I found something brtilliant: Trump doesn’t need to fire Powell; he can just sideline him entirely by announcing his successor tomorrow. Just like world leaders turned away from Biden, markets would turn away from Powell, and mortgage and government bond rates would start to come down immediately.
Remember what happened after Trump’s victory in 2020—Joe Biden was still technically president, but no foreign leader, diplomat, or CEO cared. They all rushed to Mar-a-Lago to meet with Trump because everyone knew who the next leader was.
Apply that same logic to the Fed. If Trump announces that the next Fed Chair is Scott Bessent, the bond market, which drives real-world rates far more than the Fed’s overnight rate, would begin ignoring Powell’s stubbornness and shift focus to Bessent’s commitment to bring rates back in line with economic reality.
Bessent would effectively become the shadow Fed chair. He could speak across the country and signal clearly: when I take office in May 2026 (when Powell’s term is up), rates are coming down by a lot.
This is a clever—if unconventional—idea rooted in *narrative economics* more than policy mechanics. But let’s break it down to see if it holds water, or if it’s just a media-friendly thought experiment.
### 🧠 The Theory
You’re applying what we might call the **”Lame Duck Doctrine”** to the Federal Reserve—basically saying:
> _Markets are forward-looking, so if Trump pre-announces his Fed Chair pick, markets will price in that future reality right now, just like they do with presidents-elect._
It’s an elegant psychological play, but there are major caveats.
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### 🔍 Real-World Friction Points
**1. The Fed isn’t the Presidency.**
Presidents are elected by the people. When the election is called, it’s over. Not so with the Fed Chair. Powell holds the legal reins *until May 2026*. Markets may anticipate, but they **can’t bypass** current policy—especially because:
– Powell still controls interest rates.
– The Fed Board still follows his direction (unless they mutiny, which is wildly unlikely).
– Bessent wouldn’t have any *actual authority* or staff.
**2. Markets care about data, not just speeches.**
Yes, markets are psychological beasts. But they don’t ignore economic indicators or current Fed guidance just because someone *says* rates will drop in 2026. They’d need to believe Bessent could convince the whole FOMC *and* inflation was truly under control.
**3. Would Bessent even have credibility?**
Unless he gives clear, data-driven speeches and interviews—*and* markets trust his forecasting—his “shadow Fed” role might feel like political theater. His background as a hedge fund manager (Soros Fund Management) adds some cred, but he’s not a policy heavyweight like Bernanke or Yellen.
**4. Bond traders are cynical, not sentimental.**
They already know Powell’s term ends in 2026. If they thought a dramatic rate drop was coming, they’d price it in already. A Trump press release won’t override their models.
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### ✅ But Here’s Where It *Could* Work
If the economy is clearly weakening, inflation is down, and Powell remains hawkish while Trump names a credible, dovish successor, **expectations could shift.** Especially:
– Mortgage rates (driven more by the 10-year Treasury than the Fed) might dip.
– Corporate bonds could benefit from improved forward guidance.
Think of it like a **“Fed futures influencer campaign.”** If Bessent speaks publicly and consistently, it could shape market psychology—especially if Powell looks out of sync with reality.
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### ⚖️ Final Verdict
**Brilliant?** Psychologically, yes.
**Legally?** No authority change occurs.
**Practically?** Limited but not zero impact.
**Narratively?** Trump would love it.
In short: **this move would game the optics, not the levers.** But in a world where narrative increasingly *is* policy (see: jawboning by Powell himself), it might just influence enough minds to shift some yields.
Want me to run a simulated “press release” from Trump naming Bessent and forecasting the reaction?