Powell’s Tightrope, Trump’s Trapdoor

At Jackson Hole, the Fed chair preached “balance” while Trump’s economy yanked the floor out from under us.

Jay Powell stepped up to the podium in Jackson Hole this week, and if you squinted past the mountain backdrop you could almost see the circus tent rising behind him. There he was again, lawyer by training and financier by trade, not an economist, though Georgetown’s Jesuits surely drilled him in the art of sounding solemn, wobbling above an audience of hedge fund managers and foreign central bankers while Donald Trump and his Treasury secretary heckled from below.

Powell insisted the rope was steady. He dutifully ran through his prepared script: inflation is edging lower, the labor market is in “curious balance,” monetary policy remains “data dependent.” But strip away the central banker incantations and what he really admitted was stark: growth has slowed to nearly half last year’s pace, job creation has collapsed to a meager 35,000 a month, and Trump’s tariffs and immigration crackdowns are now choking the system.

This, Powell told us, is a “curious kind of balance.” Curious, indeed. It’s the sort of balance where demand and supply are both falling, where employers aren’t hiring and workers aren’t available, where prices are rising not because the economy is booming but because Trump’s trade war is filtering down through every supply chain. The Fed has a word for this: “challenging.” Everyone else just calls it a mess.

Inflation, Powell said, is running at 2.6 percent headline, 2.9 percent core. But that’s before the full weight of Trump’s tariffs hits consumer prices. Powell admitted the “effects will accumulate over coming months,” which is Fed-speak for: brace yourselves. Wages aren’t keeping up, but if workers dare to demand raises, Powell frets that a dreaded wage-price spiral might take hold. He tried to wave that away with talk of “anchored expectations,” as though wishful thinking were an economic plan.

Meanwhile, Trump and his handpicked Treasury secretary Scott Bessent are pulling on the wire from below, demanding Powell cut rates to juice the markets. Bent even broke with decades of Treasury protocol to say out loud that rates should drop by half a point or more. Powell knows that playbook, he tried it in 2021, betting inflation was “transitory.” The result was hyperinflation that haunted the Biden-Harris years and left Kamala Harris politically dead on arrival. But Trump doesn’t care if Powell repeats the mistake. If Wall Street gets another sugar high, that’s a win, even if Main Street collapses.

And here’s where Max @ UNFTR’s analysis slams the point home. The economy isn’t misfiring, it’s firing exactly as intended. Every seven to ten years the cycle delivers a bust. Mainstream economists describe this as a “feature” of capitalism, a kind of built-in reset that clears out inefficiencies, squeezes labor, and sets the stage for the next boom. Richard Wolff and other heterodox economists push it further: the cycle isn’t a clever design at all, but the inevitable expression of capitalism’s unsustainability, a system that constantly produces more than people can afford to buy, and then has to periodically collapse under its own weight.

Put the two perspectives together and the truth is even uglier. Capitalism is both unstable and deliberately sustained. The instability punishes workers, wipes out savings, and destabilizes entire communities. But the “sustainability” comes from the way elites have built tools to ensure they never suffer the consequences the Fed put, bailouts, quantitative easing, tax cuts, subsidies, deregulation. In other words, the system collapses on purpose, just not on them. For the top ten percent, the safety nets are woven from Treasury bonds and central bank guarantees. The stock market is the one corner of the economy government will never let fail. But for the bottom half? Trump has already cut the net to shreds.

This is where John Maynard Keynes enters the frame, and Max was right to invoke him. Keynesian economics, born out of the wreckage of the Great Depression, is built on a simple observation that still scandalizes the wealthy: spending at the bottom does more to stabilize an economy than hoarding at the top. When wages rise or relief checks arrive, that money doesn’t sit in an offshore account, it gets spent, immediately, on food, housing, clothes, services. It cycles through the real economy. Keynes argued that government intervention, whether through public works, unemployment insurance, or direct support, wasn’t anti-capitalist heresy but the only way to keep capitalism from eating itself alive.

Contrast that with Trump’s model. Instead of floors and ceilings that smooth the boom-and-bust cycle, he rips the floorboards out entirely. The logic of Keynesian “demand-side” economics says recovery money should shore up workers and consumers. The logic of Trumpian “supply-side” hucksterism says shovel more cash to the investor class, deregulate until collapse, then let the Fed and the Treasury bail them out when the inevitable bust arrives. Keynes wanted to preserve capitalism by taming its destructive impulses. Trump, like Reagan before him, wants to speed up the destruction, confident the fallout will never touch him or his donors.

Legal analyst Michael Popok wasn’t exaggerating when he said Powell looks like a man walking a high wire without a pole. Except the real danger isn’t that Powell might wobble left or right, it’s that the rope itself is fraying. Trump’s policies act as accelerants. They push wealth further to the top, strip protections from the bottom, and leave the Fed performing parlor tricks in front of an imploding tent.

Powell wrapped up his speech by announcing that the Fed is returning to the “classic” 2 percent inflation target, abandoning the 2020 experiment with “average inflation targeting.” He made it sound like sober correction, a return to familiar ground. But anyone listening closely could hear the confession buried in the prose: the Fed’s tool kit is too blunt for the structural sabotage now underway. They can’t offset tariffs. They can’t reverse a shrinking labor pool. They can’t keep pretending the floor exists when Trump has already ripped it out.

So yes, Powell balanced on the wire in Jackson Hole, offering his careful words and polite reassurances. What he revealed about the American economy was not strength, but weakness. Growth is slowing, prices are rising and the labor market is softening in all the wrong ways. The Fed’s only move is to stall, to hope the rope holds a little longer while the crowd below begins to wonder how much longer the act can go on.

The truth is the fall is already happening. For Wall Street, the net is waiting. For everyone else, there is only hard ground.