Unchained Podcast: Bits + Bips – Why a Trump vs. Fed Showdown Would Crush the U.S. Dollar

Episode 822 | Aired: April 23, 2025
Host: Laura Shin
Panel: Stephen Ehrlich (moderator), Alex Krüger, Ram Ahluwalia, Zach Pandl

Episode Overview

This episode delves into the macro-financial drama surrounding the potential for a confrontation between President Trump and Fed Chair Jerome Powell. The panel dissects how this tension, coupled with escalating tariffs and uncertainty over central bank independence, is upending confidence in U.S. assets and shifting global capital flows. The conversation explores the implications for the dollar, gold, bonds, and especially Bitcoin, amid an evolving multipolar financial landscape.

Key Discussion Points & Insights

1. The Trump vs. Powell Narrative and Market Volatility

• Trigger: Speculation over whether Trump intends to remove Fed Chair Jerome Powell amid tariff escalation.
• Panel Consensus: It's unlikely Trump will actually fire Powell, but the threat destabilizes markets due to perceived erosion of central bank independence.
• Historical Reference: In late 2018, markets bottomed on Trump’s threats to remove Powell, causing investor panic.
  • Ram Ahluwalia [04:01]:
    “It would not be a good idea to fire Powell. One of the basic ideas we have is that you should separate monetary policy from the executive branch. ... It would undermine confidence—the dollar would drop.”
• Legal Angle: Trump can remove Powell only with "cause," which is subjective and would end up in courts.
  • Alex Krüger [09:06]:
    “Trump can't fire Powell by law unless he has cause. But cause is subjective… making that happen would be the end game for financial markets as we know them.”

2. The Fed’s Bind: Inflation, Tariffs, and Consumer Expectations

• Current State: The Fed must balance the dual mandate (employment, stable prices) under the cloud of rising tariffs.
• Sticky Inflation Expectations: Consumers’ inflation expectations are high, but actual disinflation persists.
• Tariff Impacts: New tariffs could become a source of persistent inflation if retaliation occurs.
• Fed Likely on Hold: Panelists expect the Fed to not lower rates soon, wanting clarity on tariffs’ effects.
  • Ram Ahluwalia [12:12]:
    “Consumers’ inflation expectations are high and the Fed needs to keep those expectations anchored because there is a reflexive effect.”

3. Dollar Devaluation and Capital Flight from U.S. Assets

• Global Shift: Structural changes are prompting investors to move away from U.S. equities and Treasuries toward commodities, gold, and Bitcoin.
• Confidence Shock: Rotations away from dollar-denominated assets amid fears of lost central bank independence and prolonged policy uncertainty.
  • Zach Pandl [06:22]:
    “Markets can see the writing on the wall that U.S. institutions are changing… You're going to start seeing portfolios shift away from dollar-based assets…”
• Rare Market Move: S&P and Nasdaq suffered significant drops alongside widening 10-year yields—a highly unusual confluence, per panel.

4. Safe Havens and Portfolio Rebalancing: Gold, Bitcoin Surge

• Shift in Risk Perception: Gold and Bitcoin, rather than U.S. Treasuries, are now viewed as safe havens.
  • Alex Krüger [19:21]:
    “Gold and Bitcoin are the safety trade now, not the ten year. That's a change in behavior.”
    • Long-end (30-year) bonds are faring even worse.
• Tactical Challenges: With gold having rallied significantly, risk of reversal is high if Trump pivots on tariffs suddenly.
• Other Havens: Investors are moving into Japanese yen, Swiss franc bonds, and gold, shifting away from U.S. bonds [27:32].

5. The Dollar’s Trajectory: Expected Prolonged Weakness

• Catalyst: April 2nd’s “tariff shock” credited with kicking off the shift.
• Pandl’s Dollar Call: Predicts DXY could fall to 70 over a few years, likening the current period to the post-Nixon shock era (1971).
  • Zach Pandl [30:59]:
    “I have high conviction in the weaker dollar trend at this point … DXY to 70 would be my own price target.”
• Asset Allocation Implication: Gold and Bitcoin expected to benefit exceptionally well in a declining dollar environment.
• Bear Market Expectations: Unless there is a decisive policy change, panelists expect continued challenges for large-cap U.S. assets.

6. Bitcoin’s Role Amid Macro Chaos

• Emerging Digital Gold: Bitcoin gaining attention as a hedge amid concerns over dollar dominance, trade wars, and central bank independence.
• Potential Sovereign Buying: Pandl suggests sovereign wealth and central banks may diversify into Bitcoin, following the post-2014 gold diversification trend.
  • Zach Pandl [44:30]:
    “I personally believe that sovereign investors will buy Bitcoin this year. That is one of the consequences, I think, of these events.”
• Correlation Regime Shift: Since COVID, Bitcoin has at times correlated with risk assets but could reemerge as a non-correlated asset now.
  • Alex Krüger [37:25; 37:57]:
    “It may take this insanity we're going through to turn Bitcoin into digital gold.”

