Fed Independence: Burns and Nixon

Michael Perelman looks at the independence of the Fed through an article in the Journal of Economic Perspectives. Here's part of Michael's post:

Nixon’s Political Business Cycle, unsettling economics: Abrams, Burton A. 2006. “How Richard Nixon Pressured Arthur Burns: Evidence from the Nixon Tapes.” Journal of Economic Perspectives, 20: 4 (Fall): pp. 177-88.

He transcribes many Nixon tapes regarding the president’s relationship to Arthur Burns.

...185: Ehrlichman, John. 1982. Witness to Power (NY: Simon and Schuster) describes a meeting between Nixon and Burns on October 23, 1969, just after Burns’s nomination to the Fed had been announced: “My relations with the Fed,” Nixon said, “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.” Burns nodded. “Arthur, I want you to come over and see me privately anytime …” “Thank you, Mr. President,” Burns said. “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.” [Pre-publication version of paper]