Powell’s Capitulation and the Road Back to Money Printing

“When there are low interest rates, there is a very low gravitational pull on asset prices.”

— Bill Clinton

September 25, 2025 — Last week, the Fed cut interest rates by 25 basis points, lowering the target range to 4.00–4.25%.

On the surface, that wasn’t a surprise. But after months of Fed Chair Jerome Powell insisting the Fed would stay the course — warning about sticky inflation, and trying to project independence — this sure looked like capitulation to President Trump.

If you’ve been following along, you know Trump’s been on Powell about cuts since before he even set foot back in the Oval Office. And earlier this month, he went beyond words and started reshaping the Fed itself — first by installing Stephen Miran, then by trying to boot Governor Lisa Cook on mortgage fraud claims.

Now, Powell will never admit it — but the cut says it all. Trump is winning.

Of course, the Fed dressed it up differently. Here’s what Powell said when pressed about cutting rates without inflation anywhere near their 2% target:

I would look at it this way. We fully understand and appreciate that we need to remain fully committed to restoring 2% inflation on a sustained basis and we will do that. At the same time, we’ve got to weigh the risks to the two goals and I would say since really since April to me the risks of higher and more persistent inflation have probably become a little less and that’s partly because the labor market has softened, GDP growth has slowed. And so I would just say that the risks there have been less than than one might think. And in terms of the labor market, what we’re seeing is unemployment is still low. It’s still a relatively low rate, but we’re seeing downside risks.

Translation: We’re cutting rates because we’re scared of recession (not because we’ve “conquered inflation”).

I mean, sure — if you’ve got to do the president’s bidding, then at least try to save face by hinting that not everything is perfect under Trump. That part makes sense.
The problem is that the Fed’s own projections cut straight against this rhetoric.

According to their latest Summary of Economic Projections, they expect GDP growth of 1.6% this year — up from 1.4% projected in June. So, at least on paper, the economy looks better than expected.

What about inflation? Surely, by now they’d at least be projecting it to glide back toward their 2% target before long.

Not really.

Back in June, their projection called for PCE inflation — the Fed’s preferred gauge — to end the year at 3.0%. And yesterday? Still 3.0%. In other words, they’re literally expecting inflation to accelerate from the current 2.6% level, which is already well above their 2% target.

Core PCE — which the Fed also loves to highlight, probably because it excludes such “non-essentials” as food and energy — tells the same story. It’s sitting at 2.9% now and projected to hit 3.1% by year-end, unchanged from June’s forecast.

So let me get this straight: The economy is growing faster than expected, inflation is running hot and expected to get worse, yet they’re cutting rates anyway.

Yeah, that sure looks like giving in to Trump.

And don’t forget the market. The S&P 500, Dow, and Nasdaq are all sitting at or near all-time highs. When Powell was pressed on the risks of cutting in that environment — basically, whether he was fueling a bubble — here’s what he said:

You know, we’re tightly focused on our goals, right? And our goals are maximum employment and price stability. And so we take the actions that we take with an eye on those goals separately. And that’s why we did what we did today. Separately, we monitor financial stability very very carefully. … We don’t have a view that there’s a right or wrong level of asset prices for any particular financial asset, but we monitor the whole picture really looking for structural vulnerabilities and I would say those are not elevated right now.

That’s just a long way of saying: we’re cornered.

Powell can pretend all he wants that he doesn’t care where the stock market goes. But you know who does care? The White House — especially with the 2026 midterms coming up.

Chalk up another point for Team Trump.

Bottom line: Powell knows inflation isn’t tamed. He knows the market’s frothy. He knows cutting now risks fueling bubbles. But with Trump breathing down his neck, he’s out of options.

But here’s the problem.

The Fed only controls short-term rates. Long-term rates — like 10-year Treasurys and mortgages — are set by the market.

In other words, the Fed can’t just wave a magic wand at an FOMC meeting and force interest rates lower across the entire yield curve. Case in point: between September and December 2024, the Fed cut rates three times by a full percentage point — yet U.S. government bond yields actually went up by 1%.

And that means one thing: the Fed will have to dust off quantitative easing (QE) and directly intervene in the bond market.

You’ve probably heard of QE — it’s when the Fed buys government debt, creating artificial demand for Treasurys to push yields down. In plain English: money printing that props up Wall Street while sticking Main Street with the bill.

