The Munk Debates Podcast - Munk Dialogue with Andrew Coyne: Jerome Powell stands up to Trump and why the West is reluctant to intervene in Iran

Episode Date: January 13, 2026

To listen to the full episode consider becoming a donor to the Munk Debates for as little as $50 annually, or $1.00 per episode. Go to www.munkdebates.com to sign up. Rudyard and Andrew react to the U.S. Justice Department's criminal investigation into Federal Reserve chair Jerome Powell alleging he lied to congress about renovation construction costs. This administration is using trumped up charges and the instruments of the state to go after people they can't otherwise control. What makes Jerome Powell a more formidable opponent to Trump compared to others who have tried to stand up to the U.S. President in the past? In the second half of the show Rudyard and Andrew turn to Iran and the regime's brutal response to countrywide protests. What should we think of Trump's musings about intervening in this conflict? It has become fashionable to oppose any type of regime change following America's forever wars in Iraq and Afghanistan, but if the West does not intervene, what will be the cost of human life in Iran and the region? Become a Munk Donor ($50 annually) to get 72-hour advanced access to the full length editions of Friday Focus and Munk Dialogues. Go to www.munkdebates.com to sign up. Hosted on Acast. See acast.com/privacy for more information.

We learn from bad examples, but we also learn from good examples. And we've seen a sea of bad examples of people bending the knee to Trump. To see somebody in such a position, in such an exposed position, standing up with that quiet dignity and courage is truly inspiring, and I hope people will take inspiration from it. President Trump launches an unparalleled attack against Jerome Powell, the chair of the U.S. Federal Reserve, big implications, possibly for the American and global economy to help break down what it all means. A pleasure to have here on Monk Dialogues, our returning guest,

Andrew Coyne, journalist with the Globe and Mail and best-selling author. I think I can see the book there in the background, Andrew. Crisis of Canadian Democracy. Well done, sir. He's like that's the thing you're supposed to do. Well, Andrew, let's talk about the big news of the last 24 hours. A story came out late Friday that the U.S. Justice Department has initiated a criminal investigation against Jerome Powell, the chair of the U.S. Federal Reserve, alleging that he lied to Congress in highly technical testimony around the construction costs and improvements related to a series of Federal Reserve buildings in Washington, D.C. There's so many ways to come at this, Andrew. But first, I just want to talk about that aspect of it. The Justice Department coming forward with charges against arguably the most powerful public official in the United States, Jerome Powell.

It's ludicrous. It's not just unprecedented. It's without any basis. I mean, the Justice Department under Donald Trump has become very clearly an arm of political intrigue. political intimidation, etc. It has no freestanding credibility, frankly, anymore, particularly for this kind of case. To bring it against this individual in particular, I mean, there cannot be a less criminal-looking civil servant in America. He has a decades-long career behind him of integrity and of standing up for good policies, even when they weren't popular.

to do so on this issue in particular, when Donald Trump is tearing down the White House to put up his, you know, vanity ballroom, it's, it smacks of the Trump method, which is you always go after people for that for which you are yourself most guilty. So it's appalling in terms of the, as a miscarriage of justice. But of course, it's a miscarriage of justice in the service of what? in the service of not just politicizing and taking over the administration of monetary policy in the United States, they could do that anyway. They're working their way at getting their own people onto the board of the Federal Reserve. The chairman's term ends in May anyway. So this is clearly they want to, as usual with Trump, they want to be seen to be dominating. They want to be sending messages to other civil servants to future Federal Reserve. governors and chairs of the board of governors that you obey or else we will crush you we will

we will use the instruments of state and this is becoming a modus operandi generally of the Trump administration is using if I may use the phrase trumped up criminal charges to go after people that they can't directly go after in other ways so it's it's appalling on you know multiple levels Yeah, let's talk a little bit, Andrew, about the potential stakes here, the economic stakes. There's a little bit of family history you may want to disclose. Your father was the governor of the Bank of Canada. So this is an institution that you indirectly know something about in terms of its role in an advanced economy. And especially, I think, Andrew, people would say,

