A Term at the Fed : An Insider's View

Rating:
Summary: Term at the Fed: Insightful & Informative
Review: Given Meyer's background as an award-winning macroeconomic forecaster, well-credentialed academic and professor, and six-year member of the Board of Governors of the Fed, it is little surprise that this account of his term at the Fed is truly insightful in several dimensions.

Meyer does a skillful job of interpreting the flow of economic events from mid 1996 to early 2002 within the intellectual framework of mainstream economics, a "school" that includes Alan Greenspan and the influential Federal Reserve staff. That this was such an interesting period in U.S. economic history --- including the late 1990s productivity acceleration, the Asian and Russian Crises, the bursting of the equity bubble, and 9/11 --- means there are plenty of potentially confusing cross currents that must be made to fit into a single framework, and Meyer does this clearly and without resort to much jargon.

As a long-time professor of monetary economics, Meyer knew well the organization and mechanics of the Fed. What he learned from his time there and reveals in this book is the real functioning of the Fed under Greenspan, especially in its conduct of monetary policy. The chapter entitled "Come with Me to the FOMC" is an interesting and insightful blow-by-blow account of a meeting of the Federal Open Market Committee, the policy-setting body of the Fed. For the advanced student of monetary policy, the book develops the 'playbook for monetary policy' in the Greenspan era, putting in context the Fed's "risk management" approach and penchant for "gradualism."

After serving closely with Alan Greenspan for nearly six years Meyer has little but praise for Greenspan's abilities as Fed Chairman. While Meyer clearly would adopt a more open and engaged style than Greenspan if he were chairman, he came to respect the Chairman's go-it-alone, no-nonsense, style. If there is a cautionary note it is that any successor to Greenspan would need to quickly establish themselves in the eyes of the other FOMC members and adopt Greenspan's technique of "leading from the middle." It makes finding a Greenspan replacement sound like a rather daunting challenge.

Finally it is refreshing to hear the candor and humility with which the tale is told. As a former leading member of what is arguably one of the world's most powerful institutions, he could have been excused for exaggerating his own importance and tooting his own horn. Rather we get an honest description of how he and his colleagues struggled to understand the remarkable performance of the economy in the second half of the 1990s and how it responded to a series of shocks starting in early 2000. A key lesson of that period made clear by this book is that the conduct of monetary policy is far too difficult and far too important to be left to amateurs and that we need more people like Meyer to sit at the big oval table at 20th and C streets.

Rating:
Summary: Insiders View of Fed
Review: This concise book is a must read for both the casual investor and the seasoned fed watcher. Former Fed Governor Larry Meyer provides the first book length account of the "Secrets of the Temple" as experienced by an actual member of the Open Market Committee. In a jargon-free style, Meyer chronicles the intellectual ferment at the Fed as Alan Greenspan and company struggled to come to terms with the implications of the "New Economy", debated the existence of a stock market bubble and dealt with the calamity of September 11th. Neither a tell-all memoir nor a self-congratulatory tome, Meyer is scrupulously honest in admitting his own mistakes while unstinting in his praise for the wisdom of Chairman Greenspan. Nevertheless, the picture he paints, of a nearly all-powerful Chairman and staff will likely be a cause of concern for those concerned about the performance of a post-Greenspan fed. An excellent book for anyone interested in the economy or the conduct of monetary policy, "A Term at the Fed" should be required reading in all introductory macroeconomics classes.

Rating:
Summary: Excellent insider's account of the Fed
Review: This is an excellent book that gives you a good insider's view on how monetary policy is crafted within the Fed. The author experienced one of the most interesting terms in the history of the Federal Reserve Bank. This is not only because of the frequent currency crisis, sovereign defaults, hedge fund bail out, stock market bubbles and crashes. These are the usual villains. But, it is the "New Economy" that became the paradigm shift in the Fed's monetary policy.

In essence, Alan Greenspan became convinced that the sustainable economic growth rate without causing undue inflation was substantially higher than it was in the past. As a result, Greenspan was comfortable lowering interest rates to record low levels, and keep them there for longer than any other Fed Chairman would have dared. Greenspan recognized that there were several factors that would keep inflation in check. These economic forces included a secular rise in U.S. labor productivity, and deflationary forces associated with globalization and the lower cost of production in China. It goes without saying that Greenspan was right one more time. Unless he undertakes a major screw up between now and then, Greenspan is likely to be remembered as the best Fed Chairman we had by the time he retires at 80 years old in 2006.

Alan Greenspan was sometimes intellectually dictatorial in his own thinking as depicted in the previous paragraph. This apparently frustrated the author somewhat who would have preferred a more collegiate, democratic, and open management style. These are good points, but they are unrealistic. The Fed Chairman has an extremely high profile. His persona is deemed to be responsible and accountable for the largest economy in the World. This economy is in turn the World's economic engine. The burden of responsibility on Greenspan is enormous and falls squarely on his shoulders alone. If he gets it wrong, he is toast. He can't in turn blame Laurence Meyer for a Fed's mistake. Alan Greenspan's successor will probably be as brilliant, and diplomatically dictatorial as Greenspan is. It is just the nature of the job.

Even though, you get that Meyer disagreed with Greenspan on their respective reading of economic indicators and policy implications, Meyer developed much intellectual and professional respect for Greenspan. The book is not at all the works of a disgruntled employee. Meyer fully recognizes he worked at the Fed during a historical transition. And, despite his occasional frustration with the job, including a lack of recognition, he most probably cherished the experience and opportunity.

Meyer comes across as having a high self-esteem, yet being egoless, with much humor. In other words, he must have been an ideal colleague to work with at the Fed. He certainly is a very good author, and has a gift for conveying complex technicalities of monetary policy in very readable and even entertaining prose.

If you enjoy books on economics and policy, I also strongly recommend "In an Uncertain World" by Robert E. Rubin, former Secretary of the Treasury under Clinton. Rubin is also probably the top candidate to replace Greenspan in 2006, if John Kerry wins the Presidential election.