The ‘Nixon shock’ might help us make sense of the Trump one

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The author is the vice president of Oliver Wayman and former head of former heads and diversified finance in Morgan Stanley

What will be the long-term financial consequences of Trump tariffs? We can be a 90-day pause, but the issue remains urgent. Looking at Richard Nixon’s experience in 1971 can help investors understand what could happen next.

Of course, recent events share some features with Nixon Shock, which took place at the time the president took the dollar from the gold standard and implemented a temporary price control. This deer of its regime led to a period of global economic instability and uncertainty. It not only caused damage to business trust, but has led to a ferry. Nixon’s price and salary control is spectacularly followed by provoking a lack of product and burning the wage price spiral. The whole episode was a key contribution to the huge inflation of the 70s.

As with Trump Tariffs, Nixon got acquainted with Kudgen countries in changing trade conditions to help reduce the US trade deficit. His biggest concerns have been Japan and Germany. “My philosophy, Mr. President, is that all foreigners remain outside us, and our work is first to turn to them that he said to him.

In today’s hyper-financial world, we have already seen that bond markets can force the hands of politicians faster. In 1971, he lasted four months before Nixon tariffs were removed by the Smithsonian Agreement. But the shock had already done enough to catalyze the emergency changes, which resulted in the creation of new tools to bet on interest risk risk and options.

The pain of stemming in the banking system prompted a huge change in financial behavior and financial settlement. Investors moved the distribution of assets to the value of gold and real assets. Meanwhile, corporations and depositors are more and more moving their activities from banks to bond markets. The bank’s lending as a share of total loan in the economy has been falling since then. In short, modern finance was falsified in the early 1970s.

There are parallels outside the United States that are currently worried about tariffs. Back in 1971, there was also shocking treatment for the closest allies of the United States. Nixon hit Canada at rates, despite his currency already floating. Prime Minister Mark Stone Today, the Canadians did not, and finally, the tariffs were removed. It could be worse. The Concittal also wanted the United States to leave Canada with a long-term car and spare parts. But Paul Volker fixed that according to his memoirs, encouraging the State Department to tear the last press release page mentioned by it.

After all, the need to stabilize international relations with allies helped to remove balance from tariffs. Henry Kissinger, then the National Security Adviser, “worried about the unresolved influence of the long-term confrontation of allied relations.”

Nixon will also put enormous pressure on navigation monetary policy to compensate the shock. William Safir, Nixon Microphone tells how the administration keeps the Fed chair Arthur Burns to expand the size of the federal reserve to expand the size of an anonymous leak.

At the end of it, the four-month taxation of Nixon can help easily make the revaluation of the dollar, but has shorted the desired goals and has had a significant impact on imports. However, the economic shocks of the move, however, were rotated for decades. Even the creation of the euro stems from it. Can the next to digital euro or deeper European capital markets? It is not yet clear, but history suggests that the periods from these recent shocks will feel coming for years.