it's remarkable contributions to the whole post-war economic order in the West and the extent to which economic policy itself is set by independent institutions separate from politics. What's at stake, Andrew, if that Maginot line, that moat between politics and monetary policy is breached? What's at stake? Well, just quickly first, a comparison and contrast with the coin affair, which was the Defenbaker's government's attempt to remove my father from the office of the governor of the Bank

of Canada, James Coyne. What's similar is, his term was about to end as well. They wanted to be seen to be removing him. The difference is there really wasn't any substantial difference over monetary policy in the Defenbaker coin affair. It was way more political than that in a kind of a base way. They didn't really have any serious substantive policy differences. They just needed a head on a spike.

They were looking for a scapegoat in the run-up to an election. In this case, it's pretty clear there is a substantial policy difference, which is Powell would like to continue with the highly successful monetary policy of the last 30 or 40 years in particular. You said post-war, and the period in the 50, 60, 70s, and 80s was a little rocky. The central banks were new to this game. We hadn't gone through the horrors of inflation in the North America in particular. And so we really learned tough lessons in the 70s and 80s and 90s.

But since then, we've had a period probably unmatched in human history of 30 years more where inflation stayed below 2% or around 2%. It's hard to find a period in human history that can match that. That's kind of stability. And it had paid huge dividends when it came to the spike in inflation coming out of the pandemic in that people having that experience kept their expectations locked on 2%. They said, okay, to themselves, okay, we're going through this period now, but inflation will get back down to 2% pretty soon. So I'm not going to make extravagant wage and price demands in the expectation

that there's going to be longstanding higher inflation. So that was a remarkable achievement and a remarkable contribution. A big part of the reason for that is the convention and the law that came into force across the democratic countries, that the central bank should be left independent, that governments, and this again comes out of the coin affair, governments have to accept responsibility for the broader policy. So there's ultimately a democratic foundation to this, that the democratically elected government is accountable for monetary policy.

But as we do with a lot of things in government, you delegate the day-to-day operation of it, so that you don't risk having behind the scenes politicization of it and pulling strings to get interest rates low just before an election or this kind of shenanigans, which we've certainly seen in the past in some democratic countries. So it's not that the central bank is some supreme power unto itself with no democratic underpinnings. It ultimately has to come from a democratic mandate, but it's this distinction between, the Democratic government sets the broad outlines of policy out in the open in public where we can all see it. But the day-to-day operation behind the scenes is left to independent professional civil servants, who ultimately can be held to account if they've messed up in one way or shape or form.

But that's the important phrase is that it has to be for cause. They have to have done something really terrible, some terrible dereliction of duty or corruption or that kind of thing. So the president doesn't really have the power to remove the Federal Bank, the Federal Reserve chair on his own. So this is why they've had to look for these invented charges again so they can get ahead on a pike. Yeah. And, Andrew, if you look around the world at countries that have either failed to observe in the breach shore, or have eroded the independence of their central banks. I think of, you know,

the most kind of blatant example is present-day Turkey, which has gone through a deep monetary crisis as a result of erosion of central bank independence. Historical examples like Zimbabwe and Argentina, which, again, are extreme. What happens, Andrew, when politicians, in a sense, take over monetary policy, why does it have this tendency to lead to a slide towards extreme inflation, in some cases hyperinflation? Well, the common thread is not only a talk autocracy and a willingness to flout rules and just do what you feel like doing for those in power, it's fiscal irresponsibility as the starting point. So fiscal authorities, the elected government that taxes and spends is in a conflict of interest, a pretty obvious and flagrant one when it comes

to monetary policy. Because whereas to raise taxes to pay for a profligate spending, they've got to go to a, if it's a democracy, an elected parliament, they've got to ask for permission to raise those taxes. That's always difficult and carries political risks. You can just inflate your way away or you hope to, that you pay off your debts in devalued dollars or whatever your currency is, and you hope to kind of cheat your creditors that way. Now, it's harder and harder to get away with that, frankly, ever since the great inflation of the 60s, 70s and 80s, bond markets, oftentimes we talk about the bond vigilantes.

