#the fed

I'll be in OTTAWA on WEDS (Jan 28) at Perfect Books and in TORONTO with Tim Wu on Jan 30.

The best summary of Trump's trade "philosophy" comes from Trashfuture's November Kelly, who said that Trump is flipping over the table in a poker game that's rigged in his favor because he resents having to pretend to play the game at all.

After all, the global system of trade was designed and enforced by American officials, especially the US Trade Representative. The US created a world whose most important commodities (food, oil, etc) were priced in dollars, meaning that anyone who wanted to buy these things from any country would first have to get US dollars, which they could only get by shipping their valuable stuff to the US, which sends them dollars in return.

Think about this trade for a minute: to get US dollars, people outside of the US would have to dig up or chop down or manufacture real things that were in finite supply. Meanwhile, to get the US dollars to pay for these real, finite things, the US just had to type zeros into a spreadsheet at the Federal Reserve:

https://www.youtube.com/watch?v=54fg-A1gCrM

The technical term political scientists use for this arrangement is "fucking sweet."

Two of my favorite political scientists are Henry Farrell and Dan Davies, whose new paper, "The US dollar system as a source of international disorder," was just published by The British Academy as part of its "Global (Dis)Order international policy programme":

https://www.thebritishacademy.ac.uk/documents/6018/Global_Disorder_-_The_US_Dollar_System_as_a_Source_of_International_Disorder.pdf

Farrell and Davies explore the history of the weaponization of "dollar centrality" (their term for the arrangement where the whole world agreed to treat the dollar as a neutral trade instrument), and show how Trump's incontinent belligerence fits into it, and lay out some shrewd possibilities for where this could all end up.

Farrell is one of the leading experts on how these boring, invisible, complex systems of financial settlement, fiber optic connections and other plumbing of the post-war era have been increasingly weaponized by successive US administrations. In 2023, he and Abraham Newman published The Underground Empire, an excellent book on the subject (really, the definitive book on the subject):

https://pluralistic.net/2023/10/10/weaponized-interdependence/#the-other-swifties

Davies, meanwhile, is a brilliant scholar (and explainer) of complex systems. Last year, he published The Unaccountability Machine, about the way that the feedback mechanisms in the systems that keep the world running are badly broken, leading to much of our modern dysfunction:

https://en.wikipedia.org/wiki/The_Unaccountability_Machine

Their paper represents a fusion of both of their approaches, and makes for fascinating reading. They start by characterizing the post-war global system as broadly "homeostatic," meaning that it can maintain stability in the face of shocks. Homeostasis requires a feedback mechanism so that it can constantly adjust itself – think of your home thermostat, which needs a thermometer so it can figure out when to run your furnace/air conditioner and when to stop.

Political scientists have identified many of these feedback systems. For example, KN Waltz describes how, when one "great power" starts to dominate the world, the weaker states in its orbit will switch their alliances to rival powers, in order to "balance" power between the big beasts. Smaller, poorer, and/or weaker countries that have looked to the US for trade and military alliances might switch to China if it looks like the US is getting too powerful – not necessarily because China offers a better deal than the US, but because a decisive global victory by the US would give it the power to squeeze these countries, because they'd have nowhere else to go.

Waltz's work is especially relevant this month, with Canada inking a Chinese trade deal and Canadian Prime Minister Mark Carney publicly declaring a "rupture" with the US-dominated order:

https://www.programmablemutter.com/p/davos-is-a-rational-ritual

When great powers ignore the feedback of these systems, the result is a collapse in global homeostasis, and radical shifts in the global order. Farrell and Davies argue that this is what's happening with the weaponization of the dollar, which has prompted many countries to take action that should have caused the US to back off, but which the US has ignored as it doubled down on the weaponized dollar:

https://www.bloomberg.com/news/articles/2025-10-20/ethiopia-in-talks-with-china-to-convert-dollar-loans-into-yuan

(Source)

This is unbelievable and unbelievably scary.

Tom Toles :: @TomTolesToons

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LETTERS FROM AN AMERICAN

August 26, 2025

Heather Cox Richardson

Aug 27, 2025

Today, for the second time in as many days, President Donald J. Trump suggested that Americans want a dictator. In a meeting in the Cabinet Room that lasted more than three hours, during which he listened to the fulsome praise of his cabinet officers and kept his hands below the table, seemingly to hide the bad bruising on his right hand, Trump said: “The line is that I'm a dictator, but I stop crime. So a lot of people say, ‘You know, if that's the case, I'd rather have a dictator.’”

With Trump underwater on all his key issues and his job approval rating dismal, the administration appears to be trying to create support for Trump by insisting that the U.S. is mired in crime and he alone can solve the problem. The administration’s solution is not to fund violence prevention programs and local law enforcement—two methods proven to work—but instead to use the power of the government to terrorize communities.

There is a frantic feel to that effort, as if they feel they must convince Americans to fear crime more than they fear rising grocery prices or having to take their children past police checkpoints on their way to school.

Last night, speaking with personality Sean Hannity on the Fox News Channel, White House deputy chief of staff Stephen Miller, widely believed to be the person behind the draconian immigration raids in the country, seemed to be angry that Washingtonians weren’t sufficiently grateful for Trump’s takeover of the streets. But Miller indicated that the administration is really focused on splitting Republicans and Democrats who disapprove of the administration's policies, demonizing the Democrats.

Miller asserted to Hannity that the “Democrat Party does not fight for, care about, or represent American citizens. It is an entity devoted exclusively to the defense of hardened criminals, gangbangers, and illegal, alien killers and terrorists. The Democrat Party is not a political party. It is a domestic extremist organization…. The Democrat Party, Sean, that exists today,” he said, “it disgusts me.”

