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Allan H. Meltzer's monumental history of the Federal Reserve System tells the story of one of America's most influential but least understood public institutions. This first volume covers the period from the Federal Reserve's founding in 1913 through the Treasury-Federal Reserve Accord of 1951, which marked the beginning of a larger and greatly changed institution. To under Allan H. Meltzer's monumental history of the Federal Reserve System tells the story of one of America's most influential but least understood public institutions. This first volume covers the period from the Federal Reserve's founding in 1913 through the Treasury-Federal Reserve Accord of 1951, which marked the beginning of a larger and greatly changed institution. To understand why the Federal Reserve acted as it did at key points in its history, Meltzer draws on meeting minutes, correspondence, and other internal documents (many made public only during the 1970s) to trace the reasoning behind its policy decisions. He explains, for instance, why the Federal Reserve remained passive throughout most of the economic decline that led to the Great Depression, and how the Board's actions helped to produce the deep recession of 1937 and 1938. He also highlights the impact on the institution of individuals such as Benjamin Strong, governor of the Federal Reserve Bank of New York in the 1920s, who played a key role in the adoption of a more active monetary policy by the Federal Reserve. Meltzer also examines the influence the Federal Reserve has had on international affairs, from attempts to build a new international financial system in the 1920s to the Bretton Woods Agreement of 1944 that established the International Monetary Fund and the World Bank, and the failure of the London Economic Conference of 1933. Written by one of the world's leading economists, this magisterial biography of the Federal Reserve and the people who helped shape it will interest economists, central bankers, historians, political scientists, policymakers, and anyone seeking a deep understanding of the institution that controls America's purse strings. "It was 'an unprecedented orgy of extravagance, a mania for speculation, overextended business in nearly all lines and in every section of the country.' An Alan Greenspan rumination about the irrational exuberance of the late 1990s? Try the 1920 annual report of the board of governors of the Federal Reserve. . . . To understand why the Fed acted as it did—at these critical moments and many others—would require years of study, poring over letters, the minutes of meetings and internal Fed documents. Such a task would naturally deter most scholars of economic history but not, thank goodness, Allan Meltzer."—Wall Street Journal "A seminal work that anyone interested in the inner workings of the U. S. central bank should read. A work that scholars will mine for years to come."—John M. Berry, Washington Post "An exceptionally clear story about why, as the ideas that actually informed policy evolved, things sometimes went well and sometimes went badly. . . . One can only hope that we do not have to wait too long for the second installment."—David Laidler, Journal of Economic Literature "A thorough narrative history of a high order. Meltzer's analysis is persuasive and acute. His work will stand for a generation as the benchmark history of the world's most powerful economic institution. It is an impressive, even awe-inspiring achievement."—Sir Howard Davies, Times Higher Education Supplement


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Allan H. Meltzer's monumental history of the Federal Reserve System tells the story of one of America's most influential but least understood public institutions. This first volume covers the period from the Federal Reserve's founding in 1913 through the Treasury-Federal Reserve Accord of 1951, which marked the beginning of a larger and greatly changed institution. To under Allan H. Meltzer's monumental history of the Federal Reserve System tells the story of one of America's most influential but least understood public institutions. This first volume covers the period from the Federal Reserve's founding in 1913 through the Treasury-Federal Reserve Accord of 1951, which marked the beginning of a larger and greatly changed institution. To understand why the Federal Reserve acted as it did at key points in its history, Meltzer draws on meeting minutes, correspondence, and other internal documents (many made public only during the 1970s) to trace the reasoning behind its policy decisions. He explains, for instance, why the Federal Reserve remained passive throughout most of the economic decline that led to the Great Depression, and how the Board's actions helped to produce the deep recession of 1937 and 1938. He also highlights the impact on the institution of individuals such as Benjamin Strong, governor of the Federal Reserve Bank of New York in the 1920s, who played a key role in the adoption of a more active monetary policy by the Federal Reserve. Meltzer also examines the influence the Federal Reserve has had on international affairs, from attempts to build a new international financial system in the 1920s to the Bretton Woods Agreement of 1944 that established the International Monetary Fund and the World Bank, and the failure of the London Economic Conference of 1933. Written by one of the world's leading economists, this magisterial biography of the Federal Reserve and the people who helped shape it will interest economists, central bankers, historians, political scientists, policymakers, and anyone seeking a deep understanding of the institution that controls America's purse strings. "It was 'an unprecedented orgy of extravagance, a mania for speculation, overextended business in nearly all lines and in every section of the country.' An Alan Greenspan rumination about the irrational exuberance of the late 1990s? Try the 1920 annual report of the board of governors of the Federal Reserve. . . . To understand why the Fed acted as it did—at these critical moments and many others—would require years of study, poring over letters, the minutes of meetings and internal Fed documents. Such a task would naturally deter most scholars of economic history but not, thank goodness, Allan Meltzer."—Wall Street Journal "A seminal work that anyone interested in the inner workings of the U. S. central bank should read. A work that scholars will mine for years to come."—John M. Berry, Washington Post "An exceptionally clear story about why, as the ideas that actually informed policy evolved, things sometimes went well and sometimes went badly. . . . One can only hope that we do not have to wait too long for the second installment."—David Laidler, Journal of Economic Literature "A thorough narrative history of a high order. Meltzer's analysis is persuasive and acute. His work will stand for a generation as the benchmark history of the world's most powerful economic institution. It is an impressive, even awe-inspiring achievement."—Sir Howard Davies, Times Higher Education Supplement

