A History of the Federal Reserve, Volume 2, Book 2, 1970-1986
Allan H. Meltzer
The end of an era! I’m finally finished with Meltzer’s (very long, 3-book) history of the Fed. (He has said he is not going to keep writing past 1986.) This was an interesting book because it covered the inflation of the 1970s and the Volcker disinflation of the early 1980s. Most of all, I would say that reading this book made me interested to read something more about Volcker. The FOMC tried some very new tactics to defeat inflation in the 1980s, which I knew before; what I didn’t know until reading this was how uncertain everyone, including Volcker, was that they would have any effect. For a significant time after the new policies began, indeed, it appeared that they were not working at all, and ultimately it took several years for the full disinflation to take effect as the public’s inflation expectations had become heavily anchored at a high level. I am very curious as to Volcker’s mindset through this period, and what it was that got him to persevere even in the face of uncertainty and fairly strong evidence that his policy was having no effect.
Meltzer, who has a fairly conservative perspective, ends the book with a fair amount of criticism of the Bernanke Fed and its actions in response to the crisis. Time will tell whether his warnings of inflation will be brought to fruition, but as Krugman keeps saying, the inflationistas have been wrong for about 5 years now.