Now, with Illinois governor J.B. Pritzker taking a stand against the deployment of troops in Chicago, Trump appears to be nervous about sending troops on his own hook and instead trying to pressure Pritzker to ask for them. In the Oval Office today, he complained that Pritzker wasn’t asking for troops, and on social media tonight he called Pritzker “an incompetent Governor who should call me for HELP.”

And yet, for all their talk of dispatching soldiers to combat crime, National Guard troops today were picking up trash in Washington, D.C., and working on dozens of “beautification and restoration" projects.

The administration’s focus on crime to win back support for the president is going to have to overcome increasing uneasiness with Trump’s attempt to take control of the nation’s monetary policy.

In a letter posted to social media last night at 8:02 Eastern Time, President Donald J. Trump announced that he was removing Federal Reserve Board governor Lisa Cook from her position “for cause.” That cause, he claimed, was the allegation from Trump loyalist William Pulte, who heads the Federal Housing Finance Agency, that Cook had made false statements on a mortgage years ago. With Pulte’s help, the administration has gone after a number of Democrats with such allegations. Cook has not been charged with any crime. Historically, “for cause” has meant corruption or dereliction of duty.

Trump has been at war with the Federal Reserve for months. The Fed is an independent institution that oversees the nation’s economy and manages the nation’s monetary policy, which means the Federal Reserve sets interest rates for the country. Trump wants it to lower interest rates to make it easier to borrow money. Cheaper money will goose the economy, but it is also likely to spur inflation, which is already on the rise thanks to Trump’s tariff war and massive deportations of migrant workers. Trump has been pressuring Federal Reserve chair Jerome Powell to lower interest rates or, failing that, to resign.

Trump has mused about taking control of the Fed himself, but the politicization of the nation’s monetary policy so it responds to the whims of Trump rather than actual economic conditions makes economists and most elected officials recoil. Today in his newsletter, economist Paul Krugman wrote that if Trump’s illegal firing of Cook is allowed to stand, “the implications will be profound and disastrous. The United States will be well on its way to becoming Turkey, where an authoritarian ruler imposed his crackpot economics on the central bank, sending inflation soaring to 80 percent. And,” he added, “the damage will be felt far beyond the Fed. This will mark the destruction of professionalism and independent thinking throughout the federal government.”

In May the Supreme Court suggested it would overturn an almost century-old precedent saying that the president cannot remove the heads of independent agencies created by Congress. But even then, it protected the independence of the Fed, writing: “The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.”

Trump administration officials appear to be trying to find a way around that ruling by going after Cook on trumped-up charges. After serving as a professor of economics and international relations at Michigan State University and on the board of directors of the Federal Reserve Bank of Chicago, Cook has been on the board of governors since 2022. She is the first Black woman to sit on the board and might have drawn Trump’s ire as well when she noted publicly that the jobs report earlier this month could signal an economic turning point.

Cook responded to Trump’s letter in a statement saying: “President Trump purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so. I will not resign. I will continue to carry out my duties to help the American economy as I have been doing since 2022.”

The administration’s apparent persecution of undocumented immigrant Kilmar Abrego Garcia, whom it unlawfully deported to the notorious terrorist CECOT prison in El Salvador in March and then refused to return despite court orders to do so, is a more immediate illustration of the lawlessness of authoritarian rule.

The government finally returned Abrego to the U.S., only to announce that it had secured an indictment against him in Tennessee for allegedly conspiring to transport undocumented immigrants for financial gain, charges stemming from a 2022 traffic stop for which Abrego was not charged with anything. He was jailed in Tennessee, and a judge ordered that he remain in jail to protect him from the government, which threatened to deport him again if he were released. He was finally released on August 22 and went home to his family in Maryland, but when he attended a mandatory check-in at the ICE facility in Baltimore, Maryland, on Monday, August 25, he was arrested.

Members of the administration routinely describe Abrego, who has no criminal convictions, as a gang member, a human trafficker, a domestic abuser, and child predator who is terrorizing the United States. Trump referred to him yesterday as “an animal.”

Now, as Jeremy Roebuck, Maria Sacchetti, and Dana Munro of the Washington Post explained yesterday, Abrego’s lawyers say the government is trying to coerce him into pleading guilty of human trafficking, offering to send him to the Spanish-speaking Latin American country of Costa Rica if he does, but threatening to deport him to Uganda if he does not. As legal analyst Harry Litman notes, deportation would enable the government to avoid “having to show their hand on what seems to be a very threadbare case.”

The official social media account of the Department of Homeland Security—a cabinet-level department of the United States government—trolled Abrego, whom the media often identifies as a “Maryland man,” by posting: “Uganda Man.”

U.S. District Judge Paula Xinis, whose order to return Abrego to the U.S. the government ignored for months, indicated she had no faith that the government would obey the law. She temporarily barred the administration from deporting Abrego until she can make sure the government follows the law, making Department of Justice lawyer confirm he understood that “[y]our clients are absolutely forbidden at this juncture to remove Mr. Abrego Garcia from the continental United States.”

Tonight, Democrat Catelin Drey won a special election for the Iowa state senate, breaking a Republican supermajority and flipping a seat in a district Trump won by 11.5 points in 2024. Drey won the seat by 10.4%, showing a swing of more than 2o points to the Democrats. And in a seven-way race in Georgia for the state Senate in a deep red district, the lone Democrat, Debra Shigley, came in first with 40% of the vote. Since no candidate won 50% of the vote, Shigley will face whichever Republican candidate comes out on top—the top two are currently hovering around 17%—in a runoff on September 23.

LETTERS FROM AN AMERICAN