AI CHAT: THE TRUMPS AND THE FEDERAL RESERVE - HEDGING THE MARKET FROM THE BOTTOM

 

Even if the Trumps can protect us in the sectors they are hostiling taking over at the international level, they are offsetting it by letting single-product companies like Nvidia, known racists to boot-which wreaks of misogyny, to become too gigantic to control.  Jensen Huang was born just 12 days after Major Tom, my brother who always was and is a totally detached, bottomless, souless vessel (christian use) who is using the Born Agains for his endgame.  I'm not sure if he was born a misogynist but he never talked to me save maybe once as we slept in the same room from about 1964 through 1972, from a chip he never lost.  The other four boys slept in the attic.  My sisters had their own room along with my parents and us on the second floor of our McKees Rocks Bottoms home.  The underlying issue of all greed is misogyny to serve as the foundation for slavery for the parasitic privileged.

These are from a chat with Google's AI on 3/25/26

QUESTION 3:

Doesn't this make it easier for people like Axerod on "Billions" to make bigger plays because there are less variables?

In a way, yes—but it’s more like the "playing field" changes rather than just getting easier.

If a character like Bobby Axelrod were looking at a shrinking Fed balance sheet (Quantitative Tightening), he would see it as a high-stakes shift in how the game is played. Here is why a "leaner" Fed actually creates the kind of environment a hedge fund shark loves:

1. More Volatility = More Profit

When the Fed has a massive balance sheet, they act like a "giant wet blanket" on the market. They buy up bonds to keep prices stable and predictable.

* The "Billions" Play: When the Fed pulls back, that "blanket" is gone. Prices for bonds and stocks swing much more wildly. For a normal saver, that’s scary. For Axelrod, volatility is opportunity. He can make much bigger "plays" on those swings because the government isn't there to steady the ship.

2. Fewer "False" Signals

Axelrod’s edge comes from reading the "true" market.

* The Logic: When the Fed is heavily involved, market prices are "artificial"—they are whatever the Fed wants them to be.

* The Advantage: If the Fed has a "lighter footprint," prices reflect actual supply and demand. This makes it "easier" for a genius trader to spot mispriced assets before anyone else does. He’s betting against other traders, not against the printing press of the U.S. government.

3. Survival of the Fittest (The Liquidity Squeeze)

As the Fed shrinks its balance sheet, "easy money" disappears.

* The Play: Smaller, weaker players get squeezed because they can’t get loans. Axelrod, who usually has massive cash reserves or "predatory" lines of credit, can swoop in and buy up distressed companies for pennies on the dollar. He thrives when others are starving for cash.

4. Are there "Fewer" Variables?

This is where it gets tricky. While there is less government meddling (one less variable), the market becomes more unpredictable.

* Without the Fed's "backstop," a bad trade can turn into a total collapse much faster.

* In Billions, Axelrod often wins because he knows what the "big players" (like the Fed) are going to do before they do it. If the Fed is "lean" and stays out of the way, he loses that specific insider-ish edge of predicting government intervention.

The Bottom Line: A smaller Fed balance sheet takes away the "safety net." For most people, that’s a risk. For a "Billions"-style predator, it’s an invitation to a bloodbodth where only the strongest survive.

Does that sound like the kind of "shark" move you'd expect from someone like Axelrod, or do you think he'd prefer the predictability of a big Fed?

Proactive Follow-up: Would you like to look at which market sectors usually get hit hardest (and become "prey") when the Fed pulls back its liquidity?

Question 2 So How does Trump think that's better?

The Trump administration’s argument for a smaller Fed balance sheet is centered on the idea that the central bank should have a "lighter footprint" to allow private markets to function more naturally. [1] 

His economic advisors, including [Kevin Hassett](https://www.google.com/search?kgmid=/m/03d1tyr&q=So+How+does+Trump+think+that%27s+better?), have called for the Fed to be as "lean as possible," arguing that this approach is better for the economy—and by extension, smaller institutions—in the following ways: [1] 

* Ending Market Distortions: Supporters argue that when the Fed holds trillions in bonds, it artificially manipulates interest rates and "distorts" the true cost of money. By shrinking the balance sheet, the administration believes the market—not the government—should decide where capital flows.

