Monday, November 7, 2016

Greenspan Had Role in Pressuring Arthur Burns Not to Raise Rates before '72 Election

Boy, did Murray Rothbard have Alan Greenspan pegged.

From the Justin Fox review of the new Sebastian Mallaby book, The Man Who Knew: The Life and Times of Alan Greenspan:
This view of Greenspan as a political animal is central to Mallaby’s account. It is also, along with the often amusing depictions of Greenspan’s personal life, what makes it so much fun to read. In his autobiography, published in 2007, Greenspan depicted his rise to power as a series of lucky coincidences. Mallaby describes in detail how Greenspan climbed to the top, and it’s a much more interesting story.

It is not heroic like the biographies of 19th-century business titans that Greenspan read when he was young. It is instead an archetypical second-half-of-the-20th-century tale of a young man of modest means rising to lofty status in business and in government by dint of intelligence, diligence, quirky charm and a Machiavellian streak. Greenspan comes across in these pages (and in person; I’ve met him twice) as a decent, thoughtful, likable guy. Just not as an innocent, and also not as a hero...

He also played a role in the notorious effort to get Arthur Burns, whom Nixon had appointed as Federal Reserve chairman, to stop raising interest rates and bad-mouthing the economy in the run-up to the 1972 election.

Nixon’s aides had been planting negative (and false) stories in the news media to pressure Burns, to no effect. So they asked the Fed chairman’s former student to talk some sense into him. Greenspan insisted to Mallaby that he refused, but Mallaby offers ample evidence that Nixon and Co. believed that Greenspan had not only talked to Burns but had also done a bang-up job of it. In any case, Burns soon started saying positive things about Nixon’s economic policies, the Fed stopped raising rates and the Great Inflation of the 1970s was unleashed

(ht Caroline Baum)

1 comment:

  1. On this topic, a conversation between Richard Nixon and his new choice for Federal Reserve Chairman Arthur Burns from October 23, 1969:

    “My relations with the Fed will be different than they were with [previous Federal Reserve chairman] Bill Martin] there. He was always six months too late doing anything. I’m counting on you, Arthur, to keep us out of a recession.”

    “Yes Mr. President, Burns said, lighting his pipe. “I don’t like to be late.”

    Nixon continued. “The Fed and the money supply are more important than anything the Bureau of the Budget does. Arthur, I want you to come over and see me privately anytime… I know there’s the myth of the autonomous Fed…” Nixon barked a quick laugh. “… and when you go up for confirmation some Senator may ask you about your friendship with the President. Appearances are going to be important, so you can call Ehrlichman to get messages to me, and he’ll call you[4].”

    [4] Ehrlichman, John. 1982. Witness to Power. New York, NY: Simon and Schuster. pp. 248-49