QE is, of course, the opposite of QT (quantitative tightening), where the Fed sells off securities or lets them mature in an attempt to pull money out of the system and tame inflation — something the Fed has supposedly been doing since 2022.

Trouble is, their so-called QT program has been pathetically ineffective. Take a look at the next chart.

Turn Your Images On

After three years of “tightening,” the Fed’s balance sheet sits at $6.6 trillion—down just 27% from the pandemic peak of $9 trillion. They’re nowhere close to pre-pandemic levels of roughly $4 trillion.

Which means that when the Fed inevitably restarts QE to push long-term rates down, it’ll be starting from an already bloated balance sheet.

And that’s the problem.

Remember what happened when they conjured $5 trillion out of thin air during the pandemic? Inflation ripped to 9% — the highest in forty years.

Kicking off the next money-printing cycle from $6.6 trillion instead of $4 trillion — with so much pandemic-era cash still sloshing around the system — all but guarantees double-digit inflation. We’re talking about potential currency destruction on a scale — and at a speed — America has never seen.

Position accordingly.

We believe the Fed’s move back into easy money will set off a massive bubble in commodities — especially in monetary metals like gold and silver.

Now, you might think you’ve missed the boat with gold at record highs and silver at 14-year highs. But, mining stocks are still sitting near their cheapest levels in relative terms.

Lau Vegys
Doug Casey’s Crisis Investing & Grey Swan Investment Fraternity

P.S. from Addison: Andrew Packer and Shad Marquitz broke down the latest moves in the commodity market on Grey Swan Live! this afternoon.

With the Fed cutting interest rates again, it’s clear that commodities have further upside ahead. However, in the short-term, there’s been a speculative burst higher that may need a few weeks to cool off.

Paid-up Fraternity members can catch the replay once it’s up on our site – and get the full list of over a dozen companies that Andrew and Shad discussed, covering the gamut from gold and silver stocks, to copper and uranium opportunities, and ultra-small players in areas such as rare earths and antimony.

If you’d like, you can drop your most pressing questions right here: Feedback@GreySwanFraternity.com. We’ll be sure to work them in during the conversation.

“When there are low interest rates, there is a very low gravitational pull on asset prices.”

— Bill Clinton

September 25, 2025 — Last week, the Fed cut interest rates by 25 basis points, lowering the target range to 4.00–4.25%.

Now, Powell will never admit it — but the cut says it all. Trump is winning.

Of course, the Fed dressed it up differently. Here’s what Powell said when pressed about cutting rates without inflation anywhere near their 2% target:

I would look at it this way. We fully understand and appreciate that we need to remain fully committed to restoring 2% inflation on a sustained basis and we will do that. At the same time, we’ve got to weigh the risks to the two goals and I would say since really since April to me the risks of higher and more persistent inflation have probably become a little less and that’s partly because the labor market has softened, GDP growth has slowed. And so I would just say that the risks there have been less than than one might think. And in terms of the labor market, what we’re seeing is unemployment is still low. It’s still a relatively low rate, but we’re seeing downside risks.

Translation: We’re cutting rates because we’re scared of recession (not because we’ve “conquered inflation”).

What about inflation? Surely, by now they’d at least be projecting it to glide back toward their 2% target before long.

Not really.

So let me get this straight: The economy is growing faster than expected, inflation is running hot and expected to get worse, yet they’re cutting rates anyway.

Yeah, that sure looks like giving in to Trump.

You know, we’re tightly focused on our goals, right? And our goals are maximum employment and price stability. And so we take the actions that we take with an eye on those goals separately. And that’s why we did what we did today. Separately, we monitor financial stability very very carefully. … We don’t have a view that there’s a right or wrong level of asset prices for any particular financial asset, but we monitor the whole picture really looking for structural vulnerabilities and I would say those are not elevated right now.

That’s just a long way of saying: we’re cornered.

Powell can pretend all he wants that he doesn’t care where the stock market goes. But you know who does care? The White House — especially with the 2026 midterms coming up.

Chalk up another point for Team Trump.

Bottom line: Powell knows inflation isn’t tamed. He knows the market’s frothy. He knows cutting now risks fueling bubbles. But with Trump breathing down his neck, he’s out of options.

But here’s the problem.

The Fed only controls short-term rates. Long-term rates — like 10-year Treasurys and mortgages — are set by the market.

