5/7/2025–|Last update: 19:36 (Mecca time)
The Wall Street Journal warned in a recent analytical report that the United States has been on the verge Central Bank From the administration Inflation AndGrowth To a tool to serve government spending priorities, a case that has long been associated with developing countries and volatile economies such as Argentina, not in the United States.
The president wants a “obedient federation”
He returned the American President Donald Trump Emphasizing his public pressure on the President of the Federal Reserve Jerome PowellDemanding it to reduce Useful interest rates Or he left his position to those who “implement the required policies.”
In an interview via Fox News, Trump explicitly said, “We are in the process of putting a person in the federal who will be able to reduce interest rates,” indicating his intention to appoint a new new president, although Powell will not end before May 2026.
These statements – according to the newspaper – not only reflect Trump’s traditional preference for a low interest environment, but rather a dangerous shift in philosophy MonetaryUsing low benefit tool to finance the huge deficit in the budget rather than targeting inflation and sustainable growth.
A rising and large price deficit
The newspaper report indicated that the “Great Great” law – which was recently approved by Congress – will raise the deficit from $ 1.8 trillion (6.4%of GDP in 2024) to 3 trillion dollars (7.1%) during a contract, according to the responsible Federal Budget Committee, and with the extension of temporary tax discounts, the deficit can reach 3.3 trillion (7.9%).
But the most worrying is that the Trump administration plans to reduce the release of long -term bonds, and instead focus on short -term cabinet bills with the aim of curbing high -term high interest rates.
But this approach is fraught with risks, as any sudden jump in a short -term benefit will be reflected directly on the cost of the debt service, which puts immediate pressure on the federal budget.
The markets are incomplete .. temporarily
Despite all these indicators, the return on treasury bonds for 10 years was closed at 4.35% on Thursday after it had risen to 4.55% last May, which reflects a relative relief in the market in part due to expectations of a “pro -Trump” background in the leadership of the federal.
In this context, economists in Goldman Sachs reported that the upcoming president of the federal will be less discomfort than the deficit, which means less interest rates in the future.
Although the markets did not translate Trump’s threats against the federal into severe inflationary expectations, “Wall Street Journal” warns that “financial domination” does not show its effects immediately, but rather accumulates gradually until it explodes in the form of an enlarged or sudden debt crisis.
“Financial domination” does not show its effects immediately, but it gradually accumulates until it explodes in the form of an enlarge
History of hegemony
The report reviewed the roots of financial domination throughout history, noting the establishment of the Bank of England in 1694 as a financier of the royal family, then the role of the federal reserve in the first and second world wars when it underwent the pressure of the US Treasury to install interest.
In the 1960s, the federal refrained from raising the benefit to prevent the influence on the issuance of bonds, which later contributed to the explosion of inflation.
But for decades, the federal tried to separate himself from politics, even in the period of 2008-2014 when he kept the benefit near zero, as his decisions were based on his independent evaluation of low enlargement, and not for direct orders from the president, according to the newspaper.
A deferred crisis, not canceled
The report warns that if this path continues, the American economy may face a financial shock similar to the one that struck Europe in the sovereign debt crisis after 2010.
He referred to an analysis of the Goldman Sachs stating that if the United States does not start austerity measures during a contract, it may need to reduce spending or raise taxes, equivalent to 5.5% of the GDP annually, which exceeds the European austerity at the time.
“Wall Street Journal” concludes its report with a warning tone, confirming that the US Central Bank is under the direction of the president instead of his independent analysis may lead to devastating results, even if it did not appear during the second Trump period.
“Yes, the markets are ignoring the danger now, but history tells us that the price is paid later, and with a complex benefit,” thus concludes the newspaper.