A History of the Federal Reserve, Vol. 1: 1913-1951

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

The weaknesses of Meltzer's book stem from his massive archive of information and the strength of his predecessors. The sheer volume of information he is trying to convey prompts the narrative to drift and the reader sometimes loses the point. And, as a good academic historian, he is engaged in a dialogue with other historians of the Fed and monetary policy that can push the layman to the sidelines. Meltzer's history assumes the reader has a rather advanced knowledge of economics and finance such as an understanding of the real bills doctrine and the operation of an international gold standard. Also, the charts and tables are often not very helpful in understanding the text or at least could have been presented in a better manner.

New York City in the 1920s and 1930s got reform, but it never got good government. Why?

Chicago has the country's last machine, yet garbage is collected, snow plowed, and taxes lower than in some Sunbelt cities. How?

Mayors and Money is the counterintuitive argument that a political machine is actually less draining on a city treasury than the most common alternative, eg undue influence of public sector unions. In New York a mayor must make very expensive promises to the transit workers, sanitationmen, teachers, hospital workers to get elected, in Chicago a mayor is chosen more by the insiders of the Cook County Democratic organization. Yes, a Chicago mayor must build things with no-bid contracts and provide patronage jobs, but these cost less than the demands of city employees.

If I have a problem with Fuchs' argument it is that she denies that Chicago and New York have different political centers of gravity. New York has this big liberal intelligentsia, plus a large Jewish population. New Yorkers pay higher taxes than Chicagoans in part because there are powerful constituencies in New York that want or tolerate more spending.

Unlike the other review, I found Fuchs' book very readible, though I thought there could have been more anecdotes. For instance, Daley's getting the State of Illinois to assume responsibility for the courts and welfare are awesome feats. No where else in the country to cities win political battles against suburbs. Fuchs implies that Daley got those things because he was a boss, but doesn't go into detail. Also, unions were and are a part of the Chicago machine, so I think Fuchs is exaggerating the differences.

Exchange rates have been central to the course of economic development in Latin America from the heyday of import substitution to the rapid expansion of foreign debt in the 1970s, and from the debt crisis and its troubled aftermath to renewed growth and borrowing in the 1990s.

Why do governments choose the currency policies they do, and how do economic and political factors affect these policies? Although currency policy is made by governments operating in a political environment, there has been little study of the political economy of exchange rate policy. The Currency Game looks to fill this void by examining the range of potential determinants of currency choices by Latin American governments. While purely economic factors--especially economic structure, trade patterns, and exogenous economic conditions--are of course important to these choices, the book focuses on the political and political economy considerations that have typically been underrepresented in the literature. These include the effects of interest groups, electoral competition, and the timing of elections on exchange rate decisions.

Since exchange regimes are adopted for reasons as diverse as inflation control, reduced volatility and improved competitiveness, the book also features a cross-country analysis of national exchange rate policies, as well as case studies of Argentina, Brazil, Chile, Colombia and Peru.

Fiscal Decentralization in Latin America examines how taxation, spending and regulatory powers can be most effectively distributed among different levels of government. Case studies of Argentina, Chile, Colombia and Peru suggest that although these countries are committed to relatively high government spending levels, the effectiveness of those expenditures could be improved through fiscal decentralization.