This Day In Market History: Nixon Implements US Price Freezes
Each day, Benzinga takes a look back at a notable market-related moment that occurred on this date.
What Happened?
On this day 48 years ago, U.S. President Richard Nixon ordered price freezes on wages, rent and goods.
Where The Market Was
The Dow Jones Industrial Average closed at 888.95 and the S&P 500 traded at 98.76.
What Else Was Going On In The World?
In 1971, the 26th Amendment to the U.S. Constitution lowered the voting age to 18. Walt Disney World opened in Orlando, Florida. A gallon of gasoline cost 40 cents.
Unprecedented Price Freezes
On Aug. 15, 1971, Nixon addressed the nation in a radio announcement ordering a 90-day freeze on all prices and wages nationwide to begin the following day. The price freeze was intended to help curb inflation.
Nixon’s plan was that after the 90-day freeze period expired, all price and wage hikes would need to be approved by a Pay Board and a Price Commission.
A nationwide price freeze may seem like an extreme measure, but there was no economic crisis in the U.S. in 1971. Unemployment was just 6%. However, Nixon decided to use his authority to combat the fact that inflation rates had risen to 7% in 1970 and 6% in 1971.
Wall Street loved the price freezes, and the Dow Jones jumped 3.85% on record volume in response.
Nixon was re-elected to a second term in 1972, but his price freezes didn’t stave off inflation. U.S. inflation jumped into the double digits later in the 1970s before reaching 13% in 1980.
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