Trump’s Favorite Whipping Boy

The Trump-Powell Smackdown

It was just another speech this morning by Federal Reserve chair Jerome Powell. Except that these days, there’s no such thing for him as “just another speech.”

He delivered the opening remarks during a conference at Fed headquarters in Washington. The confab has a mouthful of a title: Integrated Review of the Capital Framework for Large Banks Conference. Grabs you by the shirt collar, right?

The topic is surely important… but for everyone in the room, it is overshadowed by the question: “Is Powell a dead man walking?”

As we mention in passing now and then, Donald Trump drops regular hints that he might (or might not) fire Powell before Powell’s term is up in May of next year.

Trump is peeved. He wants the Fed to lower short-term interest rates to goose the economy — which the Fed has been reluctant to do given that the inflation rate is still elevated by pre-2020 standards.

Under the law, a president can fire a Fed chair “for cause” — a term that the law leaves rather vague.

Last Friday, Paradigm’s Jim Rickards took on the topic for readers of Rickards’ Strategic Intelligence — wearing his hat as both our macroeconomics maven and as a Wall Street lawyer who regularly dealt with Fed officials.

“In most circumstances,” Jim writes, “cause would include any crime or even noncriminal activities if they constituted material misrepresentations, violations of internal policies and procedures, ignoring bad acts by others and any breaches of fiduciary duties to the institution. It might also apply to other breaches that might not be crimes such as fudging expense reports, diverting funds for unauthorized uses, etc.”

So if the Fed chair is lining his pockets with money from the till, that clearly constitutes “cause.”

But if the Fed simply isn’t lowering interest rates fast enough for the president’s liking? That’s way more iffy and it’s never been tested in court.

Which brings us to the matter of renovations to the Marriner Eccles building, the Fed’s headquarters since 1937.

We mentioned this situation at the start of July. The project began in 2021 with a budget of $2.5 billion.

This past spring, the New York Post reported on some of the lavish amenities: “The plans include rooftop garden terraces, skylights, ornate water features and a new elevator system that allows board members to be dropped off directly in their VIP dining suite.”

Questioned under oath during a Senate hearing last month, Powell said the report was “misleading and inaccurate. There’s no VIP dining room, there’s no new marble. There are no special elevators. There are no new water features, there’s no beehives and there’s no roof terrace gardens.”

But a subsequent Post story asserts that Powell’s statements “directly contradicted the project’s own planning documents, which were signed off on by government pen pushers in 2021 — and which haven’t been revised since.”

Are Powell’s statements a firing offense? “No one knows but, in my view, it might be just enough to support firing Powell,” says Jim.

“If Trump did that, it’s unlikely Powell would litigate the matter. In fact, if Powell saw it coming, he might resign first just to avoid the taint on his record of public service going back to 1990.”

But Jim says from the standpoint of sheer politics, Trump would be well advised to leave Powell in place.

“If Trump fires Powell now and names a replacement, Trump will own the Fed. If the economy heads south, Trump will get all of the blame. By keeping Powell around, Trump can use him as a pinata and blame him for everything.

“That may actually be Trump’s plan, in which case one can consider all of the noise and name-calling today as part of an orchestrated plan to hold Powell responsible for bad economic outcomes. For his part, Powell feels some obligation to hang on in order to uphold the ‘independence’ of the central bank and show it cannot be bullied by the president.

“With Powell hanging on and Trump having fun bashing Powell, this circus may continue for some time.”

If so, any reaction in the markets to any remark by the president will be short-lived — background noise amid more important things like consumer demand, corporate earnings and so on.

[Editor’s note: Only a short time remains before you can act on Jim Rickards’ latest presentation — in which he laid out an “American Birthright” trade with the potential to 10x your money.

The most likely profit catalyst is an event scheduled for today — so you’ll want to click here and check out what Jim has to say while there’s still time to act.]

10 More Days

For whatever it’s worth, the president’s deadline for “reciprocal tariffs” is 10 days away — Friday, Aug. 1.

Treasury Secretary Scott Bessent said on Fox Business this morning that it’s “a pretty hard deadline… for all countries because what I think will happen is that the tariff level will boomerang back to the reciprocal level from April 2.”

As you might recall, the April 2 “Liberation Day” announcement led to an ugly reaction in both the stock and bond markets. The bond market freakout resulted in a 90-day tariff pause on April 9, to allow time for country-by-country negotiations. Then once July 9 rolled around, the deadline was postponed to Aug, 1.

(With 10 days remaining, agreements are in place with only the United Kingdom, Vietnam, Indonesia and the Philippines.)

Meanwhile, Bessent says a separate Aug. 12 deadline to complete trade negotiations with China might be pushed back.

We can’t say it often enough. Businesses can adjust to bad news. But they can’t handle uncertainty. Will the imported goods they rely on be subject to 10% tariffs or 25% or 50%? Craig Fuller of the logistics firm FreightWaves says companies are starting to buckle under the pressure of not knowing.

All that said, Wall Street is shrugging off the uncertainty — perhaps on the “TACO” theory, a saying making the rounds these days about how “Trump always chickens out.”

The S&P 500 and the Nasdaq have been hovering near all-time highs in recent days. At last check, the S&P is down just barely from yesterday’s record close over 6,300. The Nasdaq is down nearly a half percent.

