The predictable followed: news headlines, frantic speculation, and jitters on Wall Street. The Epstein story faded into the background. In the age of the internet, public memory is short and attention spans are even shorter. A shiny 'new toy' easily eclipses the 'old toy'.
News management has become remarkably simple. Traditional media outlets no longer act as 'gatekeepers,' allowing someone like Trump, renowned for his PR genius, to manipulate public opinion with relative ease.
Arends likens Trump to the internet age equivalent of Franklin Roosevelt to the radio age, and Ronald Reagan to the television age – he innately understands the medium.
The Epstein case presents an increasingly thorny problem for Trump. He has previously embraced Epstein-related conspiracy theories – that powerful individuals are implicated in the pedophile's sex scandal, and that Epstein may have been murdered in prison to cover up the scandal. Last year, Trump seemingly promised to release all 'Epstein files' if elected, but now he and his administration say 'no such files exist'.
This has led to friction with some of his most vocal supporters (and former supporters), including House Speaker Mike Johnson, Georgia Congresswoman Marjorie Taylor Greene, and podcast host Joe Rogan.
Some, including former government official Elon Musk, even suggest that Trump is suppressing the Epstein files because he himself is implicated.
For the sake of discussion, let's assume Trump is not implicated in the 'Epstein files.' However, he can't prove it. Trump has admitted knowing Epstein, commenting in a 2002 interview with Landon Thomas of New York Magazine: 'I've known Jeff for fifteen years. He's a terrific guy. It's even said that he likes beautiful women as much as I do, and many of them are on the younger side. No doubt, Jeffrey is enjoying his social life.'
In 2017, his first cabinet included the man who, as a federal prosecutor in Florida a decade earlier, let Epstein escape federal charges. Therefore, Arends points out that Trump has ample reason to do something to quell the Epstein narrative.
Of course, there's no hard evidence that the renewed rumors of 'firing Powell' are for this specific purpose. But Trump has been stoking the fires of 'firing Powell' for months. Arends says that each time the related rumors appear, there are three key points worth noting, which may prove that Trump is not serious.
If the Fed is no longer independent of direct political control, the risk of U.S. Treasury bonds will inevitably increase. This is so obvious it's almost a truism. Countries establish central banks independent of politics to reduce the risk of government debt, thereby borrowing at a lower cost.
Therefore, if Trump fires Powell, prices of medium- and long-term U.S. Treasury bonds will fall (interest rates move inversely with prices), and interest rates will rise. Firing Powell won't lower interest rates (perhaps except for the short-term federal funds rate), but instead will push them higher. The result: mortgage rates rise, business borrowing costs increase, economic slowdown or even worse.
Therefore, Arends concludes that, while it can't be 100% certain that Trump's 'talk of firing Powell' is merely a new media stunt to divert attention from the Epstein case, it's the most likely answer. This is not investment advice, but an analysis of the current situation.
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