Elon Musk Supports Abolishing The Fed: What That Could Mean for Your Wallet
Written by
Nicole Spector
Edited by
Molly Sullivan
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
Elon Musk, who is on track to become the world’s first trillionaire by 2027, is known for boldly sharing highly divisive opinions on and desires for the U.S. economy. Musk has beef with a number of U.S. governmental policies as they stand. President-elect Donald Trump, to an extent, is in alignment with Musk and wants Musk to make moves to overhaul the government.
This brings us to ask, “What could happen to The Federal Reserve under a Trump presidency — a presidency that will likely empower Musk’s political influence?” Musk has signaled that he wants to see the Fed overhauled or even dismantled. He did so by including a “100” emoji in a re-share of Republican Sen. Mike Lee of Utah’s post on X calling for ending the Fed.
“The Executive Branch should be under the direction of the president,” Lee said on Nov. 7 in a post on X, shortly after Fed Chair Jerome Powell told media outlets he wouldn’t resign if asked to do so by Trump. “The Federal Reserve is one of many examples of how we’ve deviated from the Constitution in that regard,” Lee added. “Yet another reason why we should #EndTheFed.”
Musk’s public endorsement of the wish to end the Fed shouldn’t be swept aside as mere swagger — not when he is poised to play a key role in Trump’s administration. Could the Fed be abolished? What would that mean for the economy and, ultimately, for your wallet?
Abolishing The Fed Would Be the Most Dramatic Upheaval Imaginable
Abolishing the Fed would dramatically change the entire U.S. financial system — in practically unfathomable ways. It starts all the way at the top, with our central bank system.
“America’s central bank manages the money supply and sets the key interest rates that are necessary for economic stability,” said Mike Fahey, CEO and founder at Fahey Communications, a PR firm specializing in politics and crisis communications that ran several high-profile campaigns in the past election cycle.
“It’s obviously very hard to imagine a Federal Reserve-less America, since the Fed has been around since 1913, and most of us were taught in school that it is under the auspices of the Fed that we have a relatively stable economy,” Fahey said.
Abolishing The Fed Would Mean Uncertainty and, Possibly, High Inflation
In a Fed-less nation, we won’t have monetary policy tools in places to stabilize prices. Therefore, we could see inflation volatility increase.
“For household budgets, this could mean any number of things — substantial payoffs among them,” Fahey said, “The first is that everyday borrowing could become more expensive. Rates of interest on things like mortgages, car loans and credit cards seem likely to rise not only on average but also in their variance, with payments shooting up more often and more dramatically.”
That, Fahey said, is “on the secure side of things.” On the non-secure side of things is the uncertainty that will arise with our bank accounts.
“Bank accounts could become a lot more uncertain without the Fed watching over them and ours coordinating a deposit insurance program,” Fahey said.
More Bank Crises Could Happen
Without the Fed, there would be no central authority to control the national money supply, which means banking crises could become more common. This is because they’d be without “a deep-pocketed entity to provide emergency funds,” said Michael Ashley Schulman, founding partner and CIO at Running Point Capital Advisors.
The US Dollar Could Destabilize and National Debt Could Go Into Default
Additionally, the U.S. dollar’s value could destabilize, “weakening its global dominance,” Schulman said. “Additionally, the government might face higher borrowing costs, risking default on national debt.”
The Stock Market Would Take a Huge Hit
Economic chaos at any level can send the stock market into a tizzy. The abolishment of the Fed would be the most chaotic thing imaginable, so, surely, the stock market would go haywire.
“In a hypothetical scenario in which the Fed was abolished, the initial shock would likely hit the stock market affecting every investor out there,” said Bryan M. Kuderna, founder at Kuderna Financial Team.
The Fed Will Almost Certainly Not Be Abolished (at Least, Not Anytime Soon)
So, what’s next? Will the Fed be abolished? It’s terribly unlikely. Or, rather, it’s terribly unlikely that it will happen anytime soon.
“Critics of The Federal Reserve, even some prominent ones, have not come close to mounting a serious threat to the Fed’s existence,” Fahey said. “And for good reason; abolishing the Fed would take huge legislation, would journey through enormous resistance both in the financial sector and among various economists and Congress, and would likely encounter a presidential veto along the way. The Fed is simply too well entrenched, too widely supported in the general idea, if not the specific way it operates, to be abolished anytime soon.”
More From GOBankingRates
