Customer Reviews

Inside the Fed: Monetary Policy and Its Management, Martin through Greenspan to Bernanke

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Steve Axilrod's book is a rare avis. Written as an insider on the playing field of Federal Reserve monetary policymaking from William McChesney Martin through Paul Volcker, when he was intimately involved in monetary analysis. Axilrod also opines on monetary policy matters subsequent to his departure conducted by Messrs. Greenspan and Bernanke. It is beautifully written, full of insider stuff, and always decent and polite--the latter characteristics being a hallmark (at least in the old days) of top Fed staff.

I served at the Fed at a high level during most of the Arthur Burns years, and can attest to the authenticity of Axilrod's observations for that time period. As a member of the Board Members' staffing responsible for other areas, I was not allowed to enter the inner sanctum where monetary policy was made. This I was assured by other staffers was a blessing, because FOMC meetings were notoriously boring. That's not to say that regular Board meetings were uproariously amusing, only that FOMC policy discussions were deemed worse.

Although it does not come through in Axilrod's discussion of monetary policymaking under Arthur Burns, there were higher-ups in the Economics Division who were tearing their hair over what Burns and the FOMC were doing in 1974-75. In one singular event, I received a Sunday morning phone call at home from a very high level economist asking me if I could intervene with the Chairman to get him to change the course of monetary policy! I guess the thought was that I was (a) trustworthy; (b) able to influence the notoriously cantankerous Dr. Burns; and (c) that Axilrod for whatever reasons was of no use. For better or worse, I was not in a position to intervene.

The results of Burns' monetary policy in that period, which was marked by the emergence of the OPEC cartel, were catastrophic. The nation entered a severe recession that certainly played a part in the fact that Gerald Ford was not elected President in 1976. While Axilrod doesn't say so in so many words, it appears that a principal contributing factor to the recession was the Fed's highly restrictive monetary policy, characterized by a steep plunge in M1 at a time when petroleum product prices were skyrocketing. (If you look carefully, you can see the path of M1 in the chart included as an appendix in the book.) This created a double-whammy for the economy, and it seems other people on Fed staff saw it coming but couldn't get the Chairman to alter course.

But, as Axilrod notes, the Fed's focus on the monetary aggregates was just beginning (and mainly forced by Chairman Wright Patman of the House Banking Committee) and it took a long time for the aggregates to become central to policymaking (that awaited Paul Volcker's arrival). In fact, as Chairman Burns testified repeatedly before Congress in those years, his preference was to assess a wide variety of economic indicia, and basically operate by the seat of the pants from one FOMC meeting to the next, without quite admitting it so bluntly to the congressional committees.

Today, as Axilrod notes, the monetary aggregates, long ago faded away as useful policy indicia, are replaced in the Bernanke era by--you guessed it--making it up as you go along.

This book may be inside baseball to a greater degree than any normal reader would care to follow, but for anyone interested in how a key part--monetary policymaking--of American government works, Steve Axilrod has provided an authoritative history that is unquestionably irreplaceable.

Beautifully written, packed with insights you won't find anywhere else. Axilrod's unique experience as the consummate Fed insider shines a light on the human side of policymaking and leadership. He even breathes life into the arcane mechanics of monetary policy, far beyond what's available in any textbook yet easily understandable for a discerning reader. A gem!

Both insightful and captivating. Axilrod manages to convey the extent to which the effectiveness of various Fed chairmem and indeed the Fed itself depends the ability to understand the psychology of the moment both within policy making circles and the country at large and to act at precisely the right time. Too late or too early results in failure. Brings the deadly science to life and removes a lot of the mystery surrounding this most misunderstood institution.

Don't be fooled by the title on this book. This book does not give you the real story on the Fed. This book doesn't mention one note that the Fed is actually a private corporate bank owned by none other than the Rothschild's and other European banking interests. This book is a diversion on the real truth, whether or not the author knows the truth himself is unknown but don't waste your money on this cloak and dagger piece of a trash.