* Redirecting Liquidity to "Main Street": Some advisors, like Fed Chair nominee [Kevin Warsh](https://www.google.com/search?kgmid=/m/0clm1s&q=So+How+does+Trump+think+that%27s+better?), have suggested that a smaller balance sheet could actually allow the Fed to set its primary interest rate target lower than it otherwise would be. The theory is that by removing the Fed's massive "footprint" from the bond market, more of that liquidity can be deployed by private banks into the broader economy rather than being tied up in Fed reserves.

* Reducing "Wall Street" Favoritism: A common critique from the administration is that the Fed's massive bond-buying programs primarily benefit large financial institutions and inflate asset prices (like stocks and high-end real estate). They argue a leaner Fed levels the playing field for smaller, community-based lenders.

* Fiscal Responsibility: Trump and his team have noted that the Fed's large balance sheet has recently led to billions in operational losses. Shrinking the balance sheet reduces these losses and stops the Fed from acting as a "backstop" for government debt, which they argue encourages more disciplined federal spending. [1, 2, 3, 4, 5] 

The Potential Conflict

There is an internal tension in this strategy: while Trump wants a smaller balance sheet to reduce government "meddling," he also frequently pressures the Fed to slash interest rates. Economists warn that aggressively shrinking the balance sheet can actually push long-term rates (like mortgages) higher, which would work against his goal of making housing more affordable. [2, 6, 7] 

Would you like to see how the Fed's current holdings compare to where they were at the start of the Trump administration?

[1] [https://news.bgov.com](https://news.bgov.com/bloomberg-government-news/hassett-calls-for-fed-balance-sheet-to-be-as-lean-as-possible)

[2] [https://www.washingtonpost.com](https://www.washingtonpost.com/business/2026/02/10/kevin-warsh-fed-balance-sheet/)

[3] [https://www.reuters.com](https://www.reuters.com/business/finance/warsh-may-want-smaller-fed-balance-sheet-thats-hard-achieve-2026-02-17/)

[4] [https://money.usnews.com](https://money.usnews.com/investing/news/articles/2026-03-25/fed-reports-narrowing-19-6-billion-loss-for-operations-in-2025)

[5] [https://www.investing.com](https://www.investing.com/news/economy-news/fed-reports-narrowing-196-billion-loss-for-operations-in-2025-4580460)

[6] [https://www.reuters.com](https://www.reuters.com/markets/us/with-interest-rates-hold-feds-economic-projections-take-center-stage-2025-03-19/)

[7] [https://www.washingtonpost.com](https://www.washingtonpost.com/business/2026/02/10/kevin-warsh-fed-balance-sheet/)

Question 1: From Econoday, "The current account, on a quarterly basis, measures the U.S. international balance in goods and services trade as well as unilateral transfers. (Bureau of Economic Analysis) Why Investors Care

Current Account Released On 3/25/2026 8:30:00 AM For Q4:2025

  Prior Prior Revised Actual

Balance $-226.4 B $-239.1 B $ -190.7 B

In this case, the report shows a significant improvement in the U.S. international balance. The "Actual" deficit of $-190.7 billion is much smaller than both the original and revised figures for the previous period. [1, 2] 

Understanding the Numbers

* Balance ($-190.7 B): This is the "Actual" deficit for Q4 2025. Because it is a negative number, it means the U.S. sent more money out than it brought in, but the gap narrowed by 20.2% compared to the third quarter.

* Prior Revised ($-239.1 B): This was the deficit for Q3 2025 after updates. The fact that the "Actual" is higher (closer to zero) means the deficit shrank significantly.

* GDP Ratio: The deficit fell to 2.4% of GDP, down from 3.1% in the previous quarter. [1, 2, 3, 4] 

Why Investors Care

Investors track the [Current Account](https://www.investopedia.com/terms/c/currentaccount.asp) because it acts like a national "checkbook" that measures trade and investment flows. [5, 6] 

* Currency Strength: A shrinking deficit often supports a stronger U.S. Dollar. When the deficit narrows, there is relatively less need for the U.S. to "borrow" from abroad to fund its spending.

* Economic Growth: This specific narrowing was driven by a surplus in primary income (interest and dividends earned abroad) and a smaller gap in goods trade.

* Market Sentiment: A smaller-than-expected deficit (consensus was around $-211B) is generally viewed as a "beat," signaling that the U.S. is becoming more competitive or earning more from its global investments. [2, 3, 7, 8, 9] 

Factors Driving the Q4 2025 Shift

* Income Surplus: The balance on primary income swung from a deficit to a $23.9 billion surplus.

