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There's always a certain tension between the US president and the Federal
Reserve.

James Carville, Bill Clinton's campaign official, summed it up beautifully in
the quote "It's the economy, stupid".

Voters vote with their wallets.

A healthy economy is therefore crucial for maintaining power.

And that economy is partly dependent on the Federal Reserve.

This is also why it's so important that the central bank can operate
completely autonomously.

Pressure on the Federal Reserve, however, has always been present. In 1965,
Lyndon Johnson and Fed Chairman William McChesney Martin met at his Texas
ranch. Johnson wanted a looser monetary policy to finance the Vietnam War, but
the Fed wasn't sufficiently supportive.

At one point, Johnson pushed Martin across the room and shouted at him:
"Martin, my boys are dying in Vietnam, and you won't print the money I need".

Martin was able to withstand the pressure for a while, but ultimately had to
cave and give in to the president's demands.

How long will current Fed Chairman Powell be able to resist the same pressure?

Last night, the Federal Reserve released a remarkable video in which Powell
announced that the government is threatening him with criminal charges.

The charges are related to the renovations of the Fed buildings, but it's
clear to everyone that they're simply a stick to beat the dog with.

Trump wants Powell to do his bidding or resign. And any means necessary are
good enough to achieve that goal.

These are the kinds of antics you'd expect from a developing country, but not
from the United States of America.

But when a country increasingly resembles a banana republic, it's no wonder
that it's reflected in its currency exchange rate.


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