Anna Schwartz Schools Hank Paulson

Anna Schwartz is the co-author with Nobel laureate Milton Friedman of A Monetary History of the United States, one of the most important economic treatises to be written in the last century.  The book is absolutely critical to our understanding of the Great Depression and the role that poor monetary policy played in turning a market downturn into an economic debacle.  To be honest albeit crass, I thought she was dead.  Professor Schwartz appears in this week’s Barrons (subscription required) and at age 92 is very much alive and (intellectually) kickin’. 

She takes great issue with the government’s response to the current crisis: “It’s like there’s a bunch of guys that are making it up as they go along. They talk about transparency and what they present is opacity, programs that don’t make sense, or are not yet fully laid out. This only increases the already high level of uncertainty and anxiety.”   Prof. Schwartz further highlights the inflationary risks in the current approach: It’s like the only lesson the Federal Reserve took from the Great Depression was to flood the market with liquidity. Well, it isn’t working. Professor Friedman would have enough stature to get them to listen and stop pooh-poohing any notion of possible inflation.”

One more point caught my attention.  Schwartz lamented the demise of the Shadow Open Market Committee, a private group of academic and industry economists that issued critiques and alternative policy prescriptions to the Fed.  My own experience in Washington this summer taught me that our regulators could use more citizen advisory panels instead of relying so heavily on industry input and lobbyists.

Brava, Professor Schwartz!

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