Dr. Allan H. Meltzer is an American Economist and the Allan H. Meltzer professor of Political Economy at Carnegie Mellon University’s Tepper School of Business. He is the author of a large number of academic papers and books on monetary policy and the Federal Reserve Bank. Dr. Meltzer’s two volume books, “A History of the Federal Reserve”, are considered the most comprehensive history of the central bank.   He is considered one of the world’s foremost experts on the development and application of monetary policy. Currently he is also President of the Mont Pelerin Society. Dr. Meltzer originated the aphorism “Capitalism without failure is like religion without sin. It doesn’t work.”

This is a monthly column written by Professor Meltzer for Defining Ideas of the Hoover Institution.

It is posted in   http://www.hoover.org/research/

In late August, I again spent 3 days with central bankers from all over the world at the annual meeting sponsored by the Kansas City Federal Reserve Bank. The spectacular, scenic beauty at the Grand Teton National Park, Wyoming, is one of the world’s most beautiful places. The meetings attractions include stimulating discussions of economic policy in addition to the spectacular scenery and wonderful hiking.

This year’s central topic called on participants to discuss ways to improve future monetary policy operations. A major concern is about ability to respond effectively to a recession if the current low interest environment continues. Central bankers have learned to lower interest rates to encourage borrowing in recessions and to raise rates when inflation threatens or occurs. Because interest rates are close to zero in all the developed countries, some market participants fear that central banks will be powerless to act. Chair Yellen tried to reassure them.

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