Fed Independence and Why Every President Wants Lower Rates

On September 16, 2026, the Federal Reserve voted 12 to 0 to raise its target range to 3.75% to 4%, and Kevin Warsh, the chair the President picked, voted for the increase. A few hours later the President posted that interest rates in the United States “should be 1%, or less.” The argument over Fed independence is much older than this year, because presidents from both parties have leaned on the Fed for lower rates, and the last time that pressure lined up with an easy Fed, consumer prices rose about 117% in a decade.

Why every president wants lower rates

Lower rates make mortgages and business loans cheaper, so the economy feels better in the short run, which is when presidents face voters. They also cut what the government pays to borrow, and interest is already one of its biggest bills, as we covered in America Now Spends More on Interest Than on Its Military. The cost arrives later, as higher prices. In a 1993 study of 16 countries, the economists Alberto Alesina and Lawrence Summers found that central banks under political control delivered higher and more variable inflation, with no better growth to show for it.

So the law puts some distance in. Under 12 U.S.C. section 242, a Fed governor serves a 14-year term “unless sooner removed for cause by the President,” which means a president can pick the people and complain about them but is not supposed to fire one over the rates they set.

Johnson, Martin and the 1965 rate hike

In December 1965 the Fed’s board voted 4 to 3 to raise the discount rate from 4% to 4.5%. Two days later Lyndon Johnson, paying for a war in Vietnam and large programs at home, summoned the Fed chair, William McChesney Martin, to his ranch in Texas. By the Richmond Fed’s account Martin held his ground and the increase stood, although the same history notes that the hike did not stop inflation, and by 1969 Martin conceded that “we have been unwilling to take any real risks.”

Nixon, Burns and the White House tapes

Richard Nixon picked Arthur Burns to run the Fed, and Nixon’s White House taped its own conversations. On March 19, 1971, about a year and a half before the election, Nixon told Burns, “This is the last chance that anywhere near [likely] a conservative administration can survive.” On the same tape he counted on Burns to keep “that money supply thing at a good strong rate,” and he also acknowledged that “you cannot be in a position of undermining that independence.”

On December 10, 1971, Burns called to say the Fed had cut the discount rate to 4.5% and that he wanted the committee to go further, and Nixon told him to “just kick ‘em in the rump a little.” The economist Burton Abrams, who transcribed many of these recordings, reads them as Nixon pressing Burns, directly and through his budget director George Shultz, to ease before the 1972 election.

Whether Burns eased because of Nixon is still argued over. Abrams writes that Burns’s motive “may never be definitively determined,” and Edward Nelson, a Federal Reserve Board staff economist writing in his own name, argues that the Fed did not lose its independence under Burns. The tapes record what Nixon asked for, and they do not prove that Burns obeyed.

What followed is less disputed. Abrams concludes that, whatever his reasons, Burns “helped to trigger an extremely costly inflationary boom-bust cycle,” and after the election the federal funds rate went from 4.49% in July 1972 to 9.71% by November 1973. Consumer prices rose about 117% from December 1970 to December 1980, so a dollar saved at the start of the decade bought about 46 cents’ worth at the end. The oil shocks of 1973 and 1979, and loose policy dating from the 1960s, played their part, and by March 1980 inflation ran at 14.8% a year.

What prices and gold did in the 1970s

On August 15, 1971, Nixon ended the dollar’s convertibility into gold at $35 an ounce, and the price of gold was free to move. The LBMA afternoon price was $43.63 at the end of 1971 and $589.75 at the end of 1980, about 13.5 times higher, while consumer prices rose about 2.1 times. Both ends are December figures, which leaves out the January 1980 peak. Money held only in dollars lost ground over that decade, and gold did a good deal more than keep up.

What it cost to fix

In October 1979 the new Fed chair, Paul Volcker, stopped trying to hold interest rates down. The effective federal funds rate averaged 19.10% in June 1981 and touched 22.36% on July 22, and the recession that followed took unemployment to nearly 11% late in 1982, the post-war high. Inflation came down, and the workers and businesses who paid for it had nothing to do with 1972.

Volcker told the Senate Banking Committee in February 1981 why he could do it at all, saying “we are an independent agency” and “when the day is done we have to make our own judgments.” In March 2026 Jerome Powell said of him that “despite political pressure and a painful recession, he held firm.”

Where Fed independence stands in 2026

On April 17, 2025, the President posted that Powell’s “termination cannot come fast enough,” and within a year a federal judge had put a number on the pressure. In January 2026 the Justice Department served the Fed with grand jury subpoenas over Powell’s Senate testimony, and in March Chief Judge James Boasberg quashed them. He cited “at least 100 statements” by the President or his deputies attacking the chair, and wrote that “a mountain of evidence suggests” the subpoenas were meant “to pressure its Chair into voting for lower interest rates or resigning.”

