Increasing political influence, including presidential pressure and politically-aligned board appointments, is compromising the Federal Reserve's independence. This suggests future monetary policy may be more dovish than economic data warrants, as the Fed is pushed to prioritize short-term growth ahead of elections.

The threat to the Federal Reserve's independence is not limited to a single appointment. It involves a broader potential strategy of simultaneously nominating a chair, replacing other board members like Lisa Cook, and filling vacancies as they arise. This creates the possibility for a majority of the Fed board to become politically aligned with the administration.

Rajan argues that a central bank's independence is not guaranteed by its structure but by the political consensus supporting it. When political polarization increases, institutions like the Fed become vulnerable to pressure, as their supposed autonomy is only as strong as the political will to uphold it.

While private crypto has scams, the true systemic risk is Central Bank Digital Currencies (CBDCs). Being programmable and centralized, they give governments the power to monitor, block, and control every citizen's transactions, creating an infrastructure for authoritarian control under the guise of progress.

The market's calm reaction to threats against the Fed's independence is not disbelief, but a reflection that a "tipping point" hasn't been reached. As long as the board's composition is stable, markets remain subdued, but a sudden change could trigger a rapid and dramatic repricing of risk, similar to a bankruptcy.

While tariffs were a dominant market concern previously, they have fallen in priority for investors. The primary focus has shifted to more systemic risks, including the potential for fiscal dominance over the Federal Reserve and the long-term trend of "de-dollarization" among global institutions.

While the 2008 crisis centered on commercial banks and mortgages, today's problem is rooted in the central banks themselves. The Fed's policies actively devalued US treasuries—the bedrock of the system—making this a more fundamental central banking and currency crisis, not just a banking one.

Alan Blinder argues that financial markets are severely underpricing the risk of political interference at the Federal Reserve. He cites the President's attempt to remove a governor and political appointments as clear threats that defy historical norms, calling it "one of the biggest underreactions" he's ever seen.

The debate over Fed independence is misplaced; it has already been compromised. Evidence includes preemptive reappointments of regional bank presidents and outspokenness from governors concerned about being bullied, indicating the Fed no longer operates in its prior insulated environment.