{"id":22038,"date":"2025-04-10T08:24:00","date_gmt":"2025-04-10T07:24:00","guid":{"rendered":"https:\/\/www.bordier.com\/?p=22038"},"modified":"2025-07-31T08:31:59","modified_gmt":"2025-07-31T07:31:59","slug":"touchbutton-101-nixon-shock-trump-tariffs-and-the-reagan-boom","status":"publish","type":"post","link":"https:\/\/www.bordier.com\/es\/touchbutton-101-nixon-shock-trump-tariffs-and-the-reagan-boom\/","title":{"rendered":"Touchbutton 101 \u2013 \u2018Nixon Shock\u2019, \u2018Trump Tariffs\u2019 and the \u2018Reagan Boom\u2019"},"content":{"rendered":"\n

\u201cYou can\u2019t make a buck in this market. The country\u2019s going to hell faster than when Roosevelt was in charge. Too much cheap money sloshing around in the world. Worst mistake we ever made was letting Nixon get off the gold standard.\u201d<\/em><\/p>\n\n\n\n

So says Lou Mannheim (played by Hal Holbrook) a senior partner of fictional stockbroker Jackson Steinen & Co. in the film \u2018Wall Street\u2019. Set in 1985, the film, produced by Oliver Stone, follows the fortunes of a young broker Bud Fox (Charlie Sheen) and ruthless corporate raider Gordon Gekko (Michael Douglas) and is still totemic in its depiction of 1980s excess and the consequent moral conflicts.<\/p>\n\n\n\n

The event to which Mannheim refers was the \u2018Nixon Shock\u2019, which was initiated by US President Richard Nixon in August 1971. At that time, inflation in the US was increasing, unemployment was rising. US dollars were spent overseas in exchange for imported non-US goods and the country was facing a trade deficit for the first time. In short, recession loomed.<\/p>\n\n\n\n

In the same way that US President Donald Trump has been trying to coerce the US Federal Reserve Chair, Jerome Powell, into resuming cuts to interest rates, Nixon tried to pressure Powell\u2019s predecessor, Arthur Burns, into doing the same. Apparently, Burns commented that he thought Nixon was \u201cgoing mad\u201d.<\/p>\n\n\n\n

Nixon, together with Treasury Secretary, John Connally, and Paul Volcker, then Under Secretary for International Monetary Affairs, and a chastened Burns, had a secret meeting in Camp David. They came up with an audacious plan to re-engineer the world in America\u2019s favour.<\/p>\n\n\n\n

With markets closed on Sunday 15 August, Nixon went on US television to announce the end of the gold standard (the so-called \u2018Bretton Woods\u2019 framework) devaluing the dollar; price and wage controls; and a 10% tariff on imports.Unlike now, the markets reacted positively: on Monday 16 August the Dow Jones Industrial Average rose 33 points, its then biggest daily gain. Prices stabilised and, in the following year, Nixon was re-elected president beating the democrat, George McGovern in one of the greatest landslides in US presidential history.<\/p>\n\n\n\n

The sight of Chancellor of the Exchequer, Rachel Reeves, crying at Prime Minister\u2019s Questions on Wednesday lunchtime should trigger compassion in all of us, whatever our political persuasion. It reminds us, if anything, that politicians are (unlike the replicants in \u2018Blade Runner\u2019) all too human. <\/p>\n\n\n\n

\n

\u201cThere are parallels here in that both Nixon and Trump share a common goal: putting domestic political objectives over international stability.\u201d<\/p>\n<\/blockquote>\n\n\n\n

There are parallels here in that both Nixon and Trump share a common goal: putting domestic political objectives over international stability. For Nixon, it was about curbing inflation and unemployment; for Trump, it is about leveraging tariffs to boost revenue while cutting taxes.<\/p>\n\n\n\n

There are further similar parallels; the \u2018Nixon Shock\u2019 was an inevitable, though revolutionary, response to unsustainable pressures within the workings of the Bretton Woods system that fixed exchange rates pegged to the price of gold. In the same way, \u2018Trump Tariffs\u2019 and tax policies reflect mounting tensions within today\u2019s global economic order: rising debt levels, imbalances in the labour markets, and growing protectionist sentiment.<\/p>\n\n\n\n

