The now hardening Nixon simply watched with amusement as Connally and the others tortured Burns. Burns’s vulnerability was his Jewish background. “The government is full of Jews,” Nixon told H.R. Haldeman, another aide. There was “a Jewish cabal” in government, he said, “and they all only talk to Jews.” But the person Burns wanted to talk to was Nixon.

As a concession to the bully, Burns goosed the money supply, but not enough to please the insatiable Nixon, and in the process irritating the free-market economist Milton Friedman. Later, Ehrlichman would record a typical scolding: “The President made you chairman of the Fed, Arthur,” Ehrlichman said. “You are deeply in his debt. He expects you to be loyal.” White House Sunday church services provided a chance for presidential access, but Nixon’s staff moved to block Burns’s attendance. “Keep him off of Church,” read a memo.

By June 1971 the Consumer Price Index, the proxy for inflation, was increasing at a 6 percent annual rate, and Burns was desperate. Burns believed inflation, or its appearance, would abate if Nixon and Congress placed some government restraints on wages and prices. If they didn’t, Burns would have to raise interest rates and further irritate his chief executive.

In July, Burns finally raised rates again. The president retaliated by allowing his aides to sneak a smear into The Wall Street Journal. The story suggested Burns was demanding his own salary be raised 50 percent. This was false. The story also announced that the “furious” president was considering legislation that would “bring the Federal Reserve into the executive branch.”

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Nixon had indeed absorbed the lesson of 1960, better than Burns liked. His eye now firmly on the 1972 election, the president offered a preposterously incoherent stimulus plan: tariffs, a wage and price freeze, targeted tax cuts, a suspension of the gold standard and, in 1971, the closing of the gold window, which blocked foreign governments from selling dollars for gold — in effect killing off the gold standard entirely. The plan was economic anathema. Yet when Nixon invited Burns to join the economic team for a Camp David retreat to formalize the plan, Burns was so relieved to be included that after a pro forma protest against one move — the gold standard suspension — the Fed chairman simply caved.

What followed, many Americans still remember. For Burns, a momentary elation: The Fed chairman was back in his president’s good graces. For Nixon, a political victory — the measures masked the inflation and pumped growth enough to get Nixon a second term.

But great lows followed these short-term highs. Nixon’s imperiousness cost him the presidency and the United States its economy. A storm of inflation followed when the price controls ended; Burns’s interest rate increases proved far too modest. Burns, the prophet who had spent a career warning of inflation, had carried out policies that caused it.



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