“Trump’s Rage, Powell’s Restraint: How the Interest Rate Standoff Could Reshape Markets”

Trump likely harbors deep resentment toward Fed Chair Jerome Powell right now. From his perspective, Powell is hesitating in the face of a national inflection point — a critical moment not just for the U.S. economy, but for preserving American global hegemony. This isn’t just a domestic matter. It's about resisting the shift of global power and securing America's dominant position for the long term.

The Trump administration believes that interest rate cuts are necessary to achieve this, but the Fed’s reluctance is seen as a major obstacle. Why? Because the role of government has fundamentally changed.

For decades, we lived in an era of small government. That model prioritized market forces and corporate autonomy. The government merely created conditions for private growth, intervening minimally. But today, we are entering a renewed era of big government — one where the state chooses strategic sectors and directs capital and policy to grow them. If pre-COVID America was still shaped by small-government logic, the post-COVID world — and especially Trump’s second-term ambitions — mark a return to state-led growth. Think 1970s Korea, but scaled up for the U.S.

Trump’s version of big government has two objectives: growth in future industries like AI, robotics, autonomous vehicles, and quantum computing — and destruction of strategic competitors. But this requires one thing above all: money.

And in the U.S., money doesn’t come from trade surpluses — it comes from debt. America must issue large volumes of government bonds to finance this agenda. But issuing long-term debt suppresses growth, as it locks up capital and offers little utility as collateral. That’s why the Trump strategy depends on short-term Treasuries.

These can be used as collateral in repo markets and effectively function like cash, allowing liquidity to circulate while still funding the government.

Here’s the catch: if interest rates remain high, bond prices fall — and who wants to buy short-term debt today when it might yield more tomorrow? Demand weakens, yields spike, and the Treasury struggles to raise funds. The Fed must signal rate cuts to revive demand. That’s why Trump is furious with Powell. Lower rates would stimulate demand for bonds and allow the government to finance its big-state agenda at a sustainable cost.

But Powell, understandably, is cautious. Inflation — especially from upcoming tariffs — could surge if stimulus is mistimed. The Fed cannot afford to misstep. Yet the pressure is mounting. Several Fed officials have recently hinted at a July rate cut, signaling a willingness to tolerate temporary inflation in exchange for long-term growth — aligning more closely with Trump’s vision.

Investors must recognize this shift. The playbook of the past few decades — deflation → low rates → equity rally — no longer applies. The state now chooses the winners. Growth in strategically backed industries will outpace the market, while inflation cycles may become more volatile and shorter in duration.

This is not a time for chasing short-term rallies. It’s a time to position for long-term structural growth. Only those who can identify and ride the next wave of national industrial strategy — patiently and wisely — will thrive.