The ghost of Arthur Burns

Project Syndicate/Stephen S. Roach

Repost from 5-27-2021

photo of meeting between President Richard Nixon, Treasury Secretary John Connally and Fed chairman Arthur Burns, early 1970s

“Memories can be tricky. I have long been haunted by the inflation of the 1970s. Fifty years ago, when I had just started my career as a professional economist at the Federal Reserve, I was witness to the birth of the Great Inflation as a Fed insider. That left me with the recurring nightmares of a financial post-traumatic stress disorder. The bad dreams are back. They center on the Fed’s legendary chairman at the time, Arthur F. Burns, who brought a unique perspective to the US central bank as an expert on the business cycle.”

USAGOLD note: Jerome Powell’s Federal Reserve has taken many of the same positions Arthur Burns took as Fed chairman while overseeing the Great Inflation of the 1970s. In particular, as Stephen Roach reminds us in this essay, Burns “poured fuel on the fire” by allowing real rates to go negative – the policy option the current Fed favors. Roach says overall there are “haunting similarities that bear watching.” Burns was chairman of the Fed from 1970 through 1978 under presidents Richard Nixon, Gerald Ford and Jimmy Carter in a time increasingly being compared to our own.

(Burns is seated left in the photo above with then-Treasury Secretary John Connally and President Richard Nixon.)

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