By Suzanne BlakeShareNewsweek is a Trust Project member"Big Short" investor Michael Burry has warned against what could happen if the Federal Reserve is interfered with by the Trump administration in a new podcast episode shared on Substack.
“I think when Trump starts running the Fed, it might become the end of the Fed because if he's running the Fed, then everybody's gonna hate it,” Burry said on the The Big Short Against the Rules Companion Podcast. “Not just me. So we'll see. I think the Fed is, has done a lot of damage over the last a hundred years or since its inception in 1914. And I feel we don't need the Fed. We don't need it.”
Why It Matters
Burry became known for his 2008 housing market collapse prediction, which was depicted in the 2015 movie The Big Short.
His economic analysis has reflected incoming strife for Americans, and his new commentary on interest rates and the overinvestment in AI could have long-standing implications.
...What To Know
Burry broke his silence on the topic of the Federal Reserve under Trump and called into question how the president is handling the setting of interest rates.
“Unless the Fed is going to say look, like, why are they gonna drop rates?" Burry said. "There's no reason to drop rates. Now inflation's starting to come up a little bit. The economy is muddling along, but our neutral rate is not 1 percent or 0 percent or where Trump wants it.”
Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, said Burry was effectively “calling the Fed’s bluff.”
“He's right that politicizing monetary policy is the fastest way to destroy what little credibility they have left,” Ryan told Newsweek. “When more than 80 percent of economists already believe Trump's trying to gut Fed independence, it's no longer conspiracy theory anymore. Everyone sees it for what it is, institutional demolition in real time.”
Trump has been vocal about wanting the neutral rate, which is the interest rate at which monetary policy is seen as neither accommodative nor restrictive, at about 0 percent. The Cleveland Fed has pegged the neutral rate at about 3.7 percent.
“Cut below that just because a president demands it?” Ryan said. “You're pouring rocket fuel on an economy that doesn't need it or even want it. And the inflation hangover will make 2021-2023 look like a practice run.”
What People Are Saying
Michael Ryan, a finance expert and the founder of MichaelRyanMoney.com, told Newsweek: “Here's what Main Street needs to understand: If Trump gets his way and the Fed cuts rates just to goose growth while inflation's ticking back up...savers and retirees eating a fixed income are the collateral damage.”
Alex Beene, a financial literacy instructor for the University of Tennessee at Martin, told Newsweek: “The continued push for lower interest rates is concerning, primarily because of the effects it could trigger. While many Americans see the benefits of lower rates on various types of loans, the reality is any savings is usually offset by jumps in pricing due to lower rates and more access to funds. The current plan of the Fed is the right one of slowing lowering rates as economic data justifies the move.”
Kevin Thompson, the CEO of 9i Capital Group and the host of the 9innings podcast, told Newsweek: “Burry is saying the quiet part out loud. Trump has no real economic background to truly understood who inflation is impacting, nor does he truly care. The scoreboard is how people feel about him and he will use the Fed to create that picture, even if the economics says otherwise.”
What Happens Next
While Trump interfering could unite Americans against the Fed, there could be long-standing consequences, Ryan said.
“Trump interfering might actually unite everyone against the Fed for the first time in a century," he said. "Americans hate inflation more than they love their political tribe. And if the Fed becomes Trump's lapdog, voters will finally ask the right question: Why do we need an ‘independent’ central bank that isn't actually independent?”
Request Reprint & LicensingSubmit CorrectionView Editorial & AI Guidelines
Add Newsweek as a preferred source on Google to see more of our trusted coverage when you search.Recommended For You
PoliticsDemocrat Says Trump Admin’s ‘Absurd’ Actions Will Help ICE Bill Succeed6 min read
PoliticsRepublican Ousted by Democrat in Georgia3 min read
NewsVideo of Hegseth Telling Military Not to Follow ‘Illegal Orders’ Resurfaces5 min read
NewsMAGA Reacts to Tennessee Special Election Results as Van Epps Wins2 min read
PoliticsTrump’s DOJ Sues 6 More States Over Voter Data3 min read
NewsMatt Van Epps Retains GOP Seat Over Aftyn Behn Despite Democrat Gains4 min readRelated Podcasts
Top Stories
NewsExclusive: Democrat Targets Trump’s $175B Immigration Funds for Housing7 min read
NewsVideo Shows F-16 Thunderbird Crash in California1 min read
For MembersNewsUncommon Knowledge: Will Trump Accounts Pay Off?6 min read
NewsNew Videos and Photos Released from Jeffrey Epstein’s Private Island4 min read
NewsICE Arrests Afghan National in Virginia Accused of ISIS-K Support1 min read
NewsMike Lindell Registers to Challenge Tim Walz in Minnesota Governor’s Race4 min readTrending
WeatherList of Schools Closed Tuesday as Snowstorm Hits4 min read
TennesseeTennessee Special Election: Behn Teases Another Run After Losing to Van Epps2 min read
WeatherWinter Weather Warning for Texas as Snow to Hit3 min readRepublicanRepublican Ousted by Democrat in Georgia3 min read
Live BlogNATO Warns Putin: ‘We’re Not Going Anywhere’—Ukraine War Live Updates2 min readOpinion
OpinionPete Hegseth Is Not a ‘War Criminal’ | Opinion6 min read
OpinionLebanon 2.0—Shepherding the Path to Peace | Opinion4 min read
OpinionThe Cost of Detaining Immigrants Working Legally | Opinion5 min read
OpinionProsecuting Congress for Stating the Law: An Impeachable Offense | Opinion4 min read
For MembersOpinionConventional Wisdom: Trump Pardons Former Honduran President3 min read
