Trump is currently threatening the independence of the Federal Reserve through a series of tweets, and the last time a U.S. President exerted such pressure on the Federal Reserve was in 1971, on the eve of the Great Inflation era in the United States.
In 1971, the U.S. economy was facing a "stagflation" dilemma, with an unemployment rate of 6.1%, inflation rate exceeding 5.8%, and continuous expansion of international payment deficits. To seek re-election, President Nixon exerted unprecedented pressure on Arthur Burns, the then-Federal Reserve Chairman.
White House records show that in 1971, Nixon's interactions with Burns significantly increased, especially in the third and fourth quarters, with formal meetings between the two reaching 17 times per quarter, far exceeding the normal communication frequency.
This intervention was reflected in policy operations: that year, the U.S. Federal Funds Rate dropped sharply from 5% at the beginning of the year to 3.5% by year-end, and the M1 money supply growth reached a post-World War II peak of 8.4%. In the year the Bretton Woods system collapsed and the global monetary system underwent dramatic changes, Burns' political compromise laid the groundwork for the subsequent "Great Inflation," which was only resolved when Paul Volcker significantly raised interest rates after 1979.
Burns thus bore the historical condemnation. Today's Powell absolutely does not want to repeat Burns' fate.
[The rest of the translation continues in the same manner, maintaining the original structure and translating all text while preserving HTML tags and specific terms like Block, Bull, TRON, etc.]"Close the dollar and gold exchange window, suspend the right of foreign governments to exchange dollars for gold; implement a 90-day wage and price freeze to curb inflation; impose a 10% additional tax on all taxable imported goods to protect American products from exchange rate fluctuations."
This series of measures, known as the "Nixon Shock", broke the foundation of the Bretton Woods system established in 1944, causing gold to surge and the global exchange rate system to collapse.
Initially, wage and price controls suppressed inflation in the short term, with US inflation kept at 3.3% in 1972. However, by 1973, Nixon lifted price controls, and the consequences of excessive dollar circulation and supply-demand imbalance quickly emerged. Additionally, with the first oil crisis that year, prices began to soar.
The US economy then fell into a rare "double kill" situation, with inflation reaching 8.8% in 1973 and rising to 12.3% in 1974, while unemployment continued to increase, forming a typical stagflation pattern.
At this time, Burns tried to tighten monetary policy again but found he had already lost credibility.
His reliance on political compromise and non-monetary measures laid the groundwork for the "Great Inflation" until Paul Volcker took office in 1979 and thoroughly "suppressed" inflation with extreme interest rate hikes, after which the Federal Reserve regained its independent prestige.
Powell definitely does not want to be the next Burns
Burns left an average annual inflation rate of 7% and weakened the Federal Reserve's credibility. Internal Federal Reserve documents and Nixon recordings show that Burns prioritized short-term political needs over long-term price stability, and his tenure became a negative example of central bank independence.
Some financial commentators joked:
"Burns didn't cheat, didn't kill anyone, and wasn't even a pedophile... His only crime was cutting interest rates before inflation was completely under control."
In contrast, his successor Paul Volcker "strangled" inflation with a 19% interest rate, which caused a severe recession but made him a hero in ending inflation in the eyes of Wall Street, economic history, and the public.
History proves that Americans can forgive a Federal Reserve chairman who causes an economic recession, but will not forgive a chairman who ignites inflation.
Powell is well aware of this and definitely does not want to be the next Burns.
