"Investors need to prepare for Trump's massive inflation"

Prices will probably rise as a result of Donald Trump's actions against Jerome Powell, the head of the Federal Reserve

According to Terry Tanaka, investors should be prepared for the worst.

This is a strange legal action. . The chairman of the US central bank, the Federal Reserve, Jerome Powell, may now be charged with a crime for renovations to the Fed's headquarters. It is difficult to see how the £2.5 billion spent on upgrading the Federal Reserve's offices really matters, considering that it oversees an economy valued at £30 trillion and the world's reserve currency. Nevertheless, it is obvious that Donald Trump has made the decision to use it as a weapon for a full-scale attack on a Fed chairman he would like to remove.

Powell was adamant that the legal assault was merely an attempt to intimidate the Fed. "The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the president's preference," he said in a statement. Put differently, it is an attempt to give the president more authority over monetary policy and a political assault on the Fed. Whoever is chosen to succeed Powell in the event that the courts remove him from office will undoubtedly be following direct orders from the White House.

That is a significant and risky development. This is not to say that independent central banks shouldn't be criticized. They have grown too strong, too self-assured, and too quick to print money over the last thirty years. You could argue that independent banks have allowed industry to be hollowed out while inflating a number of asset bubbles, supporting frivolous politicians, and giving priority to trendy causes rather than guaranteeing greater stability, which is what they were intended to do. Reform is warranted. However, there is a significant distinction between that and an attempt to give the White House the authority to set rates.

That presents two significant issues. First, it appears that Trump is adamant about keeping interest rates under his own control, either directly or through a subdued Fed proxy. There is prior experience with that. Prior to Gordon Brown's independence of the Bank of England in 1997, the UK had one of the worst inflation records in the world due to the chancellor's control over interest rates. Furthermore, Trump is arguably the worst candidate to set rates. He is erratic, he frequently changes his mind, he disregards advice, and because of his declining approval ratings, he will continuously attempt to lower rates in order to increase short-term demand. More importantly, it is difficult to imagine how the president would ever relinquish the authority to set rates. It is too strong a force to give up. The United States' monetary policy will always be politicized.

Under Trump, how bad will things get?

The president's other actions seem to be intended to impede the operation of the free market and raise prices. With an average import tax of 18%, the US has already imposed the highest tariffs since the 1930s. Shutting off its markets to international competition will only result in lower quality and higher prices. Trump only pledged to cap credit card interest at 10% last weekenda populist move typical of the far left. Additionally, Trump has begun limiting corporate investment in real estate. Regardless of whether there is a business case for investing in Venezuelawhich is unlikely given that oil prices are at £50 per barrelhe is ordering the oil companies to do so. There doesn't seem to be a single, well-thought-out plan, but rather a number of government-instigated market manipulations. Prices in economies under state control are always higher.

All things considered, it is obvious that the US will eventually experience a significant increase in inflation. There is no way to know for sure how bad it will get; it will depend on other developments in the global economy. However, we are aware that once prices begin to rise, it will be extremely difficult to bring them back under control. Additionally, rising US prices will result in higher global prices. Inflation is likely to swiftly spread to Britain and the rest of Europe. Given that the price of gold is reaching all-time highs every week, investors are already preparing for that. It is inevitable that defensive asset prices will rise significantly.

Learn more about Federal Reserve Jerome Powell and Donald Trump.