30 review for A History of the Federal Reserve, Volume 1: 1913-1951

  1. 5 out of 5

    Nick Klagge

    My rating in no way suggests that I think people besides me would enjoy reading this book. But I'm very glad that I did, and looking forward to reading Volume 2. I have a funny relationship with this book. On the one hand, I often found it a tough slog to get through. Not only is it 750 pages long, but Meltzer is in some ways the anti-Michael Lewis: he takes a story that is rife with international intrigue and personal conflicts, and makes it about as dry as possible. Meltzer revels in statistics My rating in no way suggests that I think people besides me would enjoy reading this book. But I'm very glad that I did, and looking forward to reading Volume 2. I have a funny relationship with this book. On the one hand, I often found it a tough slog to get through. Not only is it 750 pages long, but Meltzer is in some ways the anti-Michael Lewis: he takes a story that is rife with international intrigue and personal conflicts, and makes it about as dry as possible. Meltzer revels in statistics and in quotations from memos that he dug up in the Fed archives, but makes very little effort toward crafting the history into a narrative or giving any sense of the characters of the key players. Were it not for the fact that this book was my companion on two eight-hour-long flights, it's quite possible that I wouldn't have finished it. But on the other hand, I find myself thinking about it a lot. As someone with an interest in economics and who works at the Federal Reserve, I found a lot of interesting history in this book. I will try not to get too deep into it here, but here are some of the things in broad strokes: -The speed with which the American economy transformed from being essentially regional to essentially national. This transition certainly happened within the span of time covered in this book (1917-1951), and probably in a significantly shorter time. It was amazing to me how independent the Reserve Banks were in the early years of the Fed, with the Board in DC playing almost no role. In the early years, for example, the different Reserve Banks set their own discount rates, and that was basically unproblematic. But over the course of this book you see that independence unravel, as an increasingly national financial system starts arbitraging away differences and essentially forcing the U.S. to adopt a real central bank, which many people had not wanted. -The bizarro logic of a gold standard system. I am obviously someone whose entire academic and professional career in economics has occurred under a pure fiat currency system. It is second nature for me to think of monetary policy as countercyclical, "taking away the punch bowl" as the traditional phrase has it. I was familiar with the evidence, from Bernanke and others, that countries that left the gold standard earlier following the Great Depression tended to recover better. But still, it's so strange to observe the historical Fed following "gold standard rules" that lead it to take exactly the wrong steps, from the perspective of national economic well-being, simply to try to maintain arbitrarily decreed parity rates with gold and with other currencies. Anyone who thinks it would be better for us to go back to the gold standard should read this book. -The significance of clear goals for policy-making. The Fed's "dual mandate" to maintain maximum employment and price stability only dates back to 1977. Before that time (i.e. during the whole period covered by this book and then some), the objectives of the Fed were basically unclear. So in a sense, it is no wonder that the Fed failed to implement expansionary policy during the Great Depression, or that it kowtowed to the Treasury in pegging interest rates between WWII and the Fed-Treasury Accord (1951, where this book ends). It is amazing how many times in the course of this book Fed policymakers are unable to agree on actions, not just because they disagree on the best way to achieve their objectives (as is still the case today), but because they disagree on what the objectives are, or don't even have a clear opinion on that themselves. -The importance of a measure of humility in economic policy-making. It is very tempting to read this book from a teleological perspective, wherein the Fed groped its way around for decades until it finally grasped the "right" way of being a central bank (i.e. what we have now). I think it is undeniable that the institution has made many steps in the right direction. As just one example, it is almost unbelievable how many policy errors recounted in this book stemmed from the failure of the Fed to distinguish between nominal and real (inflation-adjusted) interest rates, something that every Econ 101 student learns today. But at the same time, this book also hammers home how these past policymakers were generally smart, informed, and well-meaning, and yet believed strongly in doctrines that now seem very misguided. I think we would be wise to try to see ourselves in the same light that we see these historical characters. There is a strain of economic thinking that I find interesting, which I mostly associate with Ashwin Parameswaran at the blog Macroeconomic Resilience, that looks at the economy from an ecological perspective, where selection pressures operate on the strategies adopted by various economic actors. Ashwin writes about how government stabilization of the economy encourages firms to pursue "exploitative" rather than "exploratory" innovation--that is, to pursue strategies of getting more efficient at doing "the same old thing" rather than to explore new possibilities. The economic environment depicted in this book is certainly not one of policy-generated stability--as I mentioned earlier, even Fed insiders didn't agree on what they should be doing, and as a result, swings in production and inflation were much sharper than during the Great Moderation period from the mid-80s to 2007. And it was indeed a period where a great deal of exploratory innovation occurred. But even acknowledging the force of Ashwin's argument, it seems difficult to me to argue that the "policy" pursued in this history is somehow preferable to policy in the Great Moderation era (even if the 2008 crash is pretty strong prima facie evidence against the latter). Perhaps this is just the unwillingness of a technocrat to disavow technocracy.

