The Fed’s Hidden Warning: Zero Rates, QE, and Trump’s Radical Plan for Your Money
A 10% chance of zero rates, Trump’s 300bps cut demand, and the economic storm no one’s ready for.
Subscribe now to receive weekly deep-dive investigations into economic policy, financial freedom, and how to protect your wealth in uncertain times.
Introduction: When the Fed Blinks, the Markets Tremble
What happens to your savings when interest rates hit zero, the Federal Reserve starts printing money again, and a resurgent Donald Trump pressures the central bank to bend to his will? This isn’t a hypothetical scenario; it’s the alarming reality signaled by a bombshell report from the New York Federal Reserve’s Liberty Street Economics. Published in 2025, the report warns of a 10% probability that U.S. interest rates could return to the zero lower bound (ZLB), a level where traditional monetary policy stalls, and unconventional measures like quantitative easing (QE) take over.
But the plot thickens. As the Fed grapples with this risk, Trump is back on the scene, demanding a staggering 300 basis point rate cut that would slash the Fed funds rate from 4.3% to just above 1%. He’s also promised to appoint the most dovish Fed chair in history by May 2026, someone who might embrace not just zero rates but potentially negative rates. Combine this with financial markets flashing warning signs through negative interest rate swaps, and you’ve got a recipe for economic upheaval.
Are you prepared for a world where your savings earn nothing, asset bubbles inflate, and political pressure distorts monetary policy? This article dives deep into the Fed’s hidden warning, Trump’s radical influence, and what it all means for your financial future. From the mechanics of ZLB and QE to the role of gold as a hedge, we’ll uncover the truth the mainstream often ignores. Let’s break it down.
Want more insights like this? Subscribe to our Substack for weekly analyses that cut through the noise.
Section 1: The Zero Lower Bound Risk. Why the Fed Is Worried?
The zero lower bound (ZLB) occurs when nominal interest rates hit 0%, leaving the Fed with no room to cut rates further to stimulate the economy. At this point, traditional monetary policy adjusting the Fed funds rate becomes ineffective, forcing the central bank to rely on unconventional tools like QE. The New York Fed’s recent report, authored by Sophia Cho, Thomas Merrens, and John Williams, estimates a 10% probability of returning to ZLB in the “medium term” based on market signals from interest rate derivatives (Liberty Street Economics, 2025).
What’s frustrating? The Fed doesn’t define “medium term.” Is it two years? Seven? Twenty? This ambiguity raises red flags, especially given the Fed’s history of missing critical signals before the 2008 financial crisis and the 2020 COVID-19 market crash.
Historical Context: ZLB Is Not New
The U.S. has been here before:
2008–2018: After the global financial crisis, the Fed held the funds rate near 0% for nearly a decade, dropping from 4.25% in 2007 to 0.25% by December 2008 (Federal Reserve Economic Data).
2020–2022: The COVID-19 pandemic prompted another ZLB period, with rates slashed to 0.25% as markets froze (Federal Reserve).
Each time, the Fed turned to QE to inject liquidity, but the return to ZLB wasn’t just a policy choice; it was a necessity driven by economic collapse. So why is the Fed now sounding the alarm about a potential return?
The Market’s Warning: Interest Rate Derivatives
The Fed’s report marks a shift: it’s finally paying attention to interest rate derivatives, particularly swaps tied to the Secured Overnight Financing Rate (SOFR). Unlike traditional indicators like the 2s-10s yield curve, these derivatives offer a forward-looking view of market expectations. The podcast host captures it vividly:
“This is the market screaming at the Federal Reserve that there’s a far greater than zero chance they will be at the zero lower bound.” — Rebel Capitalist
The Fed’s analysis, spanning January 2007 to May 2025, uses SOFR-based swaps to estimate ZLB risk. For example, a 10-year SOFR swap trading at 3.8% while the 10-year Treasury yields 4.38% suggests markets expect rates to fall significantly (CME Group, 2025). This negative spread of 60 basis points is a glaring signal of investor bets on lower rates, possibly driven by recession fears.
