Written by: Oliver, Mars Finance
Original Title: The Game of Power: Who Will Sit on the Federal Reserve's "Iron Throne"?
At the intersection of Constitution Avenue and 20th Street in Washington, sits the headquarters of the U.S. Federal Reserve Board - the Eccles Building. It is said that deep in the corridors of this white marble building, an uneasy ghost still wanders. He is none other than Arthur F. Burns, the former Federal Reserve Chairman who ultimately succumbed to massive pressure from President Richard Nixon and opened the floodgates of the "Great Inflation" in the 1970s.
Half a century later, a similar script seems to be brewing in a more aggressive and open manner. This is no longer a secret conversation in the Oval Office, but a carefully planned "shadow battle" intended to detonate simultaneously in public opinion and financial markets. When Donald Trump considers announcing his successor nearly a year before the current chairman Jerome Powell's term ends, he is summoning not just a future central bank governor, but also Burns' ghost. This heralds the ultimate stress test of the Federal Reserve's independence - the cornerstone of the post-war global financial order - with stakes and gameplay far beyond the past.
[The rest of the translation continues in the same professional manner, maintaining the original structure and meaning while translating to English.]No matter who is ultimately chosen, their strategic intent is clear: to transform the Federal Reserve Chairman from an independent economic technocrat into a "cabinet member" who must be accountable to the president's political agenda. This fundamentally overturns the central bank operating paradigm established since the Volcker era.
The Twilight of Consensus: When Cornerstones Begin to Shake
The "shadow campaign" is far from an isolated incident; it is a comprehensive challenge to the entire post-Volcker era consensus of central bank independence. The core of this consensus is that for long-term economic stability, monetary policy decision-making must be entrusted to an independent institution free from daily political turmoil. The success of this idea was a crucial premise for the global economy to operate in the relatively stable "Great Moderation" period over the past thirty years.
Now, this consensus is being eroded from multiple angles. On one side, there are attacks from legal and theoretical perspectives. For example, supporters of the "Unitary Executive Theory" argue that the president, as the sole head of the executive branch, should have the right to dismiss all officials, including the Federal Reserve Chairman, without the legal restrictions of requiring "specific reasons". On the other hand, the broader "Project 2025" proposes more radical reforms, including limiting the Federal Reserve's scope of responsibility and even exploring a potential return to the gold standard.
In this context, the "shadow chairman" strategy is more like a pathfinder, a stress test of the pressure to dismantle the Federal Reserve's independence "wall". If successful, its chain reaction would be far-reaching. The most direct danger is reigniting inflation at a fragile moment when the US government debt has already reached 123% of GDP. Any premature or politically motivated interest rate cut could burn the massive efforts to contain inflation over the past years.
The deeper crisis lies in eroding the credibility of the US dollar. The dollar's status as the primary global reserve currency is not based on gold or any physical asset, but built on the absolute trust of global investors in the stability of US institutions and the "risk-free" nature of US government bonds. The core of this trust precisely lies in an independent, predictable Federal Reserve that prioritizes maintaining price stability.
As former Treasury Secretary Lawrence Summers has repeatedly warned, any weakening of central bank independence will ultimately come at the cost of higher long-term interest rates, as global investors will demand a higher "risk premium" to compensate for the increasing political uncertainty in the United States. This will create a terrible vicious cycle: massive debt requires low interest rates -> political pressure erodes central bank independence -> damaged independence leads to credibility decline -> credibility decline pushes up long-term interest rates -> higher interest rates exacerbate debt problems.
Gazing at the Endgame
History never simply repeats, but always rhymes surprisingly. Today, as we gaze at this "shadow campaign" surrounding the Federal Reserve, we hear the historical echoes reverberating through the corridors of the Eccles Building half a century ago.
Only this time, the stage is larger, the stakes are higher, and the weapons are more advanced. It is no longer a power game limited to Washington, but an institutional subversion broadcast globally through modern media and financial instruments. Ultimately, what the market needs to price is not just inflation and employment data, but how much commitment a country has left to its most core economic institutions.
The ghost of Arthur Burns may never have left. He is an eternal warning, reminding people how fragile those seemingly impregnable institutional cornerstones can be in the face of immense power temptations. When the lighthouse guarding the global financial order begins to sway in the political storm, every traveler on this ocean should feel a chill.
