Judy Shelton, Trump's Next Fed Choice, favors a Gold Standard and Free Trade
Bloomberg reports White House considers economist Judy Shelton for Fed Board
The White House considers conservative economist Judy Shelton to fill one of the two vacancies at the Federal Reserve Governors that President Donald Trump has struggled to fill. [1[ads1]9659003] She is currently the US Executive Director of the European Bank for Reconstruction and Development, and previously worked for Sound Money Project which was founded to promote awareness of monetary stability and economic privacy.
Case for Monetary Regime Change
On April 21, Judy Shelton had a revelation in the Wall Street Journal: The case of monetary change.
Since President Trump announced his intention to nominate Herman Cain and Stephen Moore to earn from the Federal Reserve Reserve Board, general commentators have made a point of rejecting someone who is sympathetic with a gold standard as curly or unqualified.
But I'm not quite legitimate, and cautiously, questioning the Federal Reserve's infallibility by calibrating the money supply to the needs of the economy. No other state institution had more influence on the creation of money and credit in the follow-up to the devastating 2008 global breakdown. And Fed's response to the closure may have worsened the damage by reducing the incentives for banks to finance private sector growth.
What began as an emergency decision in the wake of the financial crisis to pay interest to commercial banks in surplus has become the Fed's main mechanism for conducting monetary policy. To raise interest rates, the Fed increases the rate it pays banks to keep their $ 1.5 trillion in excess of reserves – eight times that required – parked in accounts with the Federal Reserve district banks. Rewarding banks to keep surplus reserves in the sterile deposit account of the Fed, rather than lending to the public, does not help create business or spur job creation.
Meanwhile, for all the talk of a "rules-based" system of international trade, there are no rules to ensure an economic level in monetary policy. The classic gold standard established an international benchmark for currency values, in line with the free trade principles. Today's schemes allow governments to manipulate their currencies to gain an export advantage.
The money is meant to serve as a reliable unit of account and value creation across borders and over time. Asking whether this can be better secured by linking money and credit to gold or another benchmark, as opposed to relying on a dozen or so monetary officials meeting eight times a year to determine interest rates. . A linked system can allow currency conversion of individuals (such as under gold standard) or foreign central banks (as under Bretton Woods). Either way, it can correct inflationary pressures.
Money Meltdown
Judy Shelton is the author of the 1998 book Money Meltdown.
I just ordered the book to get a better idea where she came from.
Anyway, I'm sure she would have been a better choice for the Fed chair than Powell, Bernanke, Yellen or Greenspan.
Increasing Amplitude Bubbles
Shelton concluded " Central Bankers and their defenders have proven less than omniscient ."
Actually.
The Fed's judgment has produced three consecutive bubbles, each larger than the one before it. The only reason why the latest bubble has not yet been confirmed is that it has not yet broken.
It is not clear exactly what Shelton has in mind, but at least she is moving in the right direction. What is clear is that Trump is fighting for the wrong match in terms of trade.
Tariffs will not solve the alleged currency impact issues. A gold standard would.
To discuss, see:
- Dispute Trumps NAFTA "Disaster" with pictures: What is the real source of trade disruption?
- Mission impossible: Tariffs did not reduce Trade deficit (Offers will not)
Mike "Mish" Shedlock
