independence are critical for economic performance, including achieving the goals Congress has set for the Federal Reserve of stable prices, maximum employment, and moderate long-term interest rates. The reported criminal inquiry into Federal Reserve Chair Jay Powell is an unprecedented attempt to use prosecutorial attacks to undermine that independence. This is how monetary policy is made in emerging markets with weak institutions, with highly negative consequences for inflation and the functioning of their economies more broadly. It has no place in the United States whose greatest strength is the rule of law, which is at the foundation of our economic success.
National Review‘s John Puri writes eloquently against the Trumpian lawfare aimed at Jerome Powell. Two slices:
The chances that Trump would investigate Federal Reserve officials like Chairman Jerome Powell and Lisa Cook if they were acquiescing to his demands instead of resisting them are zero — zilch, nada, none. Potentially negative, thus shattering the laws of mathematics. Everybody knows this.
A second undeniable fact is that Trump is trying to dominate the Fed — to break it to his will. That he doesn’t control the Fed already infuriates him. He would seek to subjugate it even if he sought no changes in the monetary policy it sets.
But, oh, does he seek changes to policy. Destroying the central bank’s independence would be terrible enough in itself. As my predecessor Dominic Pino has documented, it extinguishes confidence in the currency and unmoors the money supply from empirical concerns in favor of political expediency. What Trump wants from the Fed in particular, however, makes his gambit all the more destructive. And obscenely stupid.
…..
The MAGA movement had better pray that Jerome Powell wins this fight over the Fed. They had better pray that Senate Republicans find a spine real quick and that they make sure Trump doesn’t appoint a lunatic or a lackey as Powell’s successor who will slash rates to the bone and blow out the Fed’s balance sheet. They had better pray the president does not get his way on this.
Because if he does, MAGA will go down in flames the same way Biden and his accessories did. And the rest of us will burn with them, because we unfortunately all share this house called the U.S. economy. We all have an interest in making sure the dollars in our pockets don’t become toilet paper.
His saner advisers are worried that Wall Street will view this as an attack on the Fed’s institutional independence, which it is. Markets reacted calmly on Monday, though the dollar fell and bond yields rose as a bet on more inflation. Whatever you think about Mr. Powell or central-bank independence, the way to change the Fed’s legal status is through legislation, not a criminal prosecution of dubious merit.
Also highly critical of Trump’s lawfare against Jerome Powell are the Editors of The Free Press. A slice:
One irony of Trump’s campaign against Powell is that the lower interest rates Trump craves might end up hurting him politically. Inflation has fallen since Trump resumed office, but it is still above the Fed’s target of 2 percent annually, and most Americans believe their wages haven’t caught up to the price levels set while inflation soared under President Joe Biden. Trump wants easy money to juice corporate hiring and reduce the cost of interest on federal debt. But prices are still a bigger concern for most voters, and it’s likely that the Fed’s caution around cutting rates has helped control inflation and reduce public rage.
Whether an independent Fed is desirable is beside the point. The core issue is lawfare: the strategic use of legal processes to intimidate, constrain, and punish institutional actors for political ends. Lawfare is the hallmark of a failing state because it erodes not just political independence, but the capacity for independent judgment.
What sort of people will work at the whim of another? The inevitable result is toadies and ideological loyalists heading complex institutions, rather than people chosen for their knowledge and experience.
Brian Doherty is correct: The first year of Trump’s second term has been “a libertarian nightmare.” A slice:
While he’s gone hog wild so far in 2026, the pattern of his core authoritarianism was already well demonstrated in 2025. Trump wielded state power to punish enemies and reward friends, sent the military into city streets under bogus pretenses and over the objections of local elected officials, authorized masked cops to enforce “papers, please” policies on U.S. citizens moving in public (the loosing of such largely undisciplined shock troops in American cities where they are not wanted has predictably resulted in the unconscionable murder of a citizen), ordered the serial murder of suspected drug smugglers, and disrupted the global economy by making Americans pay sharply increased taxes on imported goods, for starters.
He has concentrated what was supposed to be the competing branches of the federal government into the whims of one man, and erased distinctions between federal and state, public and private. America has never had a president who acted more like a monarch.
“One of those unintended consequences is that banks will reduce or eliminate credit offerings to borrowers who are too risky to justify a 10 percent annual interest rate,” wrote Ryan Young, a senior economist at the Competitive Enterprise Institute. “Wealthy people will do just fine, as will people with an established credit history. Poorer people and younger people will, in many cases, suddenly be unable to get credit from banks.”
Implementing “a 10% interest rate cap would reduce credit availability and be devastating for millions of American families and small business owners who rely on and value their credit cards, the very consumers this proposal intends to help,” said a joint statement from several banking industry groups.
When Trump and his acolytes imagine a 10 percent limit, they seem to envision the current system, unchanged but for that small detail. But this is absurd. Interest rates are inextricably tied to exposure. To restrict the ceiling to 10 percent APR is to inform banks that they may charge no more than 0.83 percent interest per month to anyone, irrespective of their financial history. The result of this would not be some lofty 10-percent-for-everyone paradise, but an extremely selective universe in which only the most secure candidates were accepted. Within a month of the new rules, most new applicants would be turned down, longstanding credit limits would be lowered, and existing customers who exhibited even a modest pattern of delinquency would have their accounts canceled on the spot. One does not have to try too hard to imagine how this would play out on social media, in the press, or in November’s midterm elections.
When one makes this argument, one is invariably accused of being a fundamentalist, or — quelle horreur! — of being “rich.” But, as it happens, my objection to this is rooted in quite the opposite experience. When I first moved to the United States, I had no credit rating and no ability to “migrate” the history that I had accrued in England into the American banking system. As such, I was caught in a Catch-22: Without credit, I could not get any of the products that would allow me to build a credit rating in the U.S., but without a credit rating, nobody would give me credit. After a few months of trying, I managed to get hold of a “secured” credit card that not only had an unusually high interest rate, but that required me to send the amount that I wished to “borrow” into an escrow account in case I defaulted on the loan. In a vacuum, such a product might well be described as “predatory.” For me, though, it was a lifeline. As a guy with no track record, no assets, a tiny income, and a visa that I could renounce at any moment, I was a considerable risk. By agreeing to the terms I was given, I was able to prove my reliability to others.
Lack of access to credit and banking services is a larger problem for poor people than high interest rates. A high-interest, low-limit credit card could be better for a poor person if the alternatives are writing a bad check (which is a crime) or borrowing from loan sharks (which employ far more brutal collection tactics than banks).
Sens. Josh Hawley (R-Missouri) and Bernie Sanders (I-Vermont) introduced legislation last year to cap credit card interest rates at 10 percent. It went nowhere, likely because most senators don’t want to wreck the American economy. Trump’s Friday night post on Truth Social came shortly after he met at the White House with provocateur Tucker Carlson, who endorsed the Hawley-Sanders bill and has used his platforms to advocate anti-usury laws.
In economics, we refer to the idea that some policies deserve legitimacy because of their intentions as the “piety myth.” It was Thomas Sowell who most lambasted the idea that left-wing ideas or general collectivist intentions warrant more grace as long as the policies “mean well.” With each of his proclamations, I believe the president finds political value in a midterm election year and, to some degree, believes that they would benefit, at least superficially or marginally, the people for whom they are intended. The opposite is true.
