• Economics
• United States

While U.S. President Donald Trump was in Davos, Switzerland, making his case for why Europe should give him control of Greenland, the U.S. Supreme Court heard another case that has a lot of importance for the dollar, the economy, and the world. 

That is relevant because global markets freaked out early this week over Trump’s erratic behavior, giving Wall Street tremors and bond markets the yips.

While U.S. President Donald Trump was in Davos, Switzerland, making his casefor why Europe should give him control of Greenland, the U.S. Supreme Court heard another case that has a lot of importance for the dollar, the economy, and the world. 

That is relevant because global markets freaked out early this week over Trump’s erratic behavior, giving Wall Street tremors and bond markets the yips.

The case before the Supreme Court is about Trump’s effort to remove Lisa Cook, a Federal Reserve governor, because of alleged irregularities with a mortgage that she secured before she joined the bank. This matters more than usual because Trump just tried to remove Jerome Powell, the chairman of the Federal Reserve, just last week.

The Federal Reserve is the U.S central bank, which sets interest rates that basically rule the world. Cook, like most other Fed governors, has long resisted Trump’s pressure to cut lending rates to turbo-boost the economy, because inflation is persistent. Her attempted ouster raised concerns about the central bank’s independence and opened up questions about whether and in what circumstances the president can legally fire a member of the Fed. 

That was the focus of hours of oral arguments before the Supreme Court on Wednesday. The government argued that Cook should be fired for cause due to the mortgage fraud allegations, but not because she opposes an easy-money policy. Her lawyer said those allegations were a boondoggle. The justices seemed skeptical of the government’s arguments, as well they might, given the precedents of deference toward Fed independence. It’s not clear where this case will come down, but oral arguments did not lean in the government’s direction.

What is more important is the markets’ reaction to Trump’s increasingly off-kilter approach to policymaking, of which his assaults on the Fed form only a part. The U.S. Congress will not restrain him—but in the past, markets have, most recently after he announced sweeping tariffs last April. 

Wall Street had a bad Tuesday as Trump threatened Denmark over Greenland. U.S. Treasury yields rose for both 10- and 30-year bonds, which is a sign of flagging confidence in the dollar and the stewardship of it. U.S. Treasury Secretary Scott Bessent said on Wednesday, after Denmark’s flagship investment fund said it would sell its U.S. assets, that Denmark and its money were “irrelevant.” (He previously had labeled Argentina a “systemic” interest of the United States worth at least a $20 billion put.)

There are other cases—even bigger ones—yet to be decided at the Supreme Court, starting with the ruling on Trump’s invocation of a national emergency to levy tariffs on nearly the whole world. Oral arguments there did not augur well for the government, either.

Global economic activity is worth about $120 trillion. Some of that, in terms of investment, is in abeyance right now, waiting to see what happens with Greenland, Venezuela, the trade deals, and the rest. 

When it comes to a ruling in the Cook case, the world may not have to wait too long, as the justices’ responses to oral arguments suggest that the decision may be fairly straightforward. However, the court has until the summer to rule on this case, as it does on the even bigger one on tariffs.