* Trade Dynamics: Imports of goods contracted more than exports, partly reflecting the impact of increased tariffs.

* Investment Flows: The report showed U.S. residents earned more from their foreign financial assets than they paid out to foreign residents. [2, 3, 10, 11, 12] 

Does seeing a narrowing trade gap make you more optimistic about the strength of the dollar in the coming months?

Note: For more granular details, you can visit the BEA Interactive Data Application.

[1] https://www.bea.gov

[2] [https://seekingalpha.com](https://seekingalpha.com/news/4568434-current-account-deficit-narrows-more-than-expected-in-q4)

[3] [https://tradingeconomics.com](https://tradingeconomics.com/united-states/current-account)

[4] [https://www.bea.gov](https://www.bea.gov/data/intl-trade-investment/international-transactions)

[5] [https://www.bea.gov](https://www.bea.gov/news/blog/2012-07-02/what-us-current-account)

[6] [https://www.investopedia.com](https://www.investopedia.com/terms/c/currentaccount.asp#:~:text=A%20current%20account%20tracks%20a%20country%27s%20money,which%20include%20individuals%2C%20businesses%2C%20and%20government%20bodies.)

[7] [https://www.imf.org](https://www.imf.org/en/publications/fandd/issues/series/back-to-basics/current-account-deficits#:~:text=When%20a%20country%20runs%20a%20current%20account,Eventually%2C%20these%20need%20to%20be%20paid%20back.)

[8] [https://www.investopedia.com](https://www.investopedia.com/ask/answers/031615/whats-difference-between-current-account-and-capital-account.asp)

[9] [https://www.federatedhermes.com](https://www.federatedhermes.com/us/insights/article/us-economy-unaffected-by-geopolitical-dominoes.do)

[10] [https://simonquickadvisors.com](https://simonquickadvisors.com/insights/2025-q4-market-update/)

[11] [https://www.vaia.com](https://www.vaia.com/en-us/textbooks/economics/microeconomics-11-edition/chapter-20/problem-25-which-statement-is-the-most-accurate-lo2-a-our-ba/#:~:text=Statement%20%28c%29:%20The%20income%20Americans%20receive%20from,generated%20from%20American%20investments%20made%20by%20foreigners.)

[12] [https://www.cliffsnotes.com](https://www.cliffsnotes.com/tutors-problems/Economics/58730122--b-1-Compute-the-balance-on-the-US-primary-income-b-2/#:~:text=This%20surplus%20suggests%20that%20U.S.%20residents%20earned,than%20foreign%20residents%20earned%20within%20the%20U.S.)

Before the above chat I read this article:

Does this mean lower interest rates will only be for the big boys.

US Fed's loss narrows sharply to $19.6 billion in 2025

By Michael S. Derby, Reuters -  12:03 PM ET 3/25/2026

US Economy

Facebook. Twitter. LinkedIn. Print

March 25 (Reuters) - The U.S. Federal Reserve reported a much narrower loss last year in an audited financial statement released on Wednesday, as its balance sheet contracted and it benefitted from a drop in interest expenses.

The Fed said that its total comprehensive loss for the full year of 2025 stood at $19.6 billion, compared with losses of $77.5 billion in 2024 and $114.6 billion in 2023. The Fed last turned a profit in 2022 and returned $76 billion to the government that year, down from $109 billion in 2021.

The Fed's losses are tied to the aftermath of the monetary policy path pursued during the COVID-19 pandemic. Then, the Fed bought Treasury and mortgage bonds aggressively to both stabilize troubled financial markets and to provide economic stimulus when its interest rate target was at near zero levels and could be trimmed no further.

The Fed earns income from bonds it owns and from services it provides to the financial sector. For most of the Fed's history, that earned the central bank substantial amounts of money, and by law, any money left over after the Fed covered its operations was handed back to the Treasury.

The Fed's bond-buying upended that relationship after the central bank began raising interest rates to combat inflation in 2022, as money the Fed paid out to financial institutions to keep its interest rate target in line shifted to exceed the income from bonds and services.

In 2025, the Fed reported $12.1 billion in interest rate expenses, down from $68 billion in 2024.

