After 2008, with the Tea Party and the “End of the Federal Reserve,” populist America once again sees monetary authority as the enemy of the middle class and savers. The demand is once again: less elite, more currency “for the people.” The common thread that connects it to the XNUMXth century: the attack on the strong dollar that enriches Wall Street and damages national production.
By Federico RAMPINI
American history repeats itself: in the political battles against central bank autonomy, there is a continuity from the 1830s to 2025. The reason is the same: challenging the financial elite through currency. Two centuries ago, “the people” were farmers and small entrepreneurs, against the predatory barons, monopolists, and bankers of the East Coast. Today, the clash is between the manufacturing sector and workers on the one hand, and Wall Street and globalization on the other. In both cases, monetary populism calls into question the role of the dollar as a pillar of international stability.
It is not the first time that an American president has engaged in a battle with his central bank. Donald Trump’s attacks on the Federal Reserve, the Fed, have important precedents. As is often the case with the 47th president, some of whose actions are considered destructive and destabilizing, are inspired by another Republican: Richard Nixon. The leader who has most influenced the current president is precisely Nixon, who governed in the 70s, when Trump was young and was forming his ideas about the economy and the world. Another even earlier precedent is found two centuries ago, in the founder of American populism: Andrew Jackson, whose cultural influence is profound in the MAGA (Make America Great Again) world. Trump’s foreign policy has even been called “Jacksonian”. Even on the economic front, the similarities are significant.
Nearly two centuries ago, Jackson, the seventh president of the United States, declared war on the Second Bank of the United States. Founded in 1816, it was a semi-public institution with functions similar to those of the Bank of Italy or the European Central Bank. It managed federal deposits, regulated monetary circulation, and sought to ensure stability in the banking system. Jackson saw it as a symbol of everything he hated: a monopoly of privileges, an unconstitutional technocratic structure, a tool in the hands of financial elites who threatened democracy. In 1832, he vetoed its renewal, then moved the federal treasury to local banks, and ordered that purchases of public lands be paid for only in gold and silver. The result was a wave of speculation, followed by the crisis of 1837 that crashed the economy.
America remained for a long time without a proper central bank, leaving the functions to weak state and private banks. Episodes of financial panic continued until the early 1907th century, when the severe crisis of 1913 forced Congress to finally create the Federal Reserve, founded in XNUMX.
Populist hostility to currency and central banks never disappeared. After the Civil War, movements arose that demanded more paper money to ease farmers’ debts. In the 1890s, populists sought abundant liquidity to raise agricultural prices and counter the impoverishment of farm families. International trade operated on the basis of payments in precious metals: a country with a trade deficit lost gold and silver, reducing the domestic monetary base. Why did American populists in the Jacksonian style oppose this system? Because they saw it as a restriction imposed by financial elites (bankers in Philadelphia, New York, and London) who denied citizens and the government access to credit. Dependence on gold and silver meant a shortage of currency: farmers and debtors demanded more money in circulation to ease debts, while the Second Bank favored the stability and security of creditor banks.
The populist movements of the 19th century and the reactions to them prepared the ground for a compromise: a modern central bank, the Federal Reserve, controlled by public institutions but with a degree of autonomy. However, the birth of the Fed did not end the hostility, quite the contrary.
The most progressive president in American history, Franklin Delano Roosevelt, at the beginning of his New Deal to combat the Great Depression, joined the attacks on the central bank and the financial elite. In 1933, he suspended the convertibility of the dollar into gold, a move that matched the aspirations of his populist predecessors: the state takes control of the currency to stimulate economic growth and employment. After World War II, the rules changed again: with the Bretton Woods system, the dollar became the center of global stability, the reserve currency and the universal means of payment. Another significant episode in the tension between the White House and the Fed occurred under the progressive Democratic president Lyndon B. Johnson, John F. Kennedy’s successor. The escalation of the war in Vietnam strained the public budget and fueled inflation. In 1965, irritated by Fed Chairman William McChesney Martin’s decision to raise interest rates, Johnson summoned him to his Texas ranch. During the conversation, he physically pushed Martin against a wall, shouting, “My boys are dying in Vietnam and you don’t care!” Johnson wanted low interest rates to finance the war and the social democratic Great Society programs. Martin, on the other hand, wanted to curb inflation. In the end, Martin stood firm, defending the independence of the central bank, but the episode remains one of the most dramatic moments in the relationship between the presidency and the Fed.
The real turning point in the modern era came with Nixon. He managed to force Fed Chairman Arthur Burns to keep interest rates low to help his reelection. This contributed to the start of the Great Inflation of the 70s, with double-digit inflation rates and a decline in confidence in the dollar.
In contrast, Paul Volcker, the Fed chairman appointed by Jimmy Carter and confirmed by Ronald Reagan, defended the central bank’s autonomy at all costs. He raised interest rates to very high levels, curbing inflation at the cost of a severe recession. Volcker’s Fed was unpopular: for opponents, monetary policy was one-sided and directed against the working class, because it aimed to curb wage growth. But Volcker restored the credibility of the dollar and monetary stability in the US. After the 2008 financial crisis, anti-Fed populism came back into fashion. The Tea Party movement and the libertarian wing of the Republican Party of Rand Paul raised the slogan “End the Federal Reserve”: for them, the central bank was a technocratic monster that manipulated markets, punished savers and impoverished the middle class.
Trump embraced this tradition. He insulted the Fed chairman, demanded the removal of a female governor, demanded decisions favorable to economic growth. These actions did not break up the Fed as Jackson did with the Second Bank, but they had obvious consequences: turbulent markets, rising government bond yields, pressure on the dollar, rising inflationary expectations.
Trump’s opponents accuse him of undermining global confidence in the dollar as the world’s reserve currency. For banking elites and most academics, this is the real danger of contemporary populist wars on central banks. The return of Jackson’s “wild” banking chaos is not expected, but America’s financial power is faltering.
There is a counter-current among economists close to Trump. According to figures like Oren Cass and Stephen Miran, the dollar’s role as a reserve currency is not a privilege, but a heavy burden with many negative consequences. It favors Wall Street and, to some extent, American consumers, but has harmed domestic industry and workers for decades. In this perspective, a weaker and less used dollar as a global reserve would not be a disaster, but a means of rebalancing: it would boost exports, reduce the trade deficit and help domestic industry. Another proposal, called the “Mar-a-Lago Accord”, envisages a controlled depreciation of the dollar to relaunch domestic production. The risks remain high, imported inflation, loss of confidence in the markets, financial instability, but for this school of thought it is the price for a true American economic renaissance.
Two hundred years ago, the attack on the Second Bank was born of the idea that the central bank favors the elite and harms the average citizen. Jackson and his supporters saw the lack of currency as a hindrance to farmers and small entrepreneurs. Their goal was more liquidity, even at the cost of higher inflation. After the Civil War, from the 1860s to the 1890s, the populist line was still the same: more currency to ease farm debts. After 2008, with the Tea Party and the “End of the Federal Reserve,” populist America again sees the monetary authority as the enemy of the middle class and savers. The demand is again: less elite, more currency “for the people.” The common thread that connects it to the XNUMXth century: the attack on the strong dollar that enriches Wall Street and harms national production. (Corriere della Sera)
