Donald Trump may have copied Ronald Reagan’s campaign slogan – “Make America Great Again” – to get elected…
But it’s another Republican president whose time in office shows the most obvious parallels with Trump’s presidency.
Richard Nixon’s spell in the White House wasn’t without controversy either. Nixon had his men break into the Watergate building where the office of the rival Democratic Party was based.
The “Watergate” scandal ultimately led to Nixon resigning in the face of almost certain impeachment when his involvement in the break in and cover-up came out.
Trump is facing similar charges after the Democratic National Committee (DNC) was hacked ahead of the 2016 presidential election.
From the start of his presidency, Trump has been accused of colluding with Russia (which is thought to be behind the hack) to further his electoral chances.
The comparison between Trump and Nixon doesn’t end there. Both of them have put pressure on the Federal Reserve to act a certain way even though they’re really not supposed to.
Unfortunately (or fortunately) for Trump, his efforts to influence the Fed may not prove as successful as Nixon’s.
What’s the same?
In the early 1970s, President Richard Nixon and Fed chairman Arthur Burns were at odds with one another.
After cutting rates in half to fight off a recession, Burns wanted to raise rates when the economy showed signs of improvement.
Nixon on the other hand didn’t want to do anything that might slow down the recovery. He couldn’t afford the economy grinding to a halt just as he was seeking re-election in 1972.
Twitter didn’t exist at the time, so Nixon had to tell Burns in a closed-door meeting (the old-fashioned way) that he didn’t want him to hike rates.
“We’ve really got to think of goosing it… late summer and fall of this year and next year,” Nixon instructed Burns in 1971.
In 2018 the president and the Fed chair are in much the same situation as Nixon and Burns found themselves in back then.
Donald Trump is wary of the Fed’s interest rate hikes. He thinks they could hurt the growth spurred by his government’s tax cuts.
But Fed chairman Jerome Powell wants to raise rates in tandem with the growing economy. He doesn’t want inflation to get out of control.
So Trump decided to do what no other president would do: publicly speak out against Fed policy.
In an interview on CNBC, Trump said he was “not thrilled” with the fact that interest rates are going up.
“Because we go up and every time you go up they want to raise rates again. I am not happy about it.
“I’m letting them do what they feel is best. But I don’t like all of this work that goes into doing what we’re doing.”
Of course, the president isn’t supposed to interfere with the Fed because technically the central bank works independent from the government.
So the White House was quick to issue a statement:
“Trump did not mean to influence the Fed’s decision-making process.”
But he also did not mean to not influence the man he himself appointed to lead the Fed, I bet.
In the 1970s, this game of political arm-wrestling between the president and the Fed chair could only throw up one winner.
Burns swiftly gave in to Nixon’s demands which led to a reversal of rate hikes.
“It was a time before central banks had so much influence over markets,” says Nomi Prins, author of Collusion: How Central Bankers Rigged The World.
“Central banks like the Fed were fixated on macroeconomic stability, not the performance of the stock market.”
The relationship between central bankers and politicians has changed a lot since then.
Central bankers have become more powerful, which means they now have enough backbone to resist pressure from politicians.
Trump can tweet all he wants about keeping interest rates the same, but Fed chair Powell is unlikely to take much notice.
The US economy is growing and everyone’s expecting the Fed to raise rates again in September. No Trump tweet or TV interview will stop that.
“If Powell adheres to Trump’s wishes, it’ll be because the economy isn’t growing as fast as predicted and because banks remain addicted to cheap central bank credit,” Prins adds.
The Fed ignoring the president this time around may actually be a blessing in disguise for Trump. That’s because Nixon’s intervention didn’t prove very wise.
When Burns acted against his own advice and reversed rate hikes, the US entered one of the highest inflationary periods in its history.
Before long, the US got caught up in stagflation – a period of high inflation and poor economic growth.
Nixon’s meddling in central bank policy didn’t work out too well. So it’s probably a good thing politicians aren’t supposed to have a role in monetary policy!
Besides, Trump may have bigger problems to worry about than the Fed raising interest rates.
With new information about the involvement of his campaign team in the DNC hack coming to light, Trump will need to make sure the Russia probe doesn’t become his Watergate.