Allan H. Meltzer
February 6, 1928 |
Allan H. Meltzer (born February 6, 1928) is an American economist and professor of Political Economy at Carnegie Mellon University's Tepper School of Business in Pittsburgh, Pennsylvania. He was born in 1928 Boston, Massachusetts. He is the author of dozens of academic papers and books on monetary policy and the Federal Reserve Bank, and has written on the development and applications of monetary policy.
Meltzer's study A History of the Federal Reserve is considered the most comprehensive history of the central bank. Volume I was released in November 2002; Volume II, which covers the years since the Federal Reserve accord in 1951 to 1969, was released in February, 2010.
Meltzer has confirmed that he originated the aphorism "Capitalism without failure is like religion without sin. It doesn't work."
Meltzer served, from 1973 to 1999, as the Chair of the Shadow Open Market Committee, a group of economists, academics, and bankers that met to critique the actions of the Federal Reserve's Federal Open Market Committee. He served as an Acting Member of the Council of Economic Advisors in 1988-89 at the end of the Ronald Reagan administration. He is currently a visiting scholar at the American Enterprise Institute.
Meltzer was the first ever recipient of the AEI's Irving Kristol award in 2003. He was honored at the award dinner by President George W. Bush, who remarked "I know I'm not the featured speaker; I'm just a warm-up act for Allan Meltzer."
Meltzer was the Chairman of the Congressionally-mandated International Financial Institution Advisory Commission, known as the Meltzer Commission. The Commission's majority report (2000) proposed changes to the operations of the International Monetary Fund and especially to those of the World Bank, which the majority recommended should withdraw from lending to "middle income countries". Four (out of 5) Commission members nominated by the then-minority Congressional Democrats filed a dissent from the majority's recommendations (Bergsten, Huber, Levinson and Torres), though one of the four (Huber) both voted for the majority report and joined the dissent. The official vote tally in favor was thus recorded as 8 to 3. Controversy over the majority's arguments and recommendations continued after the report's publication: critics, including David de Ferranti, a former Vice President at the World Bank, argued inter alia that the majority's report reflected ideological preconceptions rather than any demonstrated understanding of how the World Bank actually works, including the extensive complementarities between World Bank programs and private sector investment in developing countries. The Commission's report is defended by Meltzer's chief advisor Adam Lerrick and critiqued by de Ferranti in their respective chapters in an edited volume published by the Center for Global Development and fully accessible on the web.  The report's recommendations were not, in the event, adopted by subsequent U.S. administrations of either party.
Meltzer was highly critical of the Federal Reserve's September 2008 decision to rescue the leading bond-insurer AIG: "these disasters should be headed off early, or should be left to the marketplace to settle."  Consistent with this position, the Fed's decision not to rescue Lehman Brothers was one which, at the time, Meltzer appeared to applaud. Contrasting it with the AIG rescue, he commented: "I would say we ought to look at Lehman Brothers. They let Lehman Brothers fail. Within a few days, just a few days, Barclays was there buying up some of Lehman's assets..." A year later, however, Meltzer took a different and more critical view of the Fed's handling of the Lehman case: "After 30 years of bailing out almost all large financial firms, the Fed made the horrendous mistake of changing its policy in the midst of a recession... Allowing Lehman to fail without warning is one of the worst blunders in Federal Reserve history..." 
In May 2009, Meltzer warned that "the enormous increase in bank reserves — caused by the Fed’s purchases of bonds and mortgages — will surely bring on severe inflation if allowed to remain." Four years after Meltzer's comment, with the Fed's quantitative easing program still continuing, US inflation as measured by the consumer price index (CPI-U) was running at a year-on-year rate of 1.4%, while expected inflation over a 10-year period, as estimated by the Cleveland Federal Reserve, was running at around 1.55%. Speaking in January 2014, the Managing Director of the International Monetary Fund, Christine Lagarde, warned that the threat of deflation risked derailing the global economic recovery. Meltzer's unwillingness fully to admit the failure of his prediction, and Meltzer's claim that nobody had expected the lack of inflation, led Paul Krugman (whose model had correctly predicted the lack of inflation) to characterize Meltzer as an ostrich (for putting one's head in the sand, a play on fiscal hawks and fiscal doves)
- Major works before 1997, including his work with Swiss economist Karl Brunner.
