Saturday, August 18, 2018

This Week in Economic History: Nixon Imposes Wage and Price Controls

On August 15, 1971, President Richard Nixon closed the gold window to foreign countries, meaning they no longer could exchange dollars for gold.

The Federal Reserve had printed so much money that there was
a run on gold at the Treasury by foreign central banks. (Americans at the time couldn't own gold thanks to a ban by Franklin Delano Rosevelt.)

The printing of money also caused accelerating price inflation in the United States that Nixon tried to battle. But instead of putting pressure on the Federal Reserve to stop printing money, on the same day he closed the gold window, he also imposed a wage and price freeze.

Indeed, instead of putting pressure on then-Federal Reserve chairman Arthur Burns to stop printing money, he did the opposite.

From the Journal of Economic Perspectives:
Evidence from the Nixon tapes, recently made available to researchers, clearly reveals that President Nixon pressured Burns, both directly and indirectly through Office of Management and Budget Director George Shultz, to engage in expansionary monetary policies prior to the 1972 election.
When Nixon imposed the price controls, price inflation as measured by the consumer price index was 4.08%. When he resigned almost exactly three years later on August 9, 1974, price inflation was 10.86%.

Consumer Price Index-Annualized Change  (August 15, 1971 to August 9, 1974) 
Click on chart for larger view

So much for that plan. End the Fed!

Robert Wenzel is Editor & Publisher of


  1. Was anyone prosecuted or did anyone have government action taken on them as a result? I would think even our modern form of a statist Supreme Court wouldn't say this was authorized by the Constitution.