Central Bankers vs. The Dollar

If Donald Trump has his way and recent reports are accurate, Federal Reserve Chair Jerome Powell is considering stepping down from his position. While extremely rare, Fed Chairs resigning before the end of their term isn’t entirely unheard of. Powell’s obligations would ordinarily extend to May 2026.

But if he abdicates, Trump would replace him with an ultra-dove who is committed to aggressively cutting short-term interest rates, delivering the cheap money he craves. This new dove will crush the dollar, eviscerate savers, and send long-term interest rates soaring much higher. 

Markets are watching Powell closely, and pundits are speculating on who might replace him in the extraordinary event that he decides to leave the Fed. But even if he doesn’t resign, the end result of central bankers tinkering with the economy is always net inflationary. Whether you’re talking about the Fed or the Bank of Japan, the end result on a long enough timeline is always an expanded money supply, a currency crisis, and a reset driven by economic catastrophe.

The Fed Funds rate is 4.25%–4.5%. Trump said it should be 1.25%–1.5%. Rumors are that Powell may resign by Monday, so his replacement can slash rates to that level. This would put the nail in the dollar’s coffin, sending long-term interest rates, consumer prices, & gold soaring.

— Peter Schiff (@PeterSchiff) July 12, 2025

Central Bankers are why the dollar has dropped off a cliff in slow motion, losing over 96% of its value since 1913 when the Federal Reserve was created. Some commenters claim that this doesn’t matter, because standards of living are so much higher today. But that claim ignores the fact that inflation always rewards speculators, bankers, and insiders while punishing savers.

In today’s low rate-addicted economy, 5% and up is considered being on the “high” end. In a self-correcting free market, they would be drastically higher. Forcing low interest rates on the economy is like trying to keep a greased beach ball underwater, pushing it deeper and deeper as it continues inflating with even more air.

You’re not in control, and you never were. When you finally lose your grip, it rockets out of the surface of the pool even harder and faster.

US Consumer Price Index, 1913 to Present

SOURCE: FRED®/US Bureau of Labor Statistics

What makes the dollar different is its exorbitant privilege as the world reserve currency, and our ability to force that reality economically and geopolitically. But that privilege has been ending for many years in slow motion, and now, economic policies like capricious tariffs and “Big, Beautiful Bills” are accelerating its demise. Touted as a form of economic stimulus, Trump’s economic policies mean higher deficits.

Debt skyrockets, interest rates remain too low, deficits remain sky-high, growth remains low, and the cycle receives more and more fuel until something inevitably finally breaks the market’s trust. That’s when it all falls apart. Both Trump’s fiscal policy and Federal Reserve monetary policy, with or without Powell, are partners in crime for an economic crash.

As Peter Schiff said on The Peter Schiff Show:

“We are not changing course, we are headed on a course to a fiscal disaster. And we’re not veering from that course…we’re just stepping on the gas.”

Claims that the BBB’s spending will be magically funded by tariff revenues are nonsense. Tariffs will reduce demand for those goods, meaning the real revenue collected is always drastically lower than what hopeful projections like to pretend. Companies aren’t all going to pack up and move their manufacturing to the US, they’ll just stop selling to Americans. At absolute best, any companies that do move their manufacturing will take years, compromising Trump’s political dependence on instant results.

Despite a surprisingly good fiscal quarter for the US Government, the BBB makes it unlikely to last. We can rely on both Republican and Democrat administrations to be much better spenders than savers. When the government spends, it’s always with someone else’s money, and over 14% of that spending is just interest on the debt.

The Big, Beautiful Bill contains 1,116 pages, yet not a single page reduces future deficits. In fact, they make them larger. Only two House Republicans had the courage to vote against this monstrosity, @RepThomasMassie and @Rep_Davidson. The bill is a total fraud and a betrayal.

— Peter Schiff (@PeterSchiff) May 22, 2025

With or without the fiscal policies, inflation is all central bankers really know how to do. Sometimes they inflate slowly, at what they claim is the ideal 2% level, and sometimes they inflate a lot all at once, like in response to the 2008 financial crisis and COVID. The impact of monetary policy on ordinary Americans isn’t apparent right away. But eventually, the devastating effects of inflation are felt in the form of higher prices for everything people need to survive.

In the meantime we’re left with a boom and bust cycle where central bankers decide the “right time” to engineer a recession to try and stave off an all-out collapse. They always return to low interest rates and money printing because without them, the easy money-addicted system would collapse.

If Powell remains the Fed Chair, rate cuts will still come. It’s a matter of If, not When. But if he resigns, and is replaced with a dove hand-picked by Trump, inflation won’t just start to boil over —it will rocket into the stratosphere.