\n

\u201c\u2026while Nixon was being reactive in addressing an immediate crisis, Trump and his allies are being aggressively proactive.\u201d<\/p>\n<\/blockquote>\n\n\n\n

However, while Nixon was being reactive in addressing an immediate crisis, Trump and his allies are being aggressively proactive. Nixon was responding to economic challenges; Trump is redefining them.<\/p>\n\n\n\n

Returning to Lou Mannheim\u2019s observation, he was by that point lamenting the era for cheap money consequent on the \u2018Reagan Boom\u2019, which by 1985 was in full swing. Ronald Reagan had been elected US President in 1981, promising a return to the free enterprise principles, and a free market economy that had been in favour before the Great Depression and Franklin D. Roosevelt\u2019s \u2018New Deal\u2019 policies of the 1930s. Indeed, the years under Reagan saw the S&P 500 Index increase by 113% compared with 10% over the corresponding period immediately before his presidency.<\/p>\n\n\n\n

Although such events as \u2018Trump Tariffs\u2019, the \u2018Nixon Shock\u2019 and indeed the \u2018Reagan Boom\u2019 are extremely disruptive at the time, and can have far reaching consequences, history tells us that stability does return and that those who hold to their long-term risk adjusted strategy benefit ultimately.<\/p>\n\n\n\n

As the fictional sage of \u2018Wall Street\u2019 Mannheim observes further: \u201cQuick-buck artists come and go with every bull market, but the steady players make it through the bear markets\u201d.<\/p>\n\n\n\n

<\/p>\n\n\n\n

This page is issued and approved by Bordier & Cie (UK) PLC (\u2018Bordier UK\u2019), which is authorised and regulated by the Financial Conduct Authority (\u2018FCA\u2019) Registered Number: 114324. Bordier UK is a wealth and investment manager dedicated to providing portfolio management services. We offer Restricted advice as defined by the FCA, which means that if we make a personal recommendation of an investment solution to you, it will be from Bordier UK\u2019s range of investment propositions and will reflect your needs and your approach to risk.<\/p>\n\n\n\n

This page is not intended as an offer to acquire or dispose of any security or interest in any security. Potential investors should take their own independent advice to assess the suitability of investments. Whilst every effort has been made to ensure that the information contained in this page is correct, the directors of Bordier & Cie (UK) PLC can take no responsibility for any action taken (or not taken) as a result of the matters discussed within it.<\/p>\n\n\n\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

Read our latest Touchbutton, a light touch, brief and occasionally sideways glance at the world’s stockmarkets and economies, by Bordier UK.<\/p>\n","protected":false},"author":22,"featured_media":22044,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_seopress_robots_primary_cat":"none","_seopress_titles_title":"","_seopress_titles_desc":"","_seopress_robots_index":"","footnotes":""},"categories":[137],"tags":[],"news_country":[36],"news_language":[38],"class_list":["post-22038","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-touchbutton","news_country-uk","news_language-en"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.bordier.com\/es\/wp-json\/wp\/v2\/posts\/22038","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bordier.com\/es\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bordier.com\/es\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bordier.com\/es\/wp-json\/wp\/v2\/users\/22"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bordier.com\/es\/wp-json\/wp\/v2\/comments?post=22038"}],"version-history":[{"count":0,"href":"https:\/\/www.bordier.com\/es\/wp-json\/wp\/v2\/posts\/22038\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.bordier.com\/es\/wp-json\/wp\/v2\/media\/22044"}],"wp:attachment":[{"href":"https:\/\/www.bordier.com\/es\/wp-json\/wp\/v2\/media?parent=22038"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bordier.com\/es\/wp-json\/wp\/v2\/categories?post=22038"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bordier.com\/es\/wp-json\/wp\/v2\/tags?post=22038"},{"taxonomy":"news_country","embeddable":true,"href":"https:\/\/www.bordier.com\/es\/wp-json\/wp\/v2\/news_country?post=22038"},{"taxonomy":"news_language","embeddable":true,"href":"https:\/\/www.bordier.com\/es\/wp-json\/wp\/v2\/news_language?post=22038"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}