Why can this line stop American economy

Donald Trump says he is sacking the Federal Reserve Governor Lisa Cook.

She says she is not going anywhere – and is threatening legal action.

Nobody knows how it will come out, or whether it can end in the US Supreme Court.

It is clear that it is highly unusual – and it is raising serious questions about the freedom of the Central Bank of America.

For months, US Presidents have been pressurizing the Federal Reserve, demanding interest rate cuts to promote the US economy and can make the government cheaper to borrow.

He repeatedly targets Fed Chair J Powell, calls him everything from “very late” to “Sunnaskul”.

It is dramatic – but not completely new. The President’s spats with the Fed go back to decades. In the 1960s, President Lyndon Johnson made his fed chair famous against a wall during an argument about rates.

Now what is different that Trump is not only attacking Powell – he wants to shake the entire Fed Board and replace it with those who share their political outlook. This is why economists and investors have found on the edge.

Federal Reserve – or just “Fed” – is almost since 1913.

From the late 1970s, it had two main goals: to keep prices stable and help Americans to work as much as possible.

Importantly, it is independent. This means that it can increase or reduce interest rates without the need of approval from the Congress or the President – even if it harasses politicians.

As economist Claudia Sahum calls it, Fed’s freedom exists for such moments when political leaders want policies like high tariffs that can reduce development and increase inflation.

Giving monetary policy to politics can be risky.

Cutting interest rates may look good at first – a kind of economic sugar.

But over time, it can cause increasing inflation, market volatility and high cost for borrowers.

In 2010, Fed president Ben Bernanke then warned that political intervention could damage the “boom and bust” cycles and make inflation difficult to control.

And this is not just a domestic issue.

Global investors rely as a financial secure shelter on Fed and US Treasury Bonds.

If they begin to doubt the credibility of the fed, the cost of borrowing for the US government may increase-and worldwide it will have a knock-on impact worldwide as they are used to determine the price of assets worldwide.

So far, the financial markets are taking the latest hazards of Trump in their strid.

But he can change quickly.

The major American stock markets, including all important S&P 500, had changed very little, more concerned about the upcoming results of NVidia with traders.

The dollar fell against Major currencies after the latest President’s latest Salvo against Fed.

The most important response was from the bond market. The US was paying investors in its 30 -year bonds after Trump left for Trump’s Lisa Cook.

Betting market sites such as Kalshi and Polymarket suspect that the President will succeed in excluding it.

Others say that silence response is a mistake.

The global policy of Evercore ISI and Krishna Guha and Marco Cassirghi of the Central Bank Strategy Team argue that the markets indicate that the markets have not “properly priced” the impact of Trump’s intervention.

The ability to work independently has long has been seen as the cornerstone of economic stability in the US.

Now the fear is that this ideal – like many other people – may be in danger of flowing on one side.