  2. 4 out of 5

    Juan

    This is a very good book but I cannot in all honesty say I particularly enjoyed reading it (four nonconsecutive chapters). Meltzer offers an account that is so far unparalleled, in terms of coverage and sources, and which will very likely become the official account of the evolution of the Federal Reserve. If you’re working on American monetary history or in the history of American economic thought this will be a mine of interesting sources, data, and insights. It will also guide you through the This is a very good book but I cannot in all honesty say I particularly enjoyed reading it (four nonconsecutive chapters). Meltzer offers an account that is so far unparalleled, in terms of coverage and sources, and which will very likely become the official account of the evolution of the Federal Reserve. If you’re working on American monetary history or in the history of American economic thought this will be a mine of interesting sources, data, and insights. It will also guide you through the archival material available on the subject, which has since been digitized and is available online at FRASER. I didn’t find reading this book an enjoyable experience mainly because it is dry as sand, and so thorough that I often had trouble following the main argument. Fortunately Meltzer summarizes the main ideas at the beginning and at the end of each chapter, but it is not always enough and it is hard to follow the main threads of its really long chapters (sometimes more than 100 pages). The index and chapter subdivisions make this a great reference book about the Fed, and I guess this is the way most academic readers will approach and value it. As a side note, I wonder if this had to be like this. Does a broad and thorough coverage necessarily have to result in dry and disperse narrative?

  3. 5 out of 5

    Steve Miller

    Oh my goodness! It's no joke that this took me almost a year and a half to complete, but that has more to do with who I am as a reader than anything else. I read through this book in fits and starts. By the time I got to Hoover and the Great Depression, I had my tablet handy in order to get background on terms like Reifler-Douglass Doctrine, Real Bills Doctrine, the history of the gold standard, and to get background on people like Benjamin Strong, Marriner Eccles, Morgenthau, et al. From this b Oh my goodness! It's no joke that this took me almost a year and a half to complete, but that has more to do with who I am as a reader than anything else. I read through this book in fits and starts. By the time I got to Hoover and the Great Depression, I had my tablet handy in order to get background on terms like Reifler-Douglass Doctrine, Real Bills Doctrine, the history of the gold standard, and to get background on people like Benjamin Strong, Marriner Eccles, Morgenthau, et al. From this book, I have access to the writings of Friedman, Keynes, Bagehot, and Irving. So many mistakes were made. The Great Depression, for instance, didn't need to be the catastrophe that it was. The New York bank, with Strong as leader, shouldn't have helped Britain remain on the gold standard in such an aggressive way. Mistakes with nominal versus real interest rates. Fights over secondary reserve requirements. And on it goes. Mr. Meltzer didn't write a book that is easy to read, and many times it was hard to keep track of who was who and what was going on. The author wrote this for readers who already understand about discounting, M1, acceptances, commercial paper, and on and on. I did lots of side reading so I would be able to understand what was going on. It wasn't easy. My love of history and my love of economics kept me going to the end of the book. Looking back, I can certainly recommend using parts of this book as reference material without having to delve into the whole thing. There is a wealth of information in here that anyone with an interest in banking, government debt financing, and a host of other topics and issues will find useful.