- Bitcoin Bull and Bear Scenarios

• Bull Case: Outperforms in a dollar devaluation and confidence shock scenario.
• Bear Case: Vulnerability in a classic recession where risk assets broadly sell off.
• Demographics: New ETF and institutional buyers may behave differently in a bear market [50:05].
  • Ram Ahluwalia [50:05]:
    “The demographic is pretty young … extraordinary crypto wealth around there… The better approach is to play the cycle.”

7. Perspectives on U.S. Dollar and Reserve Currency Status

• Declining Dominance: Discussion of the dollar's share of global finance falling from 60% toward 20% (aligned with U.S. economic share).
  • Zach Pandl [44:30]:
    “All that we mean is [loss of dominance means] that number 60% is converging downward towards 20%. The dollar is not going away… over the last 10, 20 years it has on the margin been losing its most dominant position.”
• Future System: Regionalization, not immediate replacement (yuan, euro, bitcoin) [59:39–61:37].
  • Zach Pandl [59:39]:
    “My own view is that the end game of all of this is regionalization, that the Chinese yuan is used more extensively in China's sphere... the dollar continues… in the Americas… and there's room for other things including digital assets like Bitcoin.”
• Security Backing: U.S. military presence and security commitments still give dollar unmatched standing [61:47].

Notable Quotes & Memorable Moments

• On the Consequences of Threatening Fed Independence:
  "This is the end game for financial markets… if you lose that independence, you end up being Argentina—using the central bank to print the shit out of… the dollar, to finance whatever you want."
  — Alex Krüger [09:06]

• On Portfolio Rotations:
  “The song remains the same. You’re supposed to be avoiding assets at the center of the storm… favoring assets that benefit from this sort of stagflationary environment. For me that is scarce commodities, gold, copper, and most importantly bitcoin. I mean, this is really bitcoin’s moment.”
  — Zach Pandl [24:04]

• Bear Market Playbook:
  “In a bear market your mission is to preserve capital. There's very few assets that kind of fly. … Shorting assets can work but most people will not do it successfully.”
  — Ram Ahluwalia [40:43]

• On Dollar Weakness:
  “These policies are bearish for the dollar… This is the pain. And then we’ll get to Valhalla. It's a severe price shock and the impact is to lower earnings both for corporates and for consumers and increased costs.”
  — Ram Ahluwalia [34:37]

Key Timestamps for Important Segments

| Time | Section / Topic | |-------------|-----------------------------------------------------| | 04:01–05:55 | Trump vs. Powell: Market Panic & Institutional Impact | | 09:05–10:53 | Fed Chair Firing: Legal Odds and Macro Consequences | | 12:12–15:52 | The Fed's Bind: Inflation vs. Growth & Consumer Expectations | | 19:16–21:00 | Safe Haven Rotation: Gold and Bitcoin in Focus | | 24:04–25:39 | Near-Term Outlook: Tactical Positioning Strategies | | 27:32–29:39 | Where to Hide? Challenges in Safe-Haven Investing | | 30:59–33:09 | Dollar Downtrend: Forecast and Portfolio Effects | | 34:37–36:49 | Charts & Evidence of Dollar, Gold, Bitcoin Movements | | 37:25–40:24 | Bitcoin’s Evolving Correlation & Safe Haven Status | | 44:30–47:25 | Dollar Dominance, Decline, and Bitcoin’s Place | | 50:05–51:57 | Bitcoin Holders’ Demographics Amid Macro Stress | | 56:21–58:58 | “Schrödinger’s Economy” and Multiverse Market Analysis | | 59:39–61:37 | Long-Term Scenario: Multipolar Reserve Currencies |

Panel Wrap-Up: Top Questions for the Week

• Ram Ahluwalia:
  Most important question is what will be the end state for tariff policy? Will it be stable? [63:44]
• Alex Krüger:
  If there’s a clear, positive Japan deal, I’m ready to buy equities fast—contrarian view stems from the belief that a large part of market ignores downside risk, expecting Trump to “solve everything.” [64:52]
• Zach Pandl:
  Besides tariffs, I’m focused on the fiscal policy question: Will we get tax cuts to offset tariffs’ drag? Will it be austerity or further stimulus? [67:23] Also, stablecoin adoption momentum is distinct from bearish dollar macro trends. [68:45]

Conclusion

This live episode bristles with urgency: Amid a volatile macro environment, the mere specter of a Trump vs. Fed showdown is eroding faith in the dollar and U.S. assets, catalyzing capital rotations into gold, Bitcoin, and non-U.S. safe havens. The hosts caution that while big moves in assets like gold and bitcoin offer allure, sudden policy pivots could whipsaw investors. The panel agrees that central bank independence and clear tariff policy are linchpins for stability, while Bitcoin’s store-of-value thesis is getting its largest test yet.

Final thought from Alex Krüger:
“It’s not about being right or wrong, it's about—when we are wrong—how fast we pivot.” [66:42]