Courtesy of wikipedia.org
Last week, a friend who is 90 wrote a blog about winter’s itchy skin and the need for a backscratcher. I laughed and left my remark on her page along with others. Seldom do my blogs get as many responses as hers. But I’m not complaining. I know political commentary isn’t giggle-worthy. And, Lord knows, we need a laugh these days.
Happily, my readers, many of whom have been with me for several years, won’t be surprised to read that this week’s blog is about the Federal Reserve Bank and why Jerome Powell’s replacement as Chair could force some of us to sell pencils on the sidewalk one day.
The threat won’t come from the person appointed to replace Powell. It will come from the response of world leaders. Will they see Donald Trump’s choice as someone capable of keeping the Bank out of political headwinds, or will they see the new Chairman as the President’s lackey? What they decide will affect the dollar’s stability.
At the moment, our currency is dominant in international trade, just as English serves as the universal business language (“Exorbitant Pillage,” by Lael Brainard, Foreign Affairs, Nov/Dec. 2025, pg. 156). Other countries have tried to unseat the dollar’s dominance but have failed. Writer Lael Brainard explains that the reasons are threefold: 1) trust in the U.S. rule of law; 2) reliability in international engagement; and 3) the independence of the Federal Reserve (Ibid, pg. 158).
Confidence in the dollar affords benefits to our country. For example, it allows our government to borrow money at a reduced interest rate, an advantage that saves the U.S. 140 billion dollars a year. (Ibid pg. 157). It also makes the United States a safe place for other countries to park their money. They buy our bonds, and their investments help fund our government. (Ibid pg. 158)
Unfortunately, Trump’s policies are undermining the dollar’s strength. Leveling tariffs without regard for existing trade agreements erodes our credibility (Ibid, pg. 159). Appointing lackeys to the Fed Board makes its decisions suspect. Finally, the last Congressional budget added $4 trillion to the national debt over the next 10 years. To service that debt, the Treasury will have to offer higher interest rates to bond buyers, and citizens will foot that increase. (Ibid, pg. 160)
The lesson is simple. An independent Federal Reserve Board contributes to the dollar’s credibility. Weaken it, and not only will the American worker face higher taxes, but wages will buy less. China’s recent decision to cut back on U. S. bonds may be the beginning of a trend. If it is, purchasing a backscratcher may become a luxury. When that happens, reach for your tin cup and some spare pencils. Then, head to the nearest street corner to find buyers for your wares. I’m not joking. Dull though it may be as a subject, the Federal Bank bears watching.
BOYCOTT: Tesla, Apple, Amazon