Pressure on the Fed's bottom line has been easing due to rate cuts that kicked off in 2024, taking the federal funds rate from the recent peak of between 5.25% and 5.5% to the current level of 3.5% to 3.75%.

PATH BACK TO PROFITABILITY

The Fed has stressed that profits and losses on its activities do not have any bearing on its ability to conduct monetary policy.

The Fed accounts for its losses by recording what is called a deferred asset. Once that tally is covered, the Fed has said it will again return excess profits to the Treasury.

The current size of the Fed's deferred asset stands at $245 billion and its movement over recent months indicates that the Fed is back to profit-making, albeit at a very modest level. Analysts generally agree it will take the Fed years to fully extinguish the deferred asset.

POLITICAL TENSIONS

The losses have played a peripheral role in some of the tensions around cost overruns of the Fed's headquarters in Washington, a matter that became a major flashpoint between the central bank and the Trump administration, as the Department of Justice launched a criminal probe.

Beyond that, the Fed's losses did briefly give flight to a push in Congress to alter the Fed's rate control toolkit, which in theory would have reduced the interest payments it had been making to financial institutions.

Top Fed officials and many private sector analysts warned that tinkering with the Fed's rate control toolkit could create a violent market reaction, and the effort seems to have ended.

That said, the nomination of Kevin Warsh to succeed current Chair Jerome Powell, whose term as Fed leader ends in May, could bring big changes to the way the Fed deals with its holdings of bonds and manages interest rates.

Warsh has expressed interest in a much smaller balance sheet and some in the Fed have talked about how regulatory changes that reduce financial firms' need to hold liquidity could allow the central bank to have a smaller footprint in markets.

QUESTION 4

Isn't this a federal offense for a president to route the market using government financial tools?

Whether a president's use of government tools to influence the market constitutes a federal offense is a complex legal question involving conflicting statutes, constitutional theories, and recent Supreme Court rulings.

While certain laws like the STOCK Act and the Impoundment Control Act (ICA) place restrictions on presidential actions, the actual prosecution of a sitting president is historically unprecedented and legally constrained. 

University of Virginia School of Law

University of Virginia School of Law

 +2

Applicable Laws and Constraints

STOCK Act (2012): This law explicitly bars the president, vice president, and members of Congress from using non-public information for private profit. However, legal experts note that defining what constitutes "non-public information" in the context of presidential duties can be "fatally ambiguous".

Impoundment Control Act of 1974 (ICA): This act prevents the president from unilaterally refusing to spend funds appropriated by Congress, a power known as the "power of the purse". Illegal impoundment can lead to civil or administrative penalties, but criminal prosecution for these acts is rare.

Emoluments Clauses: The Constitution's Foreign and Domestic Emoluments Clauses prohibit the president from receiving profits or benefits from foreign or domestic governments beyond their official salary. While violations have been alleged in recent years, courts have often dismissed these cases on procedural grounds like "standing".

Securities Laws: General prohibitions against market manipulation, such as Section 9 of the Securities Exchange Act, make it unlawful to create a false or misleading appearance in the market. Applying these to a president's official policy announcements (like tariffs) is difficult because the statements are typically public and reflect official policy intent. 

Time Magazine

Time Magazine

 +11

Legal Obstacles to Prosecution

Presidential Immunity: In the landmark case Trump v. United States (2024), the Supreme Court ruled that presidents have absolute immunity for "core" constitutional acts and presumptive immunity for other official acts. This significantly complicates any criminal prosecution for actions taken while performing official duties, such as directing agencies or announcing trade policies.

Department of Justice (DOJ) Policy: Longstanding DOJ Office of Legal Counsel (OLC) policy maintains that a sitting president cannot be indicted or prosecuted, as it would impermissibly interfere with the executive branch's ability to function.

The "Unitary Executive" Theory: This theory suggests the president has near-total control over the executive branch, including the agencies (like the SEC) that would normally investigate market crimes. 

NPR

NPR

 +5

Current Examples (as of March 2026)

In April 2025, Democratic lawmakers called on the SEC to investigate whether President Trump's social media posts—such as calling for a "GREAT TIME TO BUY" just before pausing tariffs—constituted market manipulation. However, many ethics experts expressed skepticism that such an investigation would lead to charges, citing the lack of clear precedent and the president's broad authority over regulatory agencies. 

CNBC

CNBC

 +3

AI can make mistakes, so double-check responses