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SIMON BROWN: I’m chatting with Harry Scherzer, CEO of Future Forex. Harry, appreciate the time. Over the weekend the US Justice Department announced that they are investigating Jerome Powell. He put a statement out – a fairly punchy one – early our time Monday morning. The crux here really is around central bank independence. I was going to say there’s not much precedent for this, but actually there is. Nixon put pressure on his central banker in the 1970s. We’ve had Erdogan in Turkey do it. We know how it ends. Not well.
HARRY SHERZER: Absolutely, Simon. Thanks for having me on. This is a really fascinating headline, because you have a situation where one of the constitutional reasons that America works is because of independence between government and the central bank. This was infringed upon in Nixon’s days.
Trump is potentially doing something similar and that creates a huge amount of distrust within the market as a whole.
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HARRY SHERZER: If the market can’t trust that monetary policy is set without the president’s interference, then it’s very difficult to invest in an economy where there’s intermingling between different departments – and ultimately a conflict of interest.
SIMON BROWN: Central banks’ independence is so that they can make those hard decisions, which oftentimes politicians – and truthfully the consumer on the street – might not like. But it is the central bank’s ability to make it, kind of regardless. And it’s the setup, the way they stagger terms, the duration of terms and the Federal Reserve to give that independence.
HARRY SHERZER: Yes. If we take a step back, Simon, what it really comes down to is that a president will want results now. They want the current results to be incredible. In order to get that, they would want interest rates to be cut because then borrowing becomes cheaper, businesses grow quicker. Everything looks great on the surface.
The problem is that years in the future we might find that inflation spirals out of control as a result, and naturally – call it five, four or five years later – the next presidency is stuck with a complete mess.
For that reason, the central bank governors have to be looking at long-term projections rather than short-term projections, whereas presidents tend more to look at the short-term valuation of the country – and effectively that is what’s going to shape how they look as a president. That’s the reason underpinning the necessity for independence. It has always been that way until, I guess, recently – apart from Nixon back in the day. So it really is a scary thought that there might be interference here.
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SIMON BROWN: You make a great point there because it’s also going to play out slowly. We’ve seen some of the risk pricing already happening. Gold, the US10-year, the equity market. But this is not a January and February; it’s not even necessarily a 2026 implication. This happens down the line in years to come.
HARRY SHERZER: Exactly. In fact, in the short term what we might see is the market delighted, or rather the people delighted with lower interest rates. Everyone’s super happy, everyone says ‘Yes Trump, well done’.
The problem is that you’re really doing the opposite of investing in your future. You’re investing in ‘now’ at the expense of the future, which is exactly what the central bank is supposed not to do. It is supposed to be looking into the future and saying, ‘I’m sorry, you can’t have XYZ because in the future we’ll be in trouble if we give that’.
And so that can’t be undermined as we saw, as you mentioned, in Turkey with Erdogan. He effectively did manipulate the central bank, and it looked good – temporarily. But then it looked absolutely awful when they hit 85% inflation and effectively the poor people of Turkey just became poorer.
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SIMON BROWN: Yes. And to your point it absolutely went out of control. Is the big hit here going to potentially be the sort of long-dated US debt? I’m thinking of the 10-year, because you buy a 10-year debt and you’re not sure about what inflation is going to be. You want a better yield for protection.
HARRY SHERZER: Absolutely. The price of US Treasury bonds is going to have to go up. This is back to inflation going up if you can’t trust the underlying economy, if you can’t trust, who you’re learning to trust.
So, it might be something which is basically shooting yourself in the foot in the long run and it really is a scary thought because I’ll say – just to just to sort of temper expectations here – that the market hasn’t reacted particularly badly yet and the reason is that this is the very start of something happening.
I think the market kind of expects that, much like with a lot of what happens with Trump, basically just nothing will come of it and it’s a lot of talk about nothing. But the fact that this is even a topic of discussion is scary.
We would hope that this would never be a topic of discussion.
SIMON BROWN: Yes. This also is not something you and I should be chatting about on a random Tuesday morning. The one response has been gold trading up to all-time highs because of course gold is your classic safe haven put-it-under-your-bed type of investment.
HARRY SHERZER: Yes. You’d think that being in South Africa we’d be able to say: ‘Fantastic. If America does poorly, that reflects well on the rand/dollar.’
But unfortunately, when America coughs, South Africa gets a cold. So really what ends up happening is we will feel it as well.
And if you want to be safe, if you really want to be safe from all of this and you are scared about this, gold is the place to go because that’s the safe-haven asset. That’s why it’s trading at all-time highs.
SIMON BROWN: Absolutely. The story for gold has been strong for the last many years. This just adds another tick to it.
We’ll leave it there. Harry Scherzer, CEO of Future Forex, I appreciate the insights.
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