Economist Anna Schwartz, Milton Friedman’s coauthor of the stunning Monetary History of the United States, died yesterday at the age of 96. The New York Times obit is nicely written, describing her as the “high priestess of monetarism.”
An excerpt (read the entire obit, it is worth it):
During the financial collapse that began in 2008, she was one of the few economists with a firsthand recollection of the Depression. After praising early moves by Mr. Bernanke, she wrote, at age 93, a bitingly critical Op-Ed article for The New York Times in July 2009 opposing the reappointment of the Fed chairman who had been so influenced by her work.
She contended that Mr. Bernanke had erred in producing “extreme ease” in monetary policy and in failing to warn investors that new financial instruments were difficult to price.
Mrs. Schwartz also held that the government had been a bigger contributor to the crisis than had been widely realized. By her measure, the government had oversold the benefits of homeownership, pushing Fannie Mae and Freddie Mac, the government-backed mortgage finance giants, to lend increasingly to lower-income borrowers and fostering exceptionally low mortgage rates.
Hard to disagree. Anna Schwartz, R.I.P.
There is a lot to be admire about Schwartz, so I don’t want what I’m going to say to be taken the wrong way. She was a very sharp person who made an important contribution to our understanding of economics.
Moreover, I think she is right to question some of the Fed’s moves over the last 20 years. However, I think she is quite wrong about Bernanke’s “monetary easing.” The devil is in the details and the data supported easing. Indeed, one could argue that Bernanke didn’t provide enough liquidity in the face of the financial collapse. Her partner Milton Friedman probably would have supported easing – especially if you look at the Rx he supported for Japan during its own financial troubles.
But you are right, RIP.
More on point: Where’s the inflation post 2008? And check out M3.