In our most recent Broyhill Letter, we explained that, “Evidence from the Nixon tapes clearly reveals that Nixon pressured then Fed Chairman Arthur Burns to engage in expansionary monetary policies prior to the 1972 election. Blaming a modest rise in the unemployment rate as one of the reasons he lost the 1960 election, he demanded an expansionary monetary policy in the run-up to the 1972 election.” After reading through Burton Abrams piece in the Journal of Economic Perspectives once more, we figured the work was worth sharing in its entirety. Please click here to download a copy of the document and destroy any notions you might have had about the Fed’s “Independence.”
The expansionary policy demanded by Nixon can be seen clearly in the acceleration of the growth rate of the money supply in the table below. This surely was at least partly responsible for Nixon’s landslide victory in ’72. Unfortunately, this “excessive stimulation” created serious problems for the economy that took nearly a decade to resolve. Take a peek at the second chart of Unintended Consequences.
For what it’s worth (we think quite a bit), Jeremy Grantham calculates the odds of the Year Three Stimulus Effect of the Presidential Cycle being attributable to “luck” at the 1 in 10,000 level.