In August 2025 the President moved to fire a Fed governor, Lisa Cook, which the Supreme Court called a first “in the Federal Reserve’s 111-year history.” On June 29, 2026 the Court voted 5 to 4 not to let the firing take effect while the case goes on, a ruling that is interim rather than final.

The other side belongs on the record too. At Warsh’s swearing-in on May 22, 2026, the President said, “I want Kevin to be totally independent,” and on September 16 Warsh told reporters that “independence is a two-way street.” So far the Fed has held, and the reasons every White House has to want cheaper money have not gone anywhere.

What it means for money in dollars

Gold is not a wager on who wins this fight, and its recent record shows why. The LBMA price peaked at $5,405 on January 29, 2026 and was $4,144.55 on September 28, about 23% lower, while the Fed held rates and then raised them.

Our view is that the value of every dollar in a retirement account rests on the Fed being able to tell this president and the next five no, and that it makes sense to keep part of a retirement in something that does not need the Fed to win that argument. For us that is gold, held for decades rather than traded on the news. Since 1997, section 408(m) of the tax code has let an IRA hold bullion of the required fineness and coins such as the American Gold Eagle, with a custodian keeping the metal in a depository, and a 401(k) can move into one by direct rollover.

Chapters

1. 00:00 The President vs the Fed
2. 00:57 Why every president wants lower rates
3. 01:53 1965: Johnson calls the Fed chair to his ranch
4. 02:39 1971: Nixon, Burns and the tapes
5. 04:33 What gold did in the 1970s
6. 05:11 What it cost to fix
7. 06:06 Where the fight stands now
8. 07:52 What it means for money in dollars

Where every quote and number came from

Every link below was checked on 29 September 2026.

1. The Federal Reserve’s FOMC statement of September 16, 2026 records the decision and the 12 to 0 vote.
2. The President’s posts are quoted from archived copies of his Truth Social posts of September 16, 2026 and April 17, 2025, kept by Trump’s Truth.
3. The 14-year term and removal “for cause” are in 12 U.S. Code 242, section 10 of the Federal Reserve Act.
4. The finding on political control and inflation is from Alesina and Summers, Central Bank Independence and Macroeconomic Performance, Journal of Money, Credit and Banking, 1993.
5. The 1965 vote, the ranch meeting and Martin’s 1969 remark are from the Federal Reserve Bank of Richmond, 1965, The Year the Fed and LBJ Clashed, Econ Focus, 2016.
6. The Nixon tapes are held by the National Archives at the Nixon Library as conversation 470-018 of March 19, 1971 and conversation 016-082 of December 10, 1971. The words quoted from 470-018 follow the University of Virginia’s transcript of the tape.
7. What the tapes show, and the dispute over it, come from Burton Abrams, How Richard Nixon Pressured Arthur Burns, Journal of Economic Perspectives, 2006. The case against that reading is Edward Nelson’s paper, The Practice of U.S. Monetary Policy Independence from Martin to Greenspan, Federal Reserve Board FEDS 2026-014, whose conclusions are Nelson’s own and not the Board’s.
8. The end of gold convertibility is described by Federal Reserve History in Nixon ends convertibility of US dollars to gold.
9. Consumer prices are the BLS CPI-U, not seasonally adjusted, from FRED series CPIAUCNS, and gold is the LBMA Gold Price PM in US dollars.
10. Volcker’s change of approach is in Federal Reserve History, Volcker’s announcement of anti-inflation measures. The funds rate figures are the effective rate from FRED, series FEDFUNDS for the monthly average and DFF for the daily high. The unemployment peak is from Federal Reserve History, Recession of 1981-82.
11. Volcker’s answer to the Senate is in the hearing record of the Federal Reserve’s First Monetary Policy Report for 1981, and Powell’s words about him are from his remarks of March 21, 2026.
12. The January subpoenas are described in Powell’s statement of January 11, 2026. Chief Judge Boasberg ruled on them in his memorandum opinion of March 11, 2026 for the US District Court for the District of Columbia.
13. The Supreme Court’s ruling of June 29, 2026 in the Cook case, No. 25A312, is the source for the 5 to 4 vote and the 111-year line.
14. Warsh is quoted from the Federal Reserve’s press conference transcript of September 16, 2026, and the President from the White House video of the swearing-in on May 22, 2026.
15. Gold in an IRA rests on 26 U.S. Code 408(m) and Public Law 105-34, section 304.

This page is general education, not investment, tax or legal advice. The view in the last section is the Gold IRA Digest Editorial Team’s opinion, not a recommendation.