Why Now? The Fed’s Blind Spots
Why did the Fed overlook derivatives before 2008 and 2020? Pre-2008, it relied heavily on econometric models that underestimated systemic risks, missing the housing bubble’s collapse (Bernanke, 2010). Post-COVID, the Fed was blindsided by supply chain disruptions and inflation spikes, despite market signals (IMF, 2021). The shift to SOFR from LIBOR (phased out in 2023 due to manipulation scandals) also reflects a push for more reliable data (Reuters, 2023).
But skepticism is warranted. If the Fed’s models failed before, why trust them now? The 10% probability seems low when you consider the economy’s fragility, rising consumer debt ($17.5 trillion in Q2 2025, Federal Reserve), and sticky inflation in housing and healthcare (BLS, 2025).
What’s your take? Do you trust the Fed to predict the next crisis? Share your thoughts in the comments and subscribe for more.
Section 2: Quantitative Easing—Silver Bullet or Pandora’s Box?
When rates hit the ZLB, the Fed’s go-to tool is quantitative easing (QE), large-scale purchases of assets like Treasury bonds and mortgage-backed securities to lower long-term rates and inject liquidity. But does QE work, or is it a dangerous experiment with unintended consequences?
QE’s Track Record
Post-2008: The Fed’s balance sheet ballooned from $900 billion in 2008 to $4.5 trillion by 2015 through QE1, QE2, and QE3, stabilizing markets but inflating stock and housing prices (Federal Reserve).
2020–2022: The Fed unleashed $3 trillion in QE during COVID, pushing its balance sheet to $8.9 trillion by 2022, fueling a stock market rally despite economic lockdowns (Federal Reserve).
The Rebel Capitalist host questions QE’s effectiveness outside crises:
“Does QE do anything? … I think the true liquidity in the global monetary system comes from the banks themselves.” — Rebel Capitalist
The Case for QE
Proponents argue QE prevented deeper recessions:
Post-2008, GDP recovered by 2011, and unemployment fell from 10% to 4.7% by 2016 (BLS).
In 2020, QE stabilized bond markets and prevented a credit freeze, supporting small businesses (Brookings, 2021).
The Dark Side of QE
Critics, including the podcast host, highlight serious risks:
Wealth Inequality: QE boosted asset prices, benefiting the top 1% (whose wealth share rose from 30% to 34% post-2008, Federal Reserve).
Asset Bubbles: The S&P 500 surged 80% from 2009–2015, and housing prices hit record highs by 2022, pricing out first-time buyers (Case-Shiller).
Inflation Risks: While inflation stayed low post-2008, 2021–2022 saw it spike to 9.1%, partly due to QE-fueled demand (BLS).
Moral Hazard: QE bails out reckless financial institutions, encouraging risk-taking (IMF, 2022).
Japan’s decades-long QE experiment offers a cautionary tale: stagnant growth, persistent low rates, and no clear exit strategy (Bank of Japan). If the Fed returns to ZLB and QE, will it spark inflation, deflation, or stagflation—a toxic mix of high inflation and low growth?
What’s at Stake?
A return to QE could:
Erode purchasing power if inflation reignites.
Inflate asset bubbles, risking a 2008-style crash.
Weaken the dollar, impacting global trade (World Bank).
If QE returns, will your portfolio survive the fallout? Subscribe to explore strategies for turbulent times.
Donald Trump has never shied away from pressuring the Federal Reserve. His latest demand? A 300 basis point rate cut, slashing the Fed funds rate from 4.3% to ~1.3% in a single meeting, a move unprecedented outside a severe crisis.
“Trump wants Jerome Powell to drop interest rates by 30% in one meeting.” — Rebel Capitalist
Remarkably, this call comes without an official recession, as defined by the National Bureau of Economic Research (NBER). Trump’s history of Fed meddling includes:
2018–2019: Publicly criticized Powell for raising rates, tweeting that the Fed was “killing the economy” (Bloomberg, 2019).
2020: Pushed for negative rates, a policy untested in the U.S. (Reuters, 2020).
The Dovish Fed Chair Threat
Looking to May 2026, Trump is poised to appoint a Fed chair more dovish than any in history, potentially someone like Judy Shelton, who has advocated for low rates and even a return to the gold standard (The Wall Street Journal, 2020). A dovish chair prioritizes stimulus over inflation control, often aligning with political agendas.
