The DOJ Comes for Jerome Powell | Prof G Media

Quick Overview

The Justice Department opened a criminal investigation into Federal Reserve Chair Jerome Powell, allegedly examining whether he lied to Congress about Fed building renovations, but experts Liz Hoffman and Justin Wolfers universally concluded this is a punitive, unprecedented pressure campaign aimed at coercing the Fed into lowering interest rates to serve the President's fiscal interests, a move that historically leads to hyperinflation.

Key Points: The DOJ launched a criminal investigation into Jerome Powell for allegedly lying to Congress about Fed building renovations, which Powell stated is a pretext for the administration's threats to lower interest rates. Powell released a rare video statement calling the investigation "unprecedented" and asserting that criminal charges stem from the Fed setting rates based on public service rather than the president's preferences. Justin Wolfers warned this action places America in a club of nations like Russia, Venezuela, and Turkey that experienced economic instability after a strongman leader threatened the central bank chair, leading to fiscal dominance. Fiscal dominance occurs when the head of state pressures the central bank to lower interest rates to reduce government interest payments, which, if done below current conditions warrant, causes inflation to spiral, potentially leading to hyperinflation. Despite the gravity of the news, major indices like the Dow and S&P closed at all-time highs, while gold and silver hit record highs, suggesting markets initially treated the event as theater or a non-event. Republican Senators like Tillis and Murkowski publicly condemned the action, with Tillis stating he will not vote for a Fed chair nominee until the DOJ issue is cleared up, potentially thwarting the appointment of a compliant successor. Powell's legacy is being rewritten; he is credited with a textbook response to the pandemic and showing "enormous spine" by publicly resisting coercion, contrasting with other leaders who have rolled over.