The Feds Can’t Save You

Across policy circles, trading floors, and social media, one debate is gaining momentum:

Should the Federal Reserve continue setting U.S. interest rates — or should we let the market decide?

This isn’t just an academic question. It’s about who holds the steering wheel of the U.S. economy and whether we still trust them to drive.

A Brief History of the Fed

The Federal Reserve was created by the Federal Reserve Act of 1913, signed into law by President Woodrow Wilson on December 23, 1913.

Woodrow said it best himself: “There has been no question in our time more anxiously debated than this question of banking reform. This measure takes control of our currency out of the hands of a private monopoly and makes it an instrument of the whole people.”

The Fed’s creation meant the United States would have a central authority for monetary policy and banking stability that would serve the public interest, not just private financial institutions.

The Fed’s original mission:

• Provide a stable money supply
• Act as lender of last resort during crises
• Smooth out the boom-and-bust cycles by adjusting interest rates and credit conditions
  

Over the decades, the Fed’s mandate expanded to include promoting maximum employment, stable prices, and moderate long-term interest rates.

The Pre-Fed US Economy

The U.S. before 1913 had no central bank. Interest rates and credit were set entirely by private banks and market forces. That often worked fine during good times but in bad times it was catastrophic. Rates would spike, credit would dry up, and economic downturns would deepen.

• The Panic of 1907 was the breaking point:
  • Triggered by a failed attempt to corner the copper market
  • Stock markets collapsed, depositors rushed to withdraw cash, and many banks and trust companies failed
  • The U.S. economy spiraled toward depression
  • J.P. Morgan personally organized a rescue by rallying major banks to inject liquidity but the crisis showed the danger of relying on one man’s influence instead of a formal institution.
    

This led Congress to create the National Monetary Commission in 1908, which studied central banking systems abroad and drafted the blueprint that became the Federal Reserve Act.‍

The Value the Fed Brings

Proponents argue the Fed is the economy’s shock absorber. By raising rates when inflation rises, and cutting them when growth stalls, it can reduce the severity of recessions and keep prices stable.

It also plays a critical role as lender of last resort: injecting liquidity when markets freeze, as in 2008 and 2020. Without that backstop, many believe financial crises would be deeper and longer.

Notable Accomplishments Credited to the Fed

While controversial, the Fed has played critical roles in stabilizing the economy during crises:

• The Great Depression (1930s): Eventually implemented policies to expand the money supply, though economists debate if this came too late
• World War II: Managed interest rates to keep government borrowing costs low, enabling massive war financing
• 1980s Inflation Fight: Under Paul Volcker, the Fed hiked rates aggressively to bring down double-digit inflation, paving the way for decades of lower inflation
• 2008 Financial Crisis: Provided emergency lending facilities and slashed rates to near zero, helping prevent a complete financial collapse
• COVID-19 Pandemic (2020): Acted quickly to stabilize markets, slash rates, and launch large-scale asset purchases to avoid a deep economic depression

Attempts to Close the Fed

Over the years, various politicians — particularly populists and some libertarians — have called for the Fed’s powers to be curtailed or for it to be abolished outright.

Notable examples:

• Ron Paul and the “Audit the Fed” and “End the Fed” campaigns in the 2000s–2010s
• Some criticism during President Trump’s term, where he publicly attacked Fed rate decisions, though he did not move to dismantle it
• These efforts have never gained enough congressional support to seriously threaten the Fed’s existence.

The Case for Market-Set Interest Rates

Some economists and investors argue that central banks distort the natural supply and demand for capital. Their main points:

• True Price Discovery: Letting the market set rates would ensure borrowing costs reflect real-time economic conditions.
• No Moral Hazard: Without the Fed “bailing out” markets, risk would be priced more accurately.
• Greater Transparency: Rates wouldn’t be influenced by closed-door meetings or policy speeches.
• Fiscal Discipline: Governments would face real borrowing costs, potentially reducing deficits.
  
  

The Case Against Removing the Fed’s Role

Critics of a purely market-driven approach point out serious risks:

• Loss of Stabilization Tools: Without the Fed adjusting rates, there’s no lever to combat inflation or recessions.
• Volatility: Markets can overshoot — pushing rates too high or too low, amplifying economic swings.
• Liquidity Crises: In times of panic, rates could spike uncontrollably without a lender of last resort.
• History’s Warning: The pre-Fed era saw frequent, devastating financial panics that destabilized the economy.

Top Supporters of the Fed

• Jerome Powell, Federal Reserve Chair — Continues championing the Fed’s independence and long-term credibility. Amid political attacks, financial leaders like JPMorgan’s Jamie Dimon have echoed this defense of institutional autonomy. Business Insider
• Moderate and centrist economists, such as Mohamed El‑Erian and Jeremy Siegel, are quietly urging Powell to resign—not as a criticism of his performance, but as a strategic move to protect the Fed’s independence under mounting political stress.
  

Prominent Critics and Opponents

• Former Governor Kevin Warsh — Delivered strong criticism in April 2025, arguing the Fed has strayed beyond its mandate, misusing tools like forward guidance and drawing caution and concern from policy hawks. Reuters+Barron's

• Stephen Miran — Recently nominated by President Trump to the Fed’s Board of Governors, Miran is aligned with Trump’s call for aggressive rate cuts and structural reform, including reducing Fed independence. Financial Times

• Donald Trump and MAGA-aligned figures — Increasingly vocal critics of Powell and the institutional Fed, Trump has attacked the chair personally and signaled eagerness to restructure or replace the institution. Aljazeera.com+MarketWatch

• Libertarians and Gold-Standard Advocates — Figures like Ron Paul, Rand Paul, and economist Mark Spitznagel continue to denounce the Fed, calling for its abolition or return to the gold standard, echoing long-standing skepticism.

