Trump Challenges To Fed Independence Recall '70S Nixon-Burns Fiasco

2025-02-04 08:17:48

(MENAFN- Asia Times) Like the '20s of the 21st century, the '70s of the 20th century had an inflation problem. The problem persisted throughout the decade; indeed, it worsened. That was in significant part because early in the decade the federal Reserve Board chair let himself be pushed around by the US president.

Today's Fed chair is determined not to let that happen again. Avoiding it will require all the Political skill and courage he can muster.

Through much of 1971, Fed chair Arthur Burns was telling President Richard Nixon that lowering interest rates in an inflationary Economy was a mistake. Nixon persisted for an understandable though perhaps mistaken political reason.

For in addition to inflation the US in the '70s had an uncomfortably high 6% unemployment rate. Nixon was pushing Burns to loosen monetary policy because, anticipating 1972, he judged unemployment a greater danger to his reelection than inflation. When Nixon finally threatened legislation to trim the Fed's independence, Burns folded.

Today the Fed's independence is back in the crosshairs. President Donald Trump lost patience with Fed Chair Jerome Powell not long after appointing him in 2018. He blasted him again the other day.

Arthur Burns, the Federal Reserve Board chair under President Richard Nixon, gave into pressure from Nixon to cut interest rates and inflation worsened. Jerome Powell, the current Fed chair, is determined to cut in response to favorable data, not presidential demands. Image: DTN

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