By Allan H. Meltzer
To comprehend why the Federal Reserve acted because it did at key issues in its historical past, Meltzer attracts on assembly mins, correspondence, and different inner records (many made public in simple terms in the course of the Nineteen Seventies) to track the reasoning at the back of its coverage judgements. He explains, for example, why the Federal Reserve remained passive all through lots of the fiscal 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 impression at the establishment of people akin 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 overseas affairs, from makes an attempt to construct a brand new overseas economy within the Nineteen Twenties to the Bretton Woods contract of 1944 that proven the overseas financial Fund and the realm financial institution, and the failure of the London financial convention of 1933.
Written by means of one of many world's best economists, this magisterial biography of the Federal Reserve and the folks who contributed to shaping it's going to curiosity economists, crucial bankers, historians, political scientists, policymakers, and somebody looking a deep figuring out of the establishment that controls America's handbag strings.
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Extra info for A History of the Federal Reserve, Vol. 1: 1913-1951
The beliefs or theories that guided the Federal Reserve were mostly mainstream beliefs at the time they were held. Individual leaders influenced decisions most effectively by introducing new or different ideas or new interpretations. Benjamin Strong in the 1920s recognized the need to replace the gold standard rules and the commercial loan theory, on which the founders based the Federal Reserve Act. Marriner Eccles believed monetary policy could do nothing in the 1930s when short-term interest rates were low, so he did nothing to lift the economy from the depression.
The rate of base growth fell from 19 percent in December 1935 to –11 percent a year later. 4 shows, the reversal, when it came, was just as sudden and sharp. The Federal Reserve reversed part of the increase in reserve requirement ratios, and the Treasury stopped sterilizing gold inflows. The only declines comparable to the 1937 experience came in 1920–21 and in 1946. Both contributed to severe postwar recessions. 4 The principal counterparts or sources of the base are gold and Federal Reserve credit, the latter consisting mainly of member bank discounts and Federal Reserve purchases of government securities.
Since the United States was on the gold standard the rules required higher prices, so it is not clear that a larger portfolio would have been used at the time to cancel the effect of gold flows on money and prices. Principal gold standard countries had suspended the standard during wartime, but the belligerents and others used gold to pay for imports, and some foreigners sought safety in dollar securities. 1 summarizes outcomes in the years 1917 to 1951. The table shows that in this period the country rarely experienced price and output stability.
A History of the Federal Reserve, Vol. 1: 1913-1951 by Allan H. Meltzer