By Allan H. Meltzer
Author note: ahead by means of Alan Greenspan
Allan H. Meltzer's enormous historical past of the Federal Reserve procedure tells the tale of 1 of America's such a lot influential yet least understood public associations. this primary quantity covers the interval from the Federal Reserve's founding in 1913 throughout the Treasury-Federal Reserve Accord of 1951, which marked the start of a bigger and significantly replaced institution.
To comprehend why the Federal Reserve acted because it did at key issues in its heritage, Meltzer attracts on assembly mins, correspondence, and different inner records (many made public purely through the Nineteen Seventies) to track the reasoning in the back of its coverage judgements. He explains, for example, why the Federal Reserve remained passive all through lots of the financial decline that ended in the good melancholy, and the way the Board's activities helped to provide the deep recession of 1937 and 1938. He additionally highlights the effect at the establishment of people equivalent to Benjamin powerful, governor of the Federal Reserve financial institution of recent York within the Nineteen Twenties, who performed a key position within the adoption of a extra lively financial coverage via the Federal Reserve. Meltzer additionally examines the effect the Federal Reserve has had on foreign affairs, from makes an attempt to construct a brand new overseas economy within the Twenties to the Bretton Woods contract of 1944 that confirmed the overseas financial Fund and the area financial institution, and the failure of the London monetary convention of 1933.
Written by way of one of many world's prime economists, this magisterial biography of the Federal Reserve and the folks who assisted in shaping it's going to curiosity economists, valuable bankers, historians, political scientists, policymakers, and somebody looking a deep realizing of the establishment that controls America's handbag strings.
"It was once 'an extraordinary orgy of extravagance, a mania for hypothesis, overextended enterprise in approximately all strains and in each element of the country.' An Alan Greenspan rumination concerning the irrational exuberance of the past due Nineteen Nineties? test the 1920 annual file of the board of governors of the Federal Reserve. . . . to appreciate why the Fed acted because it did—at those severe moments and lots of others—would require years of research, poring over letters, the mins of conferences and inner Fed files. one of these activity might obviously deter so much students of financial background yet now not, thank goodness, Allan Meltzer."—Wall road Journal
"A seminal paintings that any one attracted to the internal workings of the U. S. imperative financial institution may still learn. a piece that students will mine for years to come."—John M. Berry, Washington Post
"An exceedingly transparent tale approximately why, because the principles that really educated coverage advanced, issues occasionally went good and infrequently went badly. . . . you'll in basic terms wish that we don't have to attend too lengthy for the second one installment."—David Laidler, magazine of financial Literature
"A thorough narrative heritage of a excessive order. Meltzer's research is persuasive and acute. His paintings will stand for a new release because the benchmark historical past of the world's strongest fiscal establishment. it's a powerful, even awe-inspiring achievement."—Sir Howard Davies, occasions larger schooling Supplement
Alice Hanson Jones Biennial Prize (2004)
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Extra info for A History of the Federal Reserve: 1913-1951 (A History of the Federal Reserve, Volume 1)
One, emphasized during the Restriction, is that depreciation of the exchange rate is evidence of an excessive issue of notes. 28 The main defects of Palmer’s rule as a guide to operating policy bring out some differences between the monetary theories of Thornton and Ricardo. First, Thornton accepted proposition one as a long-run proposition, but he argued at length that, in the short-run, changes in the demand for money (or monetary velocity) cannot be neglected. Such changes occur when new substitutes for money appear or their use expands.
Instead of depending on banks’ decisions to discount or repay borrowings, the new approach used open market operations to force banks to borrow or repay. Open market operations required the reserve banks to work together. Portfolio decisions remained with the directors of the individual reserve banks, but the New York reserve bank, aided by a System committee, guided and implemented System decisions to purchase and sell. The Federal Reserve Board had supervisory responsibility only. The new procedures radically changed the System’s original structure.
The governors and directors of the Bank of England were concerned with the profits of the bank, the avoidance of panic, and the appropriate response to short-term changes—for example, an increased demand for borrowing by the country banks or from banks abroad. The wide gap between monetary theory and the practice of monetary policy, familiar to observers of the contemporary discussion of policy, had opened by the 1830s. The most able economists of the period participated in the discussion, and though they focused mainly on the longer-run consequences of policy actions and ignored short-term effects, they did not hesitate to recommend policy actions.