What’s the risk? A politicized Fed undermines its independence, a cornerstone of modern central banking. Historical precedent, Paul Volcker’s aggressive rate hikes in the 1980s to tame inflation, shows the value of autonomy (Greenspan, 2007). A Trump-aligned chair could:
Slash rates prematurely, reigniting inflation.
Embrace negative rates, penalizing savers.
Erode global confidence in the dollar, impacting trade (IMF, 2023).
Global Implications
A politicized Fed doesn’t just affect the U.S.:
Emerging Markets: A weaker dollar could trigger capital outflows, destabilizing economies like Brazil or India (World Bank, 2024).
Commodity Prices: Lower rates could spike oil or food prices, hitting consumers (Bloomberg, 2025).
Geopolitical Tensions: Tariff threats from Trump could exacerbate global trade wars, forcing Fed intervention (Foreign Affairs, 2025).
Can the Fed resist political pressure, or are we headed for a monetary free-for-all? Join the discussion in our Substack community.
Section 4: Financial Derivatives, Markets Sound the Alarm
The Fed’s newfound focus on interest rate derivatives swaps tied to SOFR marks a step toward realism. Unlike LIBOR, which was phased out in 2023 due to manipulation scandals, SOFR is based on actual repo transactions, offering a more reliable benchmark (Reuters, 2023).
What Are Interest Rate Swaps?
Swaps involve two parties exchanging fixed and floating interest payments. A negative swap spread, where the fixed rate (e.g., 3.8% for a 10-year SOFR swap) is below the equivalent Treasury yield (e.g., 4.38%), signals market bets on falling rates (CME Group, 2025).
“There are a lot of entities out there betting that interest rates are not just going to be lower, but way lower in ten years. That’s pretty wild.” — Rebel Capitalist
Why Negative Spreads Matter
Negative spreads are rare and suggest:
Recession Fears: Investors expect the Fed to cut rates aggressively.
Arbitrage Opportunities: Dealers aren’t closing the gap, indicating high risk perceptions (Investopedia).
Historical Precedent: Before 2008, swap spreads widened before the crisis, a signal that the Fed missed (Bloomberg, 2009).
Data from 2025 shows a 60 basis point negative spread for 10-year swaps, a level unseen since 2020 (CME Group). This suggests markets are pricing in a 10–20% chance of ZLB within 2–7 years, higher than the Fed’s estimate.
Limitations and Uncertainties
The Fed’s reliance on derivatives isn’t foolproof:
Swap markets can be volatile, driven by speculative bets (Financial Times, 2025).
The “medium term” ambiguity undermines precision.
External shocks (e.g., geopolitical crises) could skew signals.
Are markets smarter than the Fed, or are they just panicking? Subscribe for our next deep dive into market signals.
Section 5: Economic Risks, Recession, Black Swans, and Stagflation
What could push the Fed back to ZLB? The podcast outlines two scenarios:
Recession: Rising unemployment, consumer debt defaults, or global trade disruptions.
Black Swan: A major financial collapse, geopolitical crisis, or supply chain shock.
Current Economic Landscape
As of July 2025:
Unemployment: 4.2%, up from 3.8% in 2024, signaling softening labor markets (BLS).
Inflation: Cooled to 2.5% from 9.1% in 2022, but sticky in housing (5% YoY) and healthcare (4% YoY) (BLS).
Debt: Household debt hit $17.5 trillion, with credit card balances up 10% YoY (Federal Reserve).
GDP: Growth slowed to 1.8% annualized in Q2 2025, down from 2.5% in 2024 (BEA).
The CME FedWatch Tool estimates a 30% chance of a 50 basis point rate cut by Q4 2025, reflecting market unease (CME Group). The NBER hasn’t declared a recession, but leading indicators (e.g., inverted yield curves in 2024) suggest one is possible (NBER).
Alternative Scenarios
Deflation: Falling demand could push prices down, forcing ZLB and QE (IMF, 2023).
Stagflation: High inflation with low growth, as seen in the 1970s, could complicate Fed policy (Economic History Review).
Black Swans: Potential triggers include:
A Chinese banking crisis, disrupting global trade (Bloomberg, 2025).
Middle East conflict is spiking oil to $120/barrel, inflating costs (EIA).
A major bank failure, echoing Lehman Brothers (Financial Times, 2025).