The Trade-Off

At its core, the debate comes down to a choice:

Pro-Fed: Stability (Centralized Fed Control)

Centralized control by the Federal Reserve allows it to act as a lender of last resort in crises, inject liquidity to prevent bank runs, and use interest rate adjustments to smooth out the boom-bust cycle. By anchoring inflation expectations and keeping borrowing costs relatively predictable, the Fed provides businesses, households, and governments with a stable environment for long-term planning. Its ability to coordinate with other central banks during global shocks and its dual mandate to promote stable prices and maximum employment make it a powerful tool for dampening financial turmoil and sustaining economic confidence.

Anti-Fed: Freedom (Market-Set Rates)

With market-set rates, borrowing costs are determined purely by supply and demand for capital, credit risk, and inflation expectations — not central bank policy. Large government deficits push investors to demand higher interest rates, increasing debt costs. This acts as a natural brake on overspending, forcing fiscal discipline through spending cuts, tax adjustments, or structural reforms. Investors, not central bankers, act as the real-time “enforcers” of sound fiscal policy. But, without the Fed cutting rates or injecting liquidity, recessions could be deeper and longer, credit harder to get, and unemployment slower to recover.

Who Wins and Who Loses in Each System?

Where Do You Stand?

This is not a theoretical exercise. In a world of high debt, shifting global power, and rapid information flows, how we set interest rates could shape the next century of U.S. economic history.

Let’s end with a thought for you to contemplate: Should the Fed step back and let markets set interest rates — or is their guiding hand still essential?

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Your trading screen gives you the illusion of control. You can rebalance, monitor, buy, and sell. You feel in charge.

But then the sink backs up. Or you get the flu. Or you’re told we can’t upgrade the electrical grid because… there aren’t enough welders.

This is what macro really looks like—messy, physical, inconvenient. It isn’t just data and charts. It’s plumbing, supply chains, demographics, and geopolitics.

Try coding your way out of a clogged drain.

Macro Isn’t Just Theory. It’s the Terrain.

We like to think markets are driven by logic, sentiment, or central bank policy. But real-world constraints shape the battlefield. Consider:

• We need to rebuild manufacturing and mining capacity. You can’t “reshore” factories without robots—or people to build the robots.
  
• Wastewater surveillance is how we now track public health. When no one tests for Covid, the plumbing goes hi-tech.
  
• We can’t build out the grid without skilled trades. And we’ve oversold 4-year degrees while underinvesting in vocational skills.
  
• Fiat currencies are being quietly debased. The illusion of wealth grows, but so does the fragility underneath.
  
  

These aren’t headlines. They’re underlying forces that drive markets—long before you notice them on your Bloomberg terminal.

The World Is Repricing Risk

What would’ve happened if the Israel-Iran conflict lasted two more weeks? Israel was reportedly close to running out of ammunition.

U.S. officials now openly admit: we can’t fight multiple wars simultaneously. We don’t have the weapons—or the domestic capacity to build them fast enough.

China controls the rare earths. They can squeeze supply whenever it suits them.

Fertilizer supply? Fragile. And without it, global agriculture teeters.

These are macro constraints with micro implications. And they don’t come with a tidy UI.

Your Portfolio Is a Window to Your Worldview

So… how do you structure a portfolio to reflect this reality?

You start at the top:

1. Macro cycles
   
2. Relative GDP strength
   
3. Inflation trends
   
4. Global liquidity
   
5. Geopolitical risk
   
6. Trade flows
   
   

Then you look for signal.

You listen to smart macro voices, not TikTok talking heads.

You track the cycle, not the clickbait.

And then you ask:

How do I position for resilience? What do I actually want to own?

Gold, Bitcoin, and What to Watch

• Are we in a commodity supercycle?
  
• Why are central banks hoarding gold?
  
• Should you own gold via ETFs or physical?
  
• What about Bitcoin—cold storage or fund format?
  
• Can China’s robot army offset its demographic collapse?
  
• What happens if Taiwan chip exports suddenly stop?
  
  

This isn’t just theory. It’s portfolio input.

Kahneman, Bias, and the Illusion of Skill

Daniel Kahneman (RIP, March 2024) gave us the lens to think about this. Thinking Fast and Slow isn’t just a behavioral finance classic—it’s an investment survival guide.

System 1 is fast, reactive, emotional.

System 2 is slow, analytical, disciplined.

When markets lurch, which system are you using?

Common Biases That Hurt Investors:

• Anchoring – Fixating on arbitrary price points
  
• Loss Aversion – Overreacting to small downside risk
  
• Regret Aversion – Making irrational trades to avoid missing out
  
• Confirmation Bias – Only seeing data that supports your thesis
  
• Overtrading – Confusing action with strategy
  

Micro Tip: Don’t Overcomplicate Trades

Obsessing over a $0.99 vs $1.01 entry point? Been there.

What difference does it make if you’re holding for a 10X gain?

If the bid-ask is wide, buy at the ask and move on.

Watch order size. Accumulate gradually if needed.

Don’t be conspicuous in the market, especially with small market-cap stocks. Be deliberate. 

Watch trade volumes and buys or sell inside them.

Final Thought: Reality Always Wins

Your model is only as good as the inputs.

Your strategy is only as strong as the assumptions you check.

Macro isn’t just theory. It’s the terrain you’re trading on.

And reality, as they say, bats last.

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→ Join the Fearless Investor Community

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