Bond markets are extremely attuned to any implication that that's what the government is up to. So what do they do? They mark down the price of the bonds. The inverse of that is the interest rates go up. and you wind up not even getting away with this ill-begotten plan. But it's fundamentally rooted in this conflict of interest, this attempt to get out from under fiscal burdens. And if you look at the United States right now,

they're running deficits on the order of 6% of GDP in relative peacetime, in relative prosperity, not in a recession or a war. That's utterly unsustainable. And so you can see why, there would be that temptation anyway. And of course, in Trump's case, he comes from a background of real estate developer where everything's a smile and a shoe shine.

Everything's, let's take the most optimistic possible scenario. And everything's predicated on keep interest rates low. So they always have a bias in that industry and in business generally towards the lowest interest they can get away with. Trump's been talking about interest rates should be at 1% in 2026, which is preposterous. inflation's at 2% plus in the United States. It's close to 3% I believe in the last estimate. So that's where that impetus comes from.

And if you apply it in any kind of consistent fashion for any kind of period of time where you're just basically gunning the money supply, you're hoping basically to outrun expectations. So I talked about how the bond markets are so attuned now. So in order to get any kind of fiscal benefit or any kind of economic goosing, you basically have to outrun expectations. You have to engineer inflation higher than people expect it will be. And that's a losing game.

That means you have to keep pushing inflation higher and higher and higher and higher. And that's why it winds up ending up in hyperinflation. As we wrap up this portion of our conversation, let's just talk about what you think, Andrew, could be the motives behind Trump's attack. Again, you always want to be careful to, you know, subscribing to some kind of methodology to the madness. But he is facing midterm elections this fall. There are signs, the latest job reports and other signals out of the U.S. economy, while it's not in recession, it's not performing as an incumbent president would wish going into those recessions, kind of stalling job growth.

So is this, Andrew, do you think, something just as simple and bullheaded as an attempt to, as you say, threaten and intimidate? the Fed now, so come May, when he will try to confirm, that is the president, through the Senate, his new Fed chair, that we will be treated to a series of rate cuts, and the Fed can move more than 25 basis points at a time if it wants to before the midterm elections. Well, it could be more simple and more bullheaded than that. It could be just that. Powell has defied him. Powell went famously and did a two-handed interview with the press beside, with the president beside him in which he contradicted the president. And you know how Trump feels about things like that.

More broadly, you know, everything about him is an attempt to show dominance, to show that he's in charge, that he's at the center of everything. So, you know, analyzing it through the conventional lens of democratic governments want cheap money before elections is, almost normalizing it. I wouldn't dispute that maybe part of it. But again, he's in for a rude awakening. The Fed might be able to influence short-term interest rates. It cannot control long-term interest rates. So if all that you do is you drive down in an artificial way,

short-term interest rates, in a way that alarms the markets and makes them think inflation's on the way, then you get higher long-term interest rates coming out of that, which means higher mortgage rates. So it's not even likely to pay dividends for them in any. kind of short-term electoral sense. And, you know, when you look at everything he's doing, you know, he's at, what is it, 35% now in the approval ratings. He's not acting like a guy who's really concerned about winning a conventional election.

He's certainly looking at acting like a guy who's doing everything he can to try to rig that election. Yeah. Oh, there's a story in the New York Times. I think it's today, you know, maybe there's Washington Post listing all the different ways. he's trying to, you know, put a thumb on the scales of this election. So it may be giving him too much credit in a way to say that he's just doing kind of Nixon, Nixon leaning on Arthur Burns in the in the in the in the in the 1970s.