The podcast’s audience poll is telling: many estimated a 100% chance of ZLB in a crisis. Even inflation hawks agree that a severe downturn would push the Fed to zero.
If a recession hits, will your finances withstand the storm? Subscribe for strategies to thrive in chaos.
Section 6: Gold as a Hedge, Monetary Metals’ Game-Changer
In a world of zero rates and QE, gold shines. Unlike fiat currencies, it can’t be printed, making it a hedge against monetary excess. Historical data confirms its appeal:
Post-2008: Gold surged from $700/oz in 2008 to $1,895/oz in 2011 during QE1–QE3 (World Gold Council).
2020: Gold hit $2,067/oz as the Fed’s balance sheet doubled (Kitco).
“The starting point for any one of my portfolios … is always gold.” — Rebel Capitalist Podcast
The Storage Problem
Gold’s downside? Storage fees. Most vaults charge 0.5–2% annually based on value, not weight. As gold prices rise, so do costs, eating into returns.
Monetary Metals: A New Approach
Monetary Metals offers a solution: a leasing program where investors earn 3–4% interest in gold by lending to jewelers and manufacturers. The podcast host, with $40,000–$45,000 in gold through the platform, praises its benefits:
“You’re not just paid in fiat currency, you’re paid in gold … I’ve had a great experience with them.” — Rebel Capitalist
Benefits:
Eliminates storage fees.
Pays interest in gold, compounding returns.
Vetted partners reduce counterparty risk (Monetary Metals).
Risks:
Counterparty risk from lessees, though mitigated by strict vetting.
Market volatility could affect lease demand (Gold Investing Review, 2025).
Gold vs. Other Hedges
Bitcoin: Offers high returns but faces regulatory and technological risks (Forbes, 2025).
Real Estate: Illiquid and vulnerable to rate hikes (Case-Shiller).
Bonds: Lose value in low-rate environments (Investopedia).
Gold’s role could grow if QE weakens the dollar. Analysts predict gold could hit $3,000/oz by 2030 if ZLB persists (Goldman Sachs, 2025).
Ready to protect your wealth with gold? Visit Miles Franklin at milesfranklin.com and let them know we sent you.
Conclusion: Take Control in a New Monetary Reality
The Federal Reserve’s warning of a ZLB return, Trump’s radical push for rate cuts, and markets’ ominous signals paint a troubling picture. Zero rates, QE, and a politicized Fed could erode savings, inflate bubbles, and destabilize the global economy. Yet, in this chaos lies opportunity for those who see through the noise.
In a world where central banks and politicians distort markets, financial independence starts with questioning the narrative. Gold, especially through innovative solutions like Monetary Metals, offers a hedge against monetary madness. But knowledge is your greatest asset.
Key Takeaways:
The Fed estimates a 10% chance of ZLB, but markets suggest higher risks.
QE’s benefits are oversold, with risks of inflation and inequality.
Trump’s influence threatens Fed independence, with global ripple effects.
Negative swap spreads signal market bets on lower rates.
Gold thrives in ZLB/QE environments, and Monetary Metals makes it productive.
What Can You Do?
Monitor Fed announcements and Trump’s policy moves.
Reallocate your portfolio to hedge against ZLB and QE risks.
Explore gold investments, starting with Monetary Metals’ leasing model.
Stay informed with our Substack for weekly insights.
Will you let the Fed’s policies erode your wealth, or will you take control? Join our community for upcoming pieces on protecting your wealth in a recession, decoding Fed policy, and navigating market chaos. Subscribe now and stand up for financial freedom.
Sources:
Cho, S., Merrens, T., & Williams, J. (2025). “The Zero Lower Bound Remains a Medium-Term Risk.” Liberty Street Economics.
Federal Reserve Economic Data (fred.stlouisfed.org).
Bureau of Economic Analysis (BEA), 2025.
Bureau of Labor Statistics (BLS), 2025.
Bloomberg (2009, 2019, 2025). Various articles.
Reuters (2020, 2023). LIBOR phase-out and Trump’s Fed pressure.
IMF (2021, 2023). Global financial stability reports.
World Gold Council, Kitco (gold price data).
CME Group (2025). FedWatch Tool and swap data.
Brookings (2021). QE’s economic impact.
The Wall Street Journal (2020). Judy Shelton profile.