Lagarde’s Hypocrisy: ECB Vs Fed Autonomy

Submitted by Thomas Kolbe

ECB President Christine Lagarde has warned the U.S. Federal Reserve not to lose its independence to politics. A transparent maneuver, considering the ECB has long since merged with Brussels into a political entity.

In an interview with French radio station Classique, Lagarde cautioned that U.S. President Donald Trump is attempting to seize control over the Federal Reserve. She said:

“If US monetary policy were no longer independent and instead dependent on the dictates of this or that person, then I believe that the effect on the balance of the American economy could, as a result of the effects this would have around the world, be very worrying.”

Indeed, Trump (this or that person) is exerting massive pressure on the Fed. His attempt to exploit the internal scandal surrounding Fed Governor Lisa Cook to remove her via executive order and replace her with an ally is undisputed.

Cook is accused of providing false information in mortgage dealings, allegedly declaring an Atlanta condominium as her primary residence while previously claiming her Michigan home, raising the specter of mortgage fraud.

Good Cop, Bad Cop

Regardless of the outcome, this marks the latest peak in the battle between Trump and Fed Chairman Jerome Powell, whom Trump accuses of interest rate sabotage. Powell countered the massive inflation surge caused by liquidity injections during the COVID lockdowns with rapid rate hikes and has since kept U.S. rates well above other central banks. Trump, in contrast, calls for drastic rate cuts to free the frozen housing market and ease state interest burdens.

It remains unclear to what extent this public dispute between Trump and Powell follows a political script. Following a “good cop, bad cop” dynamic, both have successfully attracted investment into the U.S. through trade policy and high rates while simultaneously devaluing the dollar against other fiat currencies. Mission accomplished, for now: the deeply negative trade balance is slowly reversing, tariff revenues are rising, and U.S. industry is regaining ground.

Return to Private Money

Away from the Fed dispute, a small monetary revolution is unfolding in the U.S.: the partial return to a private banking money system. With the GENIUS Act and the rise of U.S. dollar stablecoins, the Trump administration has established the legal framework for private money creation.

Private banks will be able to issue their own stablecoins, each backed by collateral such as U.S. Treasury bonds, gold, or Bitcoin. The U.S. is moving toward a more stable, competitive monetary system that reduces leverage risk and strengthens the banking sector compared to its European counterpart.

Lagarde is not entirely wrong that Fed power may be constrained going forward. But unlike the state-centered Eurozone system, the U.S. banking sector stands to gain significant influence at the Fed’s expense.

Lagarde Has Humor

It is almost tragicomic that the ECB president warns of a loss of Fed autonomy. Since the sovereign debt crisis a decade and a half ago, the ECB has been fully merged with Brussels. Autonomy in Eurozone monetary policy is nonexistent.

During the debt crisis, the ECB intervened massively. Nominal interest rates dropped from over 4% in 2008 to as low as -0.5%, remaining in negative territory for years. Bond purchases and long-term refinancing operations ballooned to around €3 trillion – liquidity that partially displaced private credit. This is one reason the Eurozone economy has relied on credit-financed government demand to stay afloat.

With its anti-fragmentation tools, the ECB secured peripheral bonds regardless of fiscal discipline.

Crisis Never Resolved

The results of this market manipulation are evident: the Euro Club continually expanded national deficits. The disciplining effect of interest rate penalties vanished – the ECB became a state money-printing machine, political control supplanting market discipline.

The rescue operation peaked with Mario Draghi’s legendary “Whatever it takes,” signaling that the ECB would guarantee the solvency of heavily indebted member states.

Since then, the ECB has functioned as a backstop, a lender of last resort for all Eurozone countries, many of which have abandoned fiscal responsibility. Draghi’s decision stripped the bond market of its teeth, undermining its role as a control mechanism.

Nonsense “Made by ECB”

Brussels turned the ECB into a money pump for its ideological campaign against free markets and national sovereignty. From financing absurd climate projects to building a European war economy, the ECB monetizes growing debt, with the EU Commission contributing: the upcoming Brussels budget totals roughly €2 trillion, much to be financed through eurobond issuance, relying on the ECB to step in if the market hesitates.

The ECB is far from independent. Few central banks have subordinated themselves to politics as completely. The legacy of the conservative, stability-focused German Bundesbank is gone.

Smoke Screens and Media Spin

European monetary politicization has enabled Brussels’ socialist ecologism to entrench itself despite economic fallout. Manipulated interest rates and state guarantees have produced the largest zombie economy in the world, excepting China’s real estate sector. Scarce resources are diverted to unproductive projects, freezing the Eurozone in stagnation.

Lagarde’s Fed warnings are mere distractions. Europe faces rising sovereign debt pressures, with France on the brink of crisis. ECB tools must be ready, as no one knows when the market will issue the red card.

While the U.S. continues monetary reform, deregulates the economy, and lowers taxes, Europe remains in regulatory paralysis. The ECB perpetuates the socialist debt spiral with ever-new liquidity injections. We are witnessing a slow-motion crash as European policymakers fail to escape their self-imposed ideological trap.

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About the author: Thomas Kolbe, a graduate economist, has worked for over 25 years as a journalist and media producer for clients from various industries and business associations. As a publicist, he focuses on economic processes and observes geopolitical events from the perspective of the capital markets. His publications follow a philosophy that focuses on the individual and their right to self-determination.