By Allan H. Meltzer
Publish yr note: First released could thirty first 2007
Allan H. Meltzer's severely acclaimed historical past of the Federal Reserve is the main bold, such a lot extensive, and such a lot revealing research of the topic ever carried out. Its first quantity, released to frequent serious acclaim in 2003, spanned the interval from the institution's founding in 1913 to the recovery of its independence in 1951. This two-part moment quantity of the historical past chronicles the evolution and improvement of this establishment from the Treasury–Federal Reserve accord in 1951 to the mid-1980s, while the good inflation ended. It unearths the internal workings of the Fed in the course of a interval of swift and vast swap. An epilogue discusses the position of the Fed in resolving our present financial problem and the wanted reforms of the monetary system.
In wealthy aspect, drawing at the Federal Reserve's personal records, Meltzer strains the relation among its judgements and fiscal and financial concept, its adventure as an establishment autonomous of politics, and its position in tempering inflation. He explains, for instance, how the Federal Reserve's independence used to be frequently compromised by way of the lively policy-making roles of Congress, the Treasury division, assorted presidents, or even White condominium employees, who frequently careworn the financial institution to take a temporary view of its obligations. With a watch at the current, Meltzer additionally bargains ideas for making improvements to the Federal Reserve, arguing that as a regulator of economic corporations and lender of final inn, it's going to concentration extra realization on incentives for reform, medium-term effects, and rule-like habit for mitigating monetary crises. much less recognition will be paid, he contends, to command and keep watch over of the markets and the noise of quarterly data.
At a time while the U.S. reveals itself in an remarkable monetary obstacle, Meltzer's attention-grabbing historical past would be the resource of list for students and coverage makers navigating an doubtful monetary future.
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Additional resources for A History of the Federal Reserve: 1951-1969 (A History of the Federal Reserve, Volume 2, Book 1)
The legislation has never passed, mainly because a majority prefers to maintain independence. In 1978, Congress approved the Federal Banking Agency Audit Act, providing for audit of some of the Federal Reserve’s transactions by the General Accounting Ofﬁce. The act exempted transactions with foreign central banks and related to monetary policy actions (Hackley, 1983, 5). Since the Board lacks a source of earned income, the regional reserve banks pay an assessment to the Board. Other aspects of independence are the non-renewable fourteen-year terms of Board members, the absence of Senate conﬁrmation for presidents of Federal Reserve banks, commercial banks’ ownership (but not control) of Reserve banks, the reluctance of Congress to approve legislation making the chairman’s term coterminous with the president’s, and service by Reserve bank presidents on the policymaking Federal Open Market Committee (FOMC).
The dollar exchange rate fell. After a renewed attempt to use non-monetary means, the Federal Reserve raised interest rates. The dollar strengthened. 1 above in 1978–79. Public pressure, including polling data, encouraged President Carter to replace the Secretary of the in t roduc t ion 39 Treasury with G. William Miller, who had replaced Arthur Burns at the Federal Reserve. Paul A. Volcker became chairman of the Board of Governors. ” Within two months of becoming chairman, he convinced the FOMC that it had to control money growth and allow interest rates to move as much as required to slow inﬂation.
Until August 1971, the United States kept the nominal exchange rate ﬁxed at $35 per ounce of gold. Most other countries ﬁxed their exchange rates in relation to the dollar and gold. To maintain the $35 dollar gold price, the Federal Reserve would have had to choose exchange rate stability over the requirements of domestic policy. The standard interpretation of the Employment Act of 1946 at the time gave most importance to maintaining full employment. Until the late 1970s full employment was considered a 4 percent unemployment rate.