Goodbye to a great monetary historian – R.I.P. Anna Schwartz

Yesterday, Anna Schwartz passed away in her New York City home at an age of 96. Anna Schwartz undoubtedly was one of the greatest monetary historians ever and her masterpiece A Monetary History of the United States, 1867-1960″ , which she co-authored with Milton Friedman was instrumental in changing how economic historians view the causes of the Great Depression.

Anna Schwartz’s analysis lead her to conclude that the Great Depression was caused by monetary policy failure. Or as Ben Bernanke said in 2002:

  “I would like to say to Milton and Anna: Regarding the Great Depression, you’re right, we did it. We’re very sorry, but thanks to you we won’t do it again.” 

There is no way around it – Monetary History is one of the greatest works of economics ever produced and surely one of the most important – if not the most important – book on monetary history ever written.

Somewhat unfairly Anna Schwartz never got the full recognition for her work that she deserved. How the Nobel Prize committee never awarded her the Nobel Prize in economics will forever be a puzzle.

It is a testimony to her hard work and intellect that she continued to work with Michael Bordo and Owen Humpage on a project on the history of government intervention in currency markets after breaking a hip in 2009 and having a stroke (See here and here).

While I did not agree with her analysis of the Great Recession – exactly because I agree with her analysis of the Great Depression – I will forever think of Anna Schwartz as one of the greatest monetary historians with an amazing intellect.

Anna Schwartz R.I.P.


For an overview of Anna Schwartz work see here.

Update: Read also George Selgin’s tribute to “Anna”


The reason Mario Monti is beginning to sound (very) desperate

When the eurocrat Mario Monti became Prime Minister last year we were told that he was the man to turn around the Italian economy. We were told that technocrats would do the job rotten and incompetent politicians were not able to do. However, the eurocrat Papademos did not last long in Greece and now Mario Monti is beginning to sound rather desperate. On Thursday he told reporters that EU policy makers had one week to save the euro. That is somewhat of a stern warning from somebody who is supposed to be a cool-headed technocrat.

Why this sudden desperation from Monti? Well, it is pretty simple – Italian nominal GDP is declining sharply, while Italian funding costs are increasing sharply day-by-day. With NGDP declining rapidly the public debt-to-GDP ratio obviously is exploding and as investors know that the ECB has not shown any willingness to curb the decline in NGDP then Italian debt as share of GDP is likely to continue to increase no matter how many budget cuts and tax increases the Italian parliament passes. It is very simply – without growth in NGDP the Italian government will fast become insolvent.

Therefore, it is not really Angela Merkel Mario Monti should be asking for help to solve the crisis, but rather his namesake and countryman ECB chief Mario Draghi. The ECB can end this crisis by introducing a determined policy to curb the drop in euro zone NGDP (or rather to increase NGDP markedly). On the other hand if Draghi does not act then it might very well be that Monti is right about his warnings.

PS Meanwhile Monti’s predecessor is having other ideas (remember Italy never defaults – Italy inflates…) and it is not the first time.

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