Customer Reviews

The Monetary Policy of the Federal Reserve: A History (Studies in Macroeconomic History)

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This book is a 21st century version of Friedman and Schwartz's classic Monetary History of the United States. The monetarist-leaning author shows how the Fed won the battle over inflation in some decades but lost the battle in others. Citing hundreds of FOMC transcipts and interviews with key decisionmakers, the author provides an almost anthropological account of what it means to be "soft on inflation" or "tough on inflation."

I didn't agree with everything in the book, and that's a sign of just how good it is: Hetzel takes strong positions and argues them with statistical and archival evidence. I wrote an enormous amount in the margins--the hints of future lecture notes from when I (surely) teach with this book in the near future.

One of the great services Hetzel performs is dragging into the light quotes from old-line Keynesians (including some Nobel Laureates) who said it was impossible or impractical to bring inflation down from 6% to 1% (sic), as well as quotes from famous Keynesians who argued that inflation-fighting wasn't even the Fed's business.

Those guys had it wrong, wrong, wrong. Nowadays, almost all macroeconomists seem to agree that long-lasting "inflation is always and everywhere a monetary phenomenon," as Milton Friedman used to say, but elite economists in the 50's, 60's, and 70's mocked such views. Hetzel has the goods on those who mocked the monetarists, one of the many little treasures in this fascinating volume.

This is an extremely educational book about the development of Federal Reserve policy as well as about the development of the Central Bank. What I most enjoy reading is the interplay between the monetary policymakers and the political policymakers. The vocabulary is a bit specific, even for an economist, and one will have to work a bit to follow the discussion.