  4. 4 out of 5

    se lee

    Popular passages: The country needs and, unless I mistake its temper, the country demands bold, persistent experimentation. It is common sense to take a method and try it: If it fails, admit it frankly and try another. But above all, try something. - Page 419 Appears in 438 books from 1904-2008 The Treasury and the Federal Reserve System have reached full accord with respect to debt-management and monetary policies to be pursued in furthering their common purpose to assure the successful financing Popular passages: The country needs and, unless I mistake its temper, the country demands bold, persistent experimentation. It is common sense to take a method and try it: If it fails, admit it frankly and try another. But above all, try something. - Page 419 Appears in 438 books from 1904-2008 The Treasury and the Federal Reserve System have reached full accord with respect to debt-management and monetary policies to be pursued in furthering their common purpose to assure the successful financing of the Government's requirements and, at the same time, to minimize monetization of the public debt. - Page 711 Appears in 95 books from 1908-2007 ... by every possible means consistent with the safety of the Bank, and we were not on some occasions over-nice. Seeing the dreadful state in which the public were, we rendered every assistance in our power. - Page 35 Appears in 65 books from 1803-2007 The board has no disposition to assume authority to interfere with the loan practices of member banks so long as they do not involve the Federal reserve banks. It has, however, a grave responsibility whenever there is evidence that member banks are maintaining speculative security loans with the aid of Federal reserve credit. - Page 237 Appears in 42 books from 1887-2007 To limit the total amount of paper issued, and to resort for this purpose, whenever the temptation to borrow is strong, to some effectual principle of restriction; in no case, however, materially to diminish the sum in circulation, but to let it vibrate only within certain limits... - Page 30 Appears in 34 books from 1750-2007 The sound internal economic system of a nation is a greater factor in its well-being than the price of its currency in changing terms of the currencies of other nations. - Page 449 Appears in 194 books from 1895-2008 ... in the event of any extraordinary alarm or difficulty, as the best means of preventing a great demand at home for guineas; and to lean to the side of diminution in the case of gold going abroad, and of the general exchanges continuing long unfavourable... - Page 30 Appears in 34 books from 1802-2006 And the control of the system of banking and of issue which our new laws are to set up must be public, not private, must be vested in the Government itself, so that the banks may be the instruments, not the masters, of business and of individual enterprise and initiative. - Page 67 Appears in 116 books from 1870-2007 I cannot see how the amount of bank notes issued can operate upon the price of bullion, or the state of the exchanges ; and therefore I am individually of opinion that the price of bullion, or the state of the exchanges, can never be a reason for lessening the amount of bank notes to be issued, always understanding the control which I have already described. - Page 55 Appears in 34 books from 1758-2006 That the time, manner, character and volume of open market investments purchased by Federal reserve banks be governed with primary regard to the accommodation of commerce and business, and to the effect of such purchases or sales on the general credit situation. - Page 152 Appears in 85 books from 1923-2006

  5. 5 out of 5

    Fred Kohn

    Quite the marathon, at least for me! Much of this probably has to do with the fact that this book is aimed at someone with considerable economic training. My "training" is reading a lot of popular books on economics and a small handful of semi-academic books. As soon as I started reading, I realized that my total lack of knowledge of economic theories prior to the 20th century, particularly the Real Bills Doctrine, would make it impossible for me to understand this book without further reading. Quite the marathon, at least for me! Much of this probably has to do with the fact that this book is aimed at someone with considerable economic training. My "training" is reading a lot of popular books on economics and a small handful of semi-academic books. As soon as I started reading, I realized that my total lack of knowledge of economic theories prior to the 20th century, particularly the Real Bills Doctrine, would make it impossible for me to understand this book without further reading. So I read A History of Money: From Ad 800 by John Chown in preparation. I don't know if that was the best, but it seemed to do the trick. My main beef with the book was organization. I've read dry books before, and one comes to expect that of books like this, but why in God's name would you divide a nearly 800 page book into only six chapters (not counting intro and conclusion)? The fact that some of your chapters have hundreds of footnotes might be a clue to reorganize the book.

  6. 5 out of 5

    Ralph Orr

    Five stars for its extraordinary level of research and documentation. Chapters often have hundreds of detailed footnotes. However, you really must love economics and interest rates to like this book. For the rest of us, it is a laborous read. The more you know about economics and economic theory before reading the book, the better.

  7. 4 out of 5

    Mindy

  8. 4 out of 5

    Jane Davis

  9. 5 out of 5

    Brian McAuley

  10. 4 out of 5

    tahlia fischer

  11. 4 out of 5

    Matt Guttosch

  12. 4 out of 5

    Shana Jefferis-Zimmerman

  13. 4 out of 5

    Steven Sitkowski

  14. 4 out of 5

    Mike

  15. 5 out of 5

    Regina Verdeschi

  16. 5 out of 5

    Billy McCoy

  17. 4 out of 5

    Esmaeilk

  18. 5 out of 5

    Micah Andre

  19. 5 out of 5

    Steven

  20. 4 out of 5

    Mark Amacher

  21. 5 out of 5

    Cristiano

  22. 5 out of 5

    Alan A. Reynolds

  23. 4 out of 5

    Cyber

  24. 5 out of 5

    John

  25. 4 out of 5

    James P. Daze

  26. 4 out of 5

    Alberto

  27. 5 out of 5

    Florincitu

  28. 4 out of 5

    Gary Rush

  29. 5 out of 5

    Colin Teichholtz

  30. 4 out of 5

    Max

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