The titans

Markets didn’t crash this morning. They weren’t happy, either. But no disaster.

It’s all about Trump v The Fed. The president has ramped up his attacks on the American central bank, and the feisty 72-year-old CB boss has sniped back. All this could come to impact you, your mortgage and your daughter’s new condo later in 2026.

The orange guy wants a deep interest rate cut. Days ago he said on social media he’ll insist on a one-year 10% cap on credit card interest charges. And while he has the political power to force that on the banks (shares in Capital One, Citigroup, JP Morgan, Wells Fargo and Bank of America were all clobbered at the opening of trade Monday), he can’t make the Fed do anything.

Not yet. But he’s trying.

We all know why the White House wants the cost of money to plunge. That would wipe away negative impacts of Trump’s tariffs on consumers. It would made debt cheaper and lower financing charges for households struggling with a declining economy. It would throw more gas on Wall Street as corp borrowing costs tank. The romping federal debt would be cheaper to carry, saving tens of billions. Asset values would jump, making the Trump family wealthier.

But standing in the way is public servant Jerome Powell. We’ll move rates when the data tells us, he says. Not sooner. The president can pound salt.

Trump has endlessly insulted Powell, whose term as Fed boss ends in May (but he remains a governor until 2028). He’s also sought to turf the only black female CB board member – Lisa Cook – with a flimsy charge of mortgage fraud. That goes to the Supreme Court this month. The president is ready to announce his own pick to lead the bank, who will be a MAGA loyalist. And now the Department of Justice is moving to indict Powell for lying to Congress about the cost of renovations to the CB’s century-old Washington buildings.

Powell sees through that. So do we all. Last night he issued this extraordinary, historic, unheard-of, monumental and in-you-face-Trump, response.

So far public opinion is with Powell. Most Americans and (probably) all serious investors want monetary policy to be set independently, not by self-serving elected people. This is why the US$ is the world’s reserve currency, why US Treasuries are considered to be one of the only risk-free assets on the planet, and why people keep lending America staggering sums of money (the federal public debt is now $38 trillion).

The betting is Trump will lose this one. So, no market dump.

But the fight is far from over. This year could bring some serious surprises.

Powell could conclude that fighting the most powerful man in the world – just as you leave to retire and spend more time with your dog – ain’t worth it. He might be personally sued by Trump regarding the major renovation cost overrun, ruining the rest of his life. Also not worth it. The new Fed chair could immediately lobby for a series of cuts taking the Fed rate down a full 1% in 2026. Lisa Cook could be toast, giving Trump another chance to stack the CB board.

Current market odds are for rates to stay put this month, then again at the March and April meetings. Only in June is there a chance (47% as of today) that the Fed will chop by a quarter point. Meanwhile economists in Canada fisgure our central bank will be staying on pause for the entire year.

But wait. If a guy can kidnap the leader of a major, sovereign country and disrupt the entire western world and threaten to grab other nations, how can one old, short, skinny, gray-haired nerdy banker who cycles to work be a serious obstacle?

Because he’s right, of course. Powell has integrity. Ethics and authority. Gravitas. A moral compass.

Behold the fading hero. A decent American.

About the picture: “Peaking out from under the table is our girl Lola,” writes Debbie. “She doesn’t beg but if you look at her she gives you her biggest Smile!  Lola lost weight over the summer, ten pounds, her hips and her vet are super happy!  She’s on lower calorie food and a slow bowl, no more table treats.”

To be in touch or send a picture of your beast, email to ‘[email protected]’.

Source: https://www.greaterfool.ca/2026/01/12/the-titans/