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Don’t Politicize the Fed!

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While I am no Trump supporter, I am also not someone who hates on anything and everything he does just because it’s him. For example, I was skeptical at first about the tariff plan but I think it’s actually producing some interesting and positive results for the American people. The deals Trump has gotten so far represent decent progress for Americans in the reordering of the global trade landscape. That being said, what he’s doing with the Fed is both dumb and dangerous!

We have to remember where we are in history. We live in the era of fiat currencies backed by nothing! The US Dollar is still the undisputed champ but it’s being held up by nothing more than an idea—the idea that the US government and, by extension, the American people, can be trusted. 

In the US and around much of the world, the “independent” central bank model is the only thing standing in the way of complete political control of monetary policy. For all the legitimate critiques of central banking—i.e. it’s not near as independent as we make it seem—and despite all our heartfelt political disagreements, I think we can all agree on this: turning over the execution of monetary policy to volatile, partisan politicians, many of whom are completely financially illiterate, is a terrible idea! 

Trump is playing a dangerous game with the Fed right now. It’s one thing to call Jay Powell a “loser” and to question whether he’s making another policy mistake—I completely agree that he has already made at least one in not raising rates fast enough in the pandemic era!—but it’s another to make moves that undermine the already tenuous sense of independence at the Fed. His attempt to fire Fed Governor Lisa Cook for “cause” is a blatant political move. Trump is testing the waters here to see if he can force his way into getting majority control of the Fed.

Lisa Cook is alleged to have committed mortgage fraud by representing to different lenders that different homes were her primary residence at the same time. I hate to say it but this is basically common practice. The banks offer slightly better rates for owner-occupied homes and are more than willing to look the other way or take an expansive interpretation of what “owner-occupied” may mean. I’ve been on plenty of call myself with the biggest banks in the world and seen firsthand how this works. Trump only knows about this, by the way, because he’s almost certainly done it himself!

Anyway, why is this such a big problem?

Well, we already have a currency credibility problem. The purchasing power of the US Dollar is being vaporized by persistent, structural inflation:

This inflation is a direct function of our profligate fiscal indiscretion, and now, with the passage of the Big Beautiful Bill, growing deficits are a certainty:

Foreign governments, which in the halcyon days of the Pax Americana would bail us out by continuously buying our debt, are starting to behave differently:

China is already running for the hills:

To make a long story, short: we cannot assume things will just remain as they have been. The era of America’s exorbitant privilege may be coming to an end.

I cannot underestimate how much of a big deal this is. America is rapidly moving in the direction of a regime of fiscal dominance—a situation where our large debts and deficits will force monetary policy to subordinate to the financing needs of the government. In other words, we might want to raise rates to quell inflation but doing so would be so damaging to the fiscal deficit that we simply cannot do so. 

Soon, we may be forced to choose solvency over stopping inflation. Yikes! 

Given the stakes here, we absolutely do not want the Fed to become an overly politicized organization. We want an intelligently, rationally run central bank that is as independent as possible and strong enough to balance against the obviously short-term impulses of politicians. We need to ensure that there is at least someone looking out for the genuine interests of the American people. Remember, inflation is the secret killer of all great Nations. 

The problem with going further down the road of politicization is that we are flirting with the edge of faith. We have to remember that, ultimately, our whole system is an act of collective trust.  When there’s nothing backing the US dollar except our faith in the Government, each little degradation brings us closer to the moment of crisis.

What, then, can we or should we do?

We have to take proactive steps to protect ourselves from the ravages of inflation. Period.

Given our political disfunction, fiscal dominance is all but a certainty at this point. If I’m right, this means that inflation will become a real and persistent problem. I have always believed in real estate as a great path to building wealth, but today, more so than ever. I’m calling on all Americans to prioritize owning a home at a bare minimum and, ideally, to own more real estate if possible. There are other inflation hedges out there, like gold, some equities, and maybe Bitcoin, but the perennial hedge is real estate. There’s no time to waste on this either. 

We are planning to do our part to help by offering access to our investments here in Profit+. Stay tuned for details! 

 

 

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The first step in good citizenship is to know what you are talking about! Most people think this just means reading/watching the news. But citizenship demands much more than that. We live in a representative democracy and, thus, have to actually know a little something about our representatives. They are the ones making the laws and shaping policy after all!

It can be daunting I know—in a jurisdiction like mine, there are over 20 open elected positions—but it’s easier than you think. Start by typing in your address here and seeing who your representatives are. BallotReady has done a great job compiling and organizing information and you can even click out to social media and websites to learn more. You can quickly learn a lot simply by paying attention to what your representatives are saying online.

 

For Palisades fire victims looking for a trustworthy, cost-effective homebuilder and any Los Angeles homeowners who need help with renovations or ADUs – Westward Homes

For Los Angeles real estate owners looking for sophisticated, professional property and asset management services — DNY Living

For investors interested in proprietary RE investment opportunities – Metros Capital

For RE developers who need flexible capital / savvy partners – Westward Capital

 

Stay bold. Have impact.

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