By Allan H. Meltzer

Author note: ahead via Alan Greenspan

Allan H. Meltzer's enormous heritage of the Federal Reserve procedure tells the tale of 1 of America's so much influential yet least understood public associations. this primary quantity covers the interval from the Federal Reserve's founding in 1913 in the course of 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 basically through the Seventies) to track the reasoning at the back of its coverage judgements. He explains, for example, why the Federal Reserve remained passive all through many of the financial decline that ended in the good melancholy, and the way the Board's activities helped to supply the deep recession of 1937 and 1938. He additionally highlights the influence at the establishment of people resembling Benjamin robust, governor of the Federal Reserve financial institution of latest York within the Nineteen Twenties, who performed a key function within the adoption of a extra lively financial coverage by means of 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 economic system within the Nineteen Twenties to the Bretton Woods contract of 1944 that proven the foreign financial Fund and the realm financial institution, and the failure of the London monetary convention of 1933.

Written by means of one of many world's top economists, this magisterial biography of the Federal Reserve and the folks who contributed to shaping it's going to curiosity economists, critical bankers, historians, political scientists, policymakers, and a person looking a deep figuring out of the establishment that controls America's handbag strings.

"It used to be 'an unparalleled orgy of extravagance, a mania for hypothesis, overextended enterprise in approximately all traces and in each component of the country.' An Alan Greenspan rumination in regards to the irrational exuberance of the overdue Nineties? test the 1920 annual document of the board of governors of the Federal Reserve. . . . to appreciate why the Fed acted because it did—at those serious moments and lots of others—would require years of research, poring over letters, the mins of conferences and inner Fed files. the sort of job could obviously deter so much students of financial heritage yet now not, thank goodness, Allan Meltzer."—Wall highway Journal

"A seminal paintings that any one drawn to the internal workings of the U. S. crucial financial institution should still learn. a piece that students will mine for years to come."—John M. Berry, Washington Post

"An quite transparent tale approximately why, because the principles that truly trained coverage developed, issues occasionally went good and infrequently went badly. . . . you will purely desire 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 background of the world's strongest monetary establishment. it's a powerful, even awe-inspiring achievement."—Sir Howard Davies, instances better schooling Supplement

Alice Hanson Jones Biennial Prize (2004)

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Additional info for A History of the Federal Reserve: 1913-1951 (A History of the Federal Reserve, Volume 1)

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Ricardo’s analysis is almost entirely long-run comparative statics, and his policy recommendations consisted mainly of a set of rules for restoring and maintaining convertibility of pounds into gold at a fixed exchange rate. Important as is his 2. A similar idea returned in the 1960s, when monetary policy was “assigned” to control the gold flow or balance of payments under fixed exchange rates. central banking theory and practice 21 work for economic theory, it gave very little guidance to the Bank of England on the issues of greatest concern to its directors.

After 1816 the Treasury retired debt, and the bank’s holdings of public securities declined. The monetary base measured as the sum of gold and total securities appears to have fallen after 1815. At first the bank’s holdings of private securities continued to rise, presumably because the anticipated cost of borrowing remained far below the anticipated rate of return on real assets after fifteen years of inflation. But the anticipations probably changed quickly. From mid-1814 to late 1815, the price index fell about one-third, and the bank’s holdings of private securities dropped to the low levels of the early 1790s.

Accordingly, in countries in which currency was in a rapid course of depreciation, supposing that there were no usury laws, the current rate of interest was often, . . proportionably augmented. Thus, for example, at Petersburgh, at this time, the current interest was 20 or 25 percent, which he [Thornton] conceived to be partly compensation for an expected increase of depreciation of the currency” (italics added). Thornton then gave examples of the working of this principle from the experiences of Russia, Sweden, France, and America.

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