Meltzer originated the aphorism "Capitalism without failure is like religion without sin. It doesn't work." That is, guarding companies from failure "removes the dynamic process that makes stockholders responsible for losses and disciplines managers who make mistakes."[4]
Meltzer was the first ever recipient of the AEI's Irving Kristol award in 2003.[9] 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."[10]
Meltzer was the Chairman of the Congressionally mandated International Financial Institution Advisory Commission,[11] 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. [2] The report's recommendations were not adopted by subsequent U.S. administrations of either party.
Meltzer was critical of the Federal Reserve's decision to rescue the leading bond-insurer AIG when it did so in 2008: "these disasters should be headed off early, or should be left to the marketplace to settle."[12] In turn, 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..."[12] A year later, however, Meltzer expressed a 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..."[13]
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."[14] 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%,[15] while expected inflation over a 10-year period, as estimated by the Cleveland Federal Reserve, was running at around 1.6%.[16] Meltzer's argument that nobody had expected the lack of inflation has been challenged by Paul Krugman.[17]
"Major works before 1997". Archived from the original on 2000-09-03. Retrieved 2007-02-01.{{cite web}}: CS1 maint: bot: original URL status unknown (link) , 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 pp. ix–x.
_____ (2003). "What Future for the IMF and the World Bank?," Quarterly International Economics Report, July"Archived copy"(PDF). Archived from the original on 2003-12-25. Retrieved 2013-09-28.{{cite web}}: CS1 maint: archived copy as title (link) CS1 maint: bot: original URL status unknown (link) .
Source documents for Meltzer's A History of the Federal Reserve, Volumes I and II, at the FRASER historical documents site of the Federal Reserve Bank of St. Louis