And that means one thing: the Fed will have to dust off quantitative easing (QE) and directly intervene in the bond market.

Trouble is, their so-called QT program has been pathetically ineffective. Take a look at the next chart.

Turn Your Images On

Which means that when the Fed inevitably restarts QE to push long-term rates down, it’ll be starting from an already bloated balance sheet.

And that’s the problem.

Remember what happened when they conjured $5 trillion out of thin air during the pandemic? Inflation ripped to 9% — the highest in forty years.

Position accordingly.

We believe the Fed’s move back into easy money will set off a massive bubble in commodities — especially in monetary metals like gold and silver.

Now, you might think you’ve missed the boat with gold at record highs and silver at 14-year highs. But, mining stocks are still sitting near their cheapest levels in relative terms.

Lau Vegys
Doug Casey’s Crisis Investing & Grey Swan Investment Fraternity

P.S. from Addison: Andrew Packer and Shad Marquitz broke down the latest moves in the commodity market on Grey Swan Live! this afternoon.

If you’d like, you can drop your most pressing questions right here: Feedback@GreySwanFraternity.com. We’ll be sure to work them in during the conversation.

Back in April, when we published what we called the Trump Great Reset Strategy, we described the grand realignment we believed President Trump and his acolytes were embarking on in three phases.

At the time, it read like a conceptual map. As the months passed, it began to feel like a set of operating instructions written in advance of turbulence.

As you can expect, any grandiose plan would get all kinds of blowback… but this year exhibited all manner of Trump Derangement Syndrome on top of the difficulty of steering a sclerotic empire clear of the rocky shores.

The “phases” were never about optimism or pessimism. They were about sequencing — how stress surfaces, how systems adapt, and what must hold before confidence can regenerate. And in the end, what do we do with our money?!

Relative to GDP, the net international investment claim on the U.S. economy was 20% in 2003. It had swollen to 65% by 2023. Practically every type of American company, bond, or real estate asset now has some degree of foreign ownership.

But it’s even worse than that. As the federal deficit has pumped up the GDP figures, and made a larger share of the economy dependent on government spending, the quality and sustainability of GDP have deteriorated. So, foreigners, to the extent they are paying attention, are accumulating claims on an economy that has been eroded by inefficient, government-directed spending and “investments.” Why should foreign creditors maintain confidence in the integrity of these paper claims? Only to the extent that their economies are even worse off. And in the case of China, that’s probably true.

As global government interest expense climbed, gold quietly followed it higher. The IIF estimates that interest costs on government debt now run at nearly $4.9 trillion annually. Over the same span, gold prices have tracked that burden almost one-for-one.

Silver has recently gone along for the ride, with even more enthusiasm.

Since early 2023, Japan’s 10-year government bond yield has risen roughly 150 basis points, touching levels not seen since the 1990s.

Over that same period, gold prices have surged about 135%, while silver is up roughly 175%. Zoom out two years, and the divergence becomes starker still: gold up 114%, silver up 178%, while the S&P 500 gained 44%.

According to the American Association of Individual Investors, the average retail investor has about a 70% allocation to stocks. That’s well over the traditional 60/40 split between stocks and bonds. Even a 60/40 allocation ignores real estate, gold, collectibles, and private assets.

A pullback in the 10% range – which is likely in any given year – will prompt investors to scream as if it’s the end of the world.

Our “panic now, avoid the rush” strategy is simple.

Take tech profits off the table, raise some cash, and focus on industry-leading companies that pay dividends. Roll those dividends up and use compounding to your overall portfolio’s advantage.

Back in April, when we published what we called the Trump Great Reset Strategy, we described the grand realignment we believed President Trump and his acolytes were embarking on in three phases.

At the time, it read like a conceptual map. As the months passed, it began to feel like a set of operating instructions written in advance of turbulence.

Silver has recently gone along for the ride, with even more enthusiasm.

Since early 2023, Japan’s 10-year government bond yield has risen roughly 150 basis points, touching levels not seen since the 1990s.

A pullback in the 10% range – which is likely in any given year – will prompt investors to scream as if it’s the end of the world.

Our “panic now, avoid the rush” strategy is simple.

Take tech profits off the table, raise some cash, and focus on industry-leading companies that pay dividends. Roll those dividends up and use compounding to your overall portfolio’s advantage.