If I've got my history historical chronology. You're right. You're right. William Esney Martin. It's one of the two of them. Let's end this section on a positive note, which is Chairman Powell's video statement over the weekend, Andrew, it's really the first time I think I can remember in these last, what is it now, year or so of the first year of the second term of the Trump presidency, where a public official has so forcefully and in such a forthright manner come out and condemn the president's actions, denied the validity and the basis of them,

and reminded the American public of the role of said institution and said public official. What would have happened, Andrew, if other officials had behaved the way that Powell behaved this weekend? And is the fact that Powell is now behaving this way, because let's remember he did try to, in a sense, walk a line with Trump up to this point. What does it mean that he is now, in a sense, openly called out the president, openly called out the White House? in a sense, he's thrown down the glove. Yes, in a very dignified and non-emotive way. It's very central bankerly. It's very matter of fact.

But that gives it enormous power. Central bankers, I think, particularly in this day and age, enjoy a very high reputation, maybe damaged somewhat by the inflation coming out of the pandemic and the Ukraine war. But I think people also noticed that inflation came sharply right back down again. And particularly a central bank that's earned a reputation as an inflation fighter, what is inflation? Inflation is basically a series of lies. Every contract you strike, you're basically lying to people who are saying, I'm going to pay you back in this amount of money.

But, ha, ha, it won't be worth that much by the time I pay it back to you. So we're all kind of lying to each other in periods of high inflation. So anti-inflation, honest money, as it's sometimes called, is very connected to the idea of integrity and of truth-telling and of everything that is opposed to what Donald Trump stands for. So when the Federal Reserve Governor, in this very reserved, sober, dignified way takes them on like this, that has repercussions, first of all. Second of all, the central bank is the guardian of the markets and of low inflation, to build. predictable expectations, all the things that are very, as we've come to learn, very intimately connected to prosperity and to, if you want to be crude about it, to stock market values. So he's also a formidable opponent in that regard. Thirdly, he's got the institutional power of the Fed. He cannot be easily removed. This is why they're going to these extreme measures. Everybody's always looking for the McCarthy hearings. moment when the, you know, Joseph Welch turned on and said it long lasts or have you no dignity. I don't think there's going to be that moment. If there were, this is the kind of thing that

could be, but I don't think the nature of Trump is he throws so many things at the public at once that he so damaged people's ability to tell right from wrong and to understand the events around them that it's harder to, I think, for people to focus on a kind of an aha moment like that. But this can certainly help and contribute as one of many one hopes episodes of people standing up against him. And it certainly should give hope and inspiration and courage to others to do likewise. We learn from bad examples, but we also learn from good examples. And we've seen a sea of bad examples of people bending the knee to Trump to see somebody in such a position. in such an exposed position, standing up with that quiet dignity and courage is truly inspiring

and I hope people will take inspiration from it. Thank you for listening to the first half of Andrew Coins' Monk Dialogue. If you'd like to get the full program, consider becoming a monk donor. You can do that for as little as $50 a year, a buck a week. And you get access to our popular Friday program. Friday Focus with Janice Gross Stein. Sign up for all of your unique membership perks and privileges at www.munkmunknubateswithan s.com. Click on the join button on the top right-hand corner of the screen. Thanks in advance for your generous support. The Monk debates are a project of the Aurea and Peter

and Melanie Monk Charitable Foundations. Rudyard Griffiths and Ricky Gerwitz. are the producers. Be sure to download and subscribe wherever you get your podcasts, and if you like us, feel free to give us a five-star rating. Thank you again for listening. The Monk debates are a project of the Aurea and Peter and Melanie Monk Charitable Foundations. Rudyard Griffiths and Ricky Gerwitz are the producers. Be sure to download and subscribe wherever you get your podcasts, and if you like us, feel free to give us a five-star rating. Thank you again for listening.