Ever wonder why the Fed doesn't just take orders from the White House? There's actual history behind it.

The Federal Reserve's independence isn't accidental—it's structural. Back in the day, central banks got caught up in political pressure all the time. Governments would push them to keep rates low before elections, print money to finance spending, basically treat monetary policy like a political tool. The results? Inflation spirals, currency crashes, economic chaos.

So post-WWII, especially after the stagflation nightmare of the 1970s, the consensus shifted hard. The Fed needed a firewall. Congress gave it dual mandate (price stability + employment) but kept the interest rate decisions independent. Board members get longer terms than presidents. Can't just fire them on a whim.

Why does this matter for markets? Because investors need predictability. If the Fed buckled to White House pressure every cycle, you'd get erratic monetary swings. Bond yields whiplash. Crypto getting crushed by unpredictable inflation. Asset prices depend on trusting that rate decisions follow economic data, not election calendars.

There's always tension though. Presidents complain about rate hikes. Congress occasionally questions Fed independence. But the institutional structure has held. Markets pricing in Fed policy—not political theater—keeps the whole system more stable.