Odd Lots Perry Mehrling on Trump's Echoes of the Nixon Shock
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May 14, 2025 
In this discussion, Perry Mehrling, a Boston University professor and author, explores the intriguing parallels between Trump's economic strategies and Nixon's historic monetary shifts. He dives into the implications of dollar dominance and the likelihood of it being challenged. Moreover, Mehrling examines the complexities of modern trade dynamics, especially with China, and sheds light on how past crises shape current monetary policies. His insights remind us that while political atmospheres shift, the resilience of the dollar remains a pivotal factor in global finance.
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Nixon Shock's Economic Motives
- The Nixon shock in 1971 involved taking the dollar off gold and raising tariffs to force allies to revalue currencies.
- This was driven by views that dollar reserve status overvalued the dollar and hurt US manufacturing development.
Offshore Dollar System Emergence
- The dollar system wasn't killed by the Nixon shock but entered a period of stagflation and instability.
- The offshore dollar system emerged during the 1970s crisis and was stabilized by the 1979 Volcker era.
Dominance of One Currency
- The global economy tends towards a dominant currency due to efficiency and to avoid destabilizing speculation.
- While the system requires stability at the core, fixed exchange rates are too demanding for today's world.