- Karl Brunner and Allan H. Meltzer (1993). Money and the Economy: Issues in Monetary Analysis, Cambridge. Description and chapter previews, p p. ix-x.
- Allan H. Meltzer (2001). A History of the Federal Reserve, Volume 1: 1913-1951, ISBN 978-0-226-52000-1 Description.
- _____ (2003). "What Future for the IMF and the World Bank?," Quarterly International Economics Report, July Cached copy.
- _____ (2006)."An Appreciation: Milton Friedman, 1912-2006," On the Issues, AEI Online.
- _____ (2009) A History of the Federal Reserve, Volume 2, Book 1, 1951-1969, ISBN 978-0-226-52001-8
- _____ (2009) A History of the Federal Reserve, Volume 2, Book 2, 1970-1985, ISBN 978-0-226-51994-4
- _____ (2012) Why Capitalism?, ISBN 978-0-19-985957-3
- "Faculty Information". Retrieved 2007-06-11.
- "A History of the Federal Reserve". (subscription required)
- "The Mont Pelerin Society". Retrieved 2012-12-25.
- Two Authorities on Fed Advise Congress Against Expanding Its Power
- "A History of the Federal Reserve, Volume 2, Book 1, 1951-1969 [Hardcover]". Amazon.com. Retrieved 2010-06-30.
-  (Ich habe einmal gesagt: "Kapitalismus ohne Fehler ist wie Religion ohne Sünde". Dieser Satz hat es sogar bis ins Kreuzworträtsel der New York Times gebracht.)
- "Annual Dinner and Lecture". Retrieved 2009-07-09.
- "International Financial Institutions Advisory Commission". Retrieved 2007-06-11.
- "What Happened to the 'Depression'?" Allan H. Meltzer, Wall Street Journal, September 1, 2009.http://online.wsj.com/article/SB10001424052970204251404574342931435353734.html
- Meltzer, Allan H. "Inflation Nation". New York Times, 3 May 2009. Accessed online on 5/3/13 at: http://www.nytimes.com/2009/05/04/opinion/04meltzer.html?pagewanted=1&adxnnl=1&adxnnlx=1367578979-RPtNA0Cj6DHKum4atnNkAQ
- U.S. Department of Labor, Bureau of Labor Statistics, Consumer Price Index, accessed on 7/2/13 at: http://www.bls.gov/cpi/tables.htm
- "Cleveland Fed Estimates of Inflation Expectations" accessed on 7/3/13 at: http://www.clevelandfed.org/research/data/inflation_expectations/
- "IMF warns of growing threat from deflation". Financial Times, January 16, 2014.
- Allan Meltzer's home page at Carnegie-Mellon
- Research of Allan Meltzer compiled at Carnegie-Mellon
- Meltzer's homepage at the American Enterprise Institute
- Article on monetarism by Meltzer from the Concise Encyclopedia of Economics
- Interview with Meltzer from the Minnesota Fed's webpage
- Press release from Carnegie-Mellon on Meltzer's speech upon receipt of the Irving Kristol award
- Text of Meltzer's acceptance speech for the Irving Kristol award
- Transcript of Meltzer's appearance on PBS's Think Tank program
- Source documents for Meltzer's A History of the Federal Reserve, Vol. I from the FRASER historical documents site of the Federal Reserve Bank of St. Louis
- interview on National Public Radio's broadcast of September 26. 2008.
- Roberts, Russ. "Allan Meltzer Podcasts". EconTalk. Library of Economics and Liberty.