Thread by @huwsteenis

Nixon's shock of 71 can help us make sense of Trump's shock

He imposed 10% import tariffs for 4 months at the same time as coming off the gold standard - which partly led to the stagflation of the 70s

My latest @ft

🧵

“My philosophy, Mr President, is that all foreigners are out to screw us and it’s our job to screw them first.” 

Nixon’s Treasury Sec. Connally 

2/7

The Nixon shock helped forge modern finance eg

- creation of interest rates & FX derivatives.
- Investors shifted asset allocation to gold and real assets to preserve value.
- corporates and depositors increasingly moved their activities from banks to bond markets.

3 /7

Back in 1971 Nixon hit Canada with tariffs despite its currency already floating.

Like Prime Minister Mark Carney today, Canadians didn’t back down and eventually the tariffs were removed.
4/7

Nixon also put huge pressure on the Fed for expansionary monetary policy to offset the shock. William Safire, Nixon’s speechwriter, recounts how the administration kept up a steady stream of anonymous leaks to pressure Fed chair Arthur Burns

5/7

At the end of it all, Nixon’s four-month tax may have helped facilitate dollar revaluation, but it fell short of the desired goals and had no discernible impact on imports. The move’s economic shockwaves, however, rippled through the decades. 

6/7

Full article in @ft here



The ‘Nixon shock’ might help us make sense of the Trump oneon.ft.com/3YsyW0m