Foremost expert gives a history lesson on economics

It was a cloudy day in Pittsburgh, but light streamed through the tall windows of Professor Allan Meltzer’s condominium overlooking Carnegie Mellon University, where he has taught economics for 56 years.

At 85, Meltzer’s mind is ever-brilliant, but his mood was cloudy. “We’re in the biggest mess we’ve been in since the 1930s,” he told me. “We’ve never had a more problematic future.”

As America’s foremost expert in monetary policy, Meltzer should know. He’s the author of the three-volume “A History of the Federal Reserve.” For over 25 years he was the chair of the Shadow Open Market Committee, a group that meets regularly to discuss the policy of the Federal Reserve.

The Federal Reserve’s loose monetary policy — quantitative easing, purchases of bonds — is resulting in record-low interest rates, so investors are taking risks to get higher yields. The Fed spends $85 billion a month purchasing Treasury bonds and mortgage-backed securities. That’s the amount of the entire sequester for fiscal year 2013.

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