Is The Fed Blaming Trump For Economic Woes?

Have you ever wondered if the economy is a chess game where the powerful quietly move their pawns to dodge blame? The idea that the Federal Reserve might be setting up Donald Trump to take the fall for an economic storm feels like something out of a political thriller. Yet, as I dig into the numbers—$37 trillion in national debt, inflation stubbornly above 2% for over four years—it’s hard not to sense a narrative forming. Let’s unravel this complex web of monetary policy, stagflation, and political maneuvering to see what’s really at play.

Navigating the Economic Strait

The Federal Reserve’s job is often likened to steering a ship through treacherous waters, balancing maximum employment and price stability. Think of it as dodging two sea monsters: one that spikes unemployment, another that fuels runaway inflation. For decades, economists leaned on the Phillips Curve, a model suggesting an inverse relationship between unemployment and inflation. If jobs are plentiful, inflation might creep up; if prices soar, joblessness could follow. Simple, right? Not quite.

In reality, this tradeoff is shaky at best. History shows periods of booming growth with falling prices, challenging the idea that inflation and employment are always at odds. Today, the U.S. faces a trickier beast: stagflation, where sluggish growth or high unemployment coexists with persistent inflation. It’s like trying to sail through a storm with no compass—every move feels risky.

Stagflation: The Unwelcome Guest

Just a year ago, Fed Chairman Jerome Powell dismissed stagflation, saying he saw neither the “stag” nor the “flation.” Fast forward to 2025, and both are knocking. Core inflation has hovered above the Fed’s 2% target for over 50 months, hitting 2.82% in June 2025. Meanwhile, economic growth lags, and unemployment ticks upward. This isn’t a new phenomenon—Paul Volcker tackled a similar mess in the 1980s with sky-high interest rates. But today’s economy, bloated with debt, can’t handle that medicine without collapsing.

Stagflation is the economic equivalent of being stuck between a rock and a hard place—growth stalls, prices soar, and no easy fix exists.

– Economic analyst

Why does stagflation stump policymakers? Because traditional tools—cutting rates to boost jobs or hiking them to tame inflation—don’t work when both problems strike at once. It’s like trying to treat a fever and a broken leg with the same pill. The Fed’s hesitation to act decisively suggests they’re aware of the deeper issue: a system teetering on the edge.

The Debt Monster Looms Large

Let’s talk numbers. The U.S. national debt stands at a jaw-dropping $37 trillion, growing by over $3 trillion annually. Add in unfunded liabilities—think Social Security and Medicare—and you’re staring at $200 trillion more. If the government devoted every dollar of revenue to debt repayment, ignoring interest, it would take 50 years to clear the slate. That’s not a budget; it’s a ticking time bomb.

Here’s where it gets dicey. At a modest 5% interest rate, servicing $40 trillion in debt by 2026 would eat up $2 trillion annually—40% of federal income. A crisis could push that to 50% or more. This is fiscal dominance, where debt levels dictate monetary policy, not the other way around. The Fed can’t raise rates to fight inflation without bankrupting the government. It’s a trap.

Is Trump the Fall Guy?

The narrative swirling around is intriguing: Trump pushes for lower interest rates to juice growth, while Powell holds steady to protect the dollar. But is this a genuine clash or a staged drama? Some argue the Fed is subtly positioning Trump to take the blame for an inevitable crash. After all, the economy is floating on bubbles—AI stocks, housing, and U.S. bonds—that dwarf past excesses. A bust isn’t just likely; it’s imminent.

Trump’s call for a 300-basis-point rate cut seems bold, but it aligns with fiscal realities. Lower rates ease the debt burden, but they also fuel inflation, weakening the dollar. Powell, aware of the crisis, might concede smaller cuts to avoid a full-blown revolt. Yet, the Fed’s own reports hint at unease, admitting inflation’s persistence and the economy’s fragility.

The Fed’s independence is a myth when debt calls the shots.

The Phillips Curve Fallacy

Let’s debunk a myth. The Phillips Curve assumes inflation and unemployment can’t both be high. But history tells a different story. From 1800 to 1913, the U.S. saw falling prices—down over 40%—while innovations like telephones and automobiles flourished. The economy boomed, not busted. If the Phillips Curve were gospel, that century should’ve been a depression. Instead, it was a golden age.

This challenges the Fed’s playbook. Falling prices don’t always mean economic doom; they can signal efficiency and growth. Today’s obsession with 2% inflation ignores how monetary policy distorts markets, creating bubbles that eventually pop. Perhaps the real issue isn’t Trump or Powell—it’s a flawed system built on shaky assumptions.

Fiscal Dominance: The Real Puppet Master

Fiscal dominance is the elephant in the room. When debt grows so large that it dictates policy, the Fed loses control. Raising rates to curb inflation risks a debt crisis; cutting them fuels more inflation. It’s a lose-lose. The Trump administration’s plan to shift national debt to floating rates—think adjustable-rate mortgages for treasuries—is a gamble. It assumes inflation will stay tame, but history suggests otherwise.

This table lays bare the bind. The Fed’s hands are tied, and Trump’s push for lower rates only tightens the knot. But is he being set up? The Fed has a history of deflecting blame—think of past crises where politicians took the heat for monetary missteps.

What’s Next for Assets?

The economic storm will hit asset classes hard. Here’s a quick breakdown:

• Stocks: AI and tech bubbles are primed to burst, echoing the 2000 dot-com crash.
• Real Estate: Housing prices, already stretched, face pressure as rates stay high.
• Bonds: Treasury yields will climb, squeezing bond prices and federal budgets.
• Currencies: The dollar’s value erodes as inflation outpaces rate hikes.

Investors need to brace for volatility. The Fed’s delicate dance—balancing debt and inflation—means no asset is safe. Personally, I’ve always found diversification to be a lifeline in such times, but even that feels like a thin shield against a hyperinflationary meltdown.

The Fed’s Independence: Fact or Fiction?

The idea of an independent Fed is romantic but outdated. Since the gold standard ended in 1971, the Fed’s been tethered to political and fiscal pressures. Trump’s threats to influence Fed decisions—like targeting voting member Lisa Cook—only highlight this reality. The Fed’s independence was compromised long ago; today’s drama just makes it public.

Central banks serve the system, not the ideal of independence.

– Financial historian

Could Trump seize control of the Fed? It’s less a coup than a culmination. The system’s flaws—decades of debt-fueled growth and monetary easing—set the stage. Blaming Trump might be convenient, but it masks deeper truths about a broken economic model.

Looking Ahead: A Rocky Road

So, is the Fed setting Trump up? Maybe not deliberately, but the pieces are falling that way. The economy’s fragility, coupled with fiscal dominance, limits options. Rate cuts might delay the inevitable, but they won’t prevent a bust. Hyperinflation looms as the likely escape valve for unpayable debts.

What’s my take? The Fed and Trump are both players in a game rigged by past decisions. Pointing fingers won’t solve the debt crisis or tame inflation. As an observer, I can’t help but wonder: when the storm hits, will we focus on the scapegoat or the system that failed us?

The road ahead is murky, but understanding these dynamics—stagflation, fiscal dominance, and the Fed’s constrained choices—helps us prepare. Whether you’re an investor, a policymaker, or just curious, one thing’s clear: the economic strait is narrowing, and navigating it will test us all.