Elsewhere, gold has pushed over $3,400 for the first time in over a month, the bid now $3,424. Silver has powered over $39, another high last seen in 2011.

When it comes to digital nondollar assets, Bitcoin is hanging tough just below $119,000 while Ethereum has pulled back to $3,712.

Crude is down a buck to $66.23, approaching the bottom of its trade range the last two weeks.

Fake It Till You Make It

Rarely do we do a blatant told-you-so in these virtual pages… but we’re making an exception today.

From the front page of today’s Wall Street Journal print edition:

A $500 billion effort unveiled at the White House to supercharge the U.S.’ artificial-intelligence ambitions has struggled to get off the ground and has sharply scaled back its near-term plans.

Six months after Japanese billionaire Masayoshi Son stood shoulder to shoulder with Sam Altman and President Trump to announce the Stargate project, the newly formed company charged with making it happen has yet to complete a single deal for a data center.

Son’s SoftBank and Altman’s OpenAI, which jointly lead Stargate, have been at odds over crucial terms of the partnership, including where to build the sites, according to people familiar with the matter.

The promise of an “immediate” $100 billion investment has dwindled to the possibility the companies might have one data center built in Ohio before year-end.

The day after the announcement by Trump etal. in January, your editor ventured that Stargate was all smoke and mirrors.

Understand, this is part and parcel of how SoftBank’s Son operates. Dan Amoss, who’s Jim Rickards’ senior analyst, puts it this way: “Promise 10x to 100x of what is economically realistic and then hope that the cost of equity capital remains forever below the risk-free interest rate.”

Fake it till you make it, huh?

Comic Relief

There’s been so much good Epstein memery going around in recent days. Here’s one example I encountered today…

Program note: Barring any unexpected developments in the markets, tomorrow will bring a comprehensive 2025 follow-up to our Nov. 21, 2023 edition titled, “From JFK To Jeffrey Epstein.”

Sugar vs. HFCS

➢ As it happens: On the heels of its quarterly earnings report today, KO said it would indeed release a new version of Coke in the United States made with cane sugar.

“I think you and I read different research regarding HFCS,” said one reader. “I'm quite sure its use is proven to be much more a factor in the development of diabetes and many other health-related concerns. I stopped reading your article at that point.”

We heard from another reader who blames HFCS for his diabetes, and the diabetes experienced by his loved ones: “I was drinking two liters a day of pop for years and if I knew corn syrup was gonna do that to me, I would’ve stopped because the sugar had never done that to me.”

A third took exception to Emily’s assertion that there are few differences in the health impacts of sugar versus HFCS. “This will reinforce this belief with our fellow readers that HFCS is safe,” this individual writes. “It reflects very poorly on Paradigm's credibility.”

When I suggested Emily take on the Coke story for Saturday, it wasn’t our intention to stir up a hornet’s nest on which sweetener is better or worse.

We just wanted to use the “Mexican Coke” phenomenon to illustrate the folly of government intervention in the economy via both subsidies for corn and import quotas on sugar.

But as long as folks have their back up…

“There is absolutely no difference between sucrose (Mexican Coke) and high-fructose corn syrup (U.S. Coke),” endocrinologist Robert Lustig tells Newsweek.

"They both cause mitochondrial dysfunction and chronic metabolic disease. The only difference is price. High-fructose corn syrup is half the cost, so manufacturers can afford to put more in, and make more profits. Otherwise, they're exactly the same."

Lustig, we’ll point out, is not a mainstream figure. He’s made plenty of enemies in the medical field during a career treating childhood obesity. His Wikipedia entry has links to conventional scientists sniffing at his description of dietary fructose — present in both sugar and HFCS — as a “poison.”

Sugar and HFCS are factors behind the obesity-and-diabetes epidemic, yes — but at the root is the government’s five-decade demonization of saturated fat.

It started in 1976 with a series of hearings convened by the late Sen. George McGovern (D-South Dakota). The result was the feds’ publication of the first Dietary Guidelines for Americans in 1980.

From that point on, saturated fat was the enemy. Butter? Cheese? Red meat? Avoid.

Just one problem: The human body needs saturated fat to feel satisfied.

But the Dietary Guidelines quickly became the received wisdom. The makers of processed foods responded by removing the fat. Unfortunately, that rendered the foods as tasty as cardboard. Solution? Substitute sugar for the missing fat.

New problem: Sugar, unlike saturated fat, does not leave the body feeling satisfied; instead, it stimulates a craving for still more sugar.

So by the early 1990s, Americans were downing entire boxes of "SnackWell's" cookies in one sitting and thinking it was all good. Hey, they're low-fat!

When I last took on this topic over a decade ago, it seemed as if the tide was turning with the publication of books like Gary Taubes’ Good Calories, Bad Calories (2007) and Nina Teicholz’ The Big Fat Surprise (2014).

But no: The 2025 edition of the Guidelines — they’re updated every five years — proudly proclaims that “Since the first edition of the Dietary Guidelines was published in 1980, each subsequent edition has consistently recommended limiting consumption of saturated fat.”

That’s even though a meta-analysis of hundreds of studies found in 2014 that — as Teicholz wrote in The Wall Street Journal — “Saturated fat does not cause heart disease.”

But the feds’ jihad against saturated fat is certainly lucrative for the makers of GLP-1 weight-loss drugs, no?

Best regards,

Dave Gonigam
Managing editor, Paradigm Pressroom's 5 Bullets