On Tuesday (July 21), the U.S. Senate Banking Committee approved the nomination of economist Judy Shelton, a long-time advocate of the gold standard, for one of the two vacancies on the board of governors of the Federal Reserve (aka “the Fed”), which is the central bank of the United States. The next step in the road to Shelton becoming a Fed governor is for the full Senate to decide if her comination should be confirmed.
Shelton has a Bachelor of Science (in Education) degree from Portland State University. She also holds an MBA and a Ph.D in Business Administration from the University of Utah.
In her book “Money Meltdown: Restoring Order to the Global Currency System“, which was published in hardcover form in March 1994, she argued for sound money:
“… given the disadvantages of other systems—the corruptness of floating rates, the superficiality of pegged exchange rates, the confusion of competitive private currencies—an international gold standard emerges as the most attractive option.
“A gold standard, in short, would prevent governments from using their currencies as tools of short-term economic policy, trading the temporary ad vantage of cheap exports against the longer-term problems of decreased purchasing power for their citizens in the global economy. The emphasis among participants in the international marketplace would rightly turn to comparative advantage and genuine competence.”
On 12 February 2009, in an op-ed piece (titled: “Capitalism Needs a Sound-Money Foundation”) for the Wall Street Journal, she wrote:
“Let’s go back to the gold standard… Under a gold standard, if people think the paper money printed by government is losing value, they have the right to switch to gold.”
In 2012, she co-edited a book called “Roads to Sound Money” published by the Sound Money Project of the Atlas Economic Research Foundation (now known as “Atlas Network”), which she joined as a Senior Fellow in February 2010.
This book was a collection of essays, some of which advocated a return to the gold standard, a monetary system — “widely used in the 19th and early part of the 20th century” — “in which the standard economic unit of account is based on a fixed quantity of gold.”
In August 2016, she joined the Trump presidential campaign as an economic advisor.
Roughly three years later (on 2 July 2019), ccording to a report by CNBC, President Donald Trump tweeted that he intended to nominate to the Fed Dr. Shelton as well as Christopher Waller, who is executive vice president and director of research at the Federal Reserve Bank of St. Louis. This news was officially announced by the White House on 16 January 2020.
Shelton has rather controversial views on monetary policy. At various times, during the previous decade, she has questioned the need for the Fed and the validity of its monetary policy objectives (as mandated by the Federal Reserve Act) of maximum employment, price stability, and moderate long-term interest rates.
She said during an interview with Bloomberg Television on 30 May 2019:
“I would probably be highly skeptical of those… Those are such nebulous objectives.”
When asked how she would achieve sound money, Shelton replied:
“I would first start by saying it’s a different mindset when you talk about sound money. You’re now looking at money as a moral contract of assorts between the government and its citizens.
“Money is meant to be a reliable meaningful unit of account. It’s supposed to be a dependable store of value. It’s supposed to work for everyone in the same way.
“There should be no monetary favoritism that helps wealthy investors or big corporations who want to buybacks. Money should work for everyone, and it should not be causing further wealth inequality. And so that’s where I would start.
“I think the Fed is going through a period of introspection. Its own inflation targeting approach is not achieving the results it thought.
“The models aren’t working the way that central bankers would have anticipated. They’re targeting inflation, missing the target. They’re even defining stable prices and in a way that I’m not sure everyone would agree.
“I’m sometimes called a gold bug. I guess you were alluding to commodities. I do think that there is virtue in having some kind of a some monetary integrity that’s not just dependent on a dozen people meeting eight times a year to decide what should be the price of capital.
“So I think the Fed should be open and I think is increasingly open to new ways of working mechanism and maybe even taking a look at its own record and deciding how it could be better.”
Macro-economist and crypto analyst/trader Alex Krüger said yesterday that he expected the excitement around Shelton’s potential nomination to the Fed to help push the price of Bitcoin to $10K within days:
$BTC by 10K within a few days would make sense.
One word: Shelton.
— Alex (@classicmacro) July 21, 2020