Perry Mehrling on Trump's Echoes of the Nixon Shock
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What is the main focus of the episode and who is the guest?
A new chapter in global growth is being written, and much of it is happening in Africa.
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I'm Jennifer Zabasaja. Every week on the Next Africa podcast, we track capital flows and political shifts shaping the continent's future.
The digitalization of Africa is gonna power its growth.
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there, Oddlots listeners. The following episode was recorded May 2nd on the Princeton campus. Obviously, some things have changed since then, but I still think it's a very interesting and relevant conversation. So take a listen.
Bloomberg Audio Studios Podcasts, radio, news.
Hello and welcome to another episode of the Oddlots Podcast. I'm Tracy Alloway.
How does Perry Mehrling explain the concept of “exorbitant privilege”?
And I'm Joe Weisenthal.
Joe. Do you feel like you are hearing the term exorbitant privilege a lot more than you used to?
Yes.
Is that a loaded question? Maybe it is. Yes.
You heard it a lot, you know, large budget deficits, right? Those were explainable or people claimed that they were explainable because of something called exorbitant privilege, which I've never totally known what that term means. But obviously, with some of the policy volatility in the United States, which is a very nice way of putting it, you hear it again and whether it can last or whether it can be exhausted.
So I had the same reaction to you. I started thinking about it like why are we hearing this over and over again? And then I was curious when we first started using that term. And I think to your point about what exactly this means. We first started using it in the nineteen sixties and sort of going into the early nineteen seventies.
What were the key actions and consequences of the 1971 Nixon Shock?
Yes. And it was this idea that because we had built the financial system around the US dollar vis a vis Bretton Woods, which we've talked about on the show, that the US was in this, you know, privileged position where it felt like people in other countries were basically subsidizing the US lifestyle.
The constraints that typical countries might face in terms of spending don't to the same extent seem to apply to the United States. In general, when it comes to talking about the dollar. I find that there's just a lot of sloppy definitions thrown around. People talk about dollar strength, but they're not always clear whether they're talking about dollar euro as an exchange rate or dollar share of transactions or dollar share in reserves or the global reserve currency or the global safe haven assets. Lots of fuzzy defined terms that unsatisfies me.
That's totally fair. I don't get as mad at fuzzy terms because we don't have all day, really. Like, do we have to define everything into like obsolescence? No. But anyway, speaking of someone who probably also doesn't like fuzzy terms to your point, we have the perfect guest to talk about all of this. And I guess a big moment that keeps coming up on our show quite a few times over recent episodes, and that is the Nixon shock.
The Nixon shock. Right.
How do the economic policies of Trump compare to Nixon’s 1970s reforms?
Because people look at the uh tariffs that Trump announced on April 2nd and they reach for historical analogies about the changing relationship between the US and the rest of the world in part via trade and part via currency. And so much to mine from the past.
So we have the perfect guest, and we're actually at the perfect event to do this as well. So we're at Princeton University.
That's right. We uh came down here, we did a podcast, which either if you're listening to this, either it's gonna come out or you'll have already heard it, depending on the sequence. We're at a conference. Brendan Greeley invited us down, a conference on currencies and what is a currency and so forth.
How to write a biography of a currency.
That's the name of the conference. So anyway, yes, a perfect guest at the perfect context to talk about the dollar.
Okay, so we do have the perfect guest. We're gonna be speaking with he's a longtime Outlaw's guest. Yes. Although he hasn't been on for a while.
What are the immediate effects of the April‑2 tariffs on global trade and capital flows?
Yeah. We're speaking with Perry Merling, a professor of international political economy at the party school of global studies over at Boston University.
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Chapters
8 chapters
1
What is the main focus of the episode and who is the guest?
0:00–1:07
2
How does Perry Mehrling explain the concept of “exorbitant privilege”?
1:07–1:58
3
What were the key actions and consequences of the 1971 Nixon Shock?
1:58–3:12
4
How do the economic policies of Trump compare to Nixon’s 1970s reforms?
3:12–4:01
5
What are the immediate effects of the April‑2 tariffs on global trade and capital flows?
4:01–5:05
6
Why does Mehrling believe the dollar’s dominance is unlikely to be displaced soon?
5:05–5:55
7
How might political changes, not just fiscal policy, reshape the dollar system?
5:55–6:43
8
What are the take‑aways and outlook for the future of the global monetary order?
6:43–31:01
Speakers
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