Controversial Gold Advocate Advances for a Fed Appointment

Mish

President Trump’s two Federal Reserve nominees, including the hot-button pick Judy Shelton, will proceed to a vote in the full Senate.

The New York Times reports Shelton Clears Senate Committee, Moving Closer to Fed Board.

Judy Shelton, an unorthodox economist with close ties to the Trump administration, moved a step closer to a seat on the Federal Reserve Board after the Senate Banking Committee voted along party lines on Tuesday to advance her nomination to the full Senate.

Ms. Shelton moved forward along with Christopher Waller, who is research director at the Federal Reserve Bank of St. Louis and a more conventional pick. If they are confirmed by simple majority votes in the Senate, Ms. Shelton and Mr. Waller will fill the two empty seats on the Fed’s seven-member board in Washington.

Attack Dogs Blast Shelton

In a stunningly ignorant, yet hardly surprising op-ed, Steven Rattner says God Help Us if Judy Shelton Joins the Fed.

“Why do we need a central bank?” Ms. Shelton asked in a Wall Street Journal essay in 2009. She wants monetary policy set by the price of gold, a long-abandoned approach that would be akin to a Supreme Court justice embracing the Code of Hammurabi.

Anyone who questions the need for a Central Bank immediately has at least something on the ball. 

The Fed has blown 3 consecutive economic bubbles of increasing amplitude. 

By keeping interest rates too low too long, the Fed helped brew the dotcom bubble, then when it burst blew the housing bubble, then before Covid hit blew another enormous stock market bubbles.

Letting the market set rates would have been a dramatic improvement. 

The Federal Reserve is an indispensable player in managing our economy. Period. 

Wrong. Period. 

Her past opposition to the Fed buying bonds to help stimulate the economy — as it did successfully during the 2008 financial crisis — would have prevented the central bank from standing up many of the rescue programs that are now helping to keep the economy afloat.

Were it not for the Fed blowing bubbles, we would not need the Fed to stimulate the economy. The Fed overstimulated the economy in a major way three times in the last 20 year. 

Rattner wants more of the same.

Between 1880 and 1933, the United States experienced at least five full-fledged banking crises; in the past 87 years, we’ve had two. Though promoted as smoothing price movements, a gold standard in fact magnifies them, as a comparison of the pre-Depression period to the post-World War II era makes clear.

Rattner is ignorant of history.

We had banking crises not because of gold, but because banks lent out more gold than they had on deposit, a fraudulent practice. 

A few other weird ideas from Ms. Shelton: She has questioned the accuracy of government statistics. She wants a single currency for North America. (Does she not know how badly the euro has worked?)

Government stats, especially GDP and the CPI are indeed fatally flawed.

But Rattner is correct that wanting a single currency for North America is ridiculous. 

However, that is nothing Shelton could do on her own even as Fed Chair. The US, Canada, and Mexico would all have to agree. 

Until her confirmation hearing, she backed getting rid of federal deposit insurance, a key protection for individual savers. 

Bingo, that is another plus for Shelton. FDIC is an enabler of Fractional Reserve Lending (that is lending more money or for longer period than there are deposits)

The system is so screwed up now that lending creates its own deposit reserves to the benefit of those with first access to money (namely the banks and the wealthy).

Thus Ratter openly advocates more income and wealth inequality. 

God help us if the next chair is Ms. Shelton or anyone else with her views. Senate Republicans must recognize this danger and show some backbone.

That was written before the committee vote. Shelton passed the committee 13-12 and now advances to the full senate.

Diversity Desperately Needed

What the Fed desperately needs is diversity in new ideas not token people of color or gender that all think the same way,

Regardless of what one thinks of gold, it is clear the Fed needs new ideas instead of the same old bubble-blowing mindset of a bunch of clowns who have proven they do not know what inflation even is.

Question for Rattner

Hello Steve what do you think if I proposed the Fed set the price of steel or oranges? 

Hopefully you would think that would be crazy. But setting the correct price of interest rates and money supply is much harder. 

We know that based on 3 consecutive bubbles.

Mish

Comments (66)
No. 1-18
MattH
MattH

Hi Mish,

I think we all agree wholeheartedly that we need to fix the valuation of each unit of currency, however the challenge in doing this exclusively to gold means that we would limit the total quantity of currency in circulation (based on the quantity of gold). Clearly this would promote the hoarding of money (at the end of the day people are greedy), and in effect creating unnecessary monetary shortages (and potentially elevated interest rates - which would have serious unintended consequences).

Surely the solution is to delink money from debt and then to fix the valuation of each unit of currency to a “basket of commodities” (which could also include a unit hour of labour for example). In this way, we would solve the valuation issue and also solve the potential problem of hoarding where the quantity could be managed according to the needs of the economy.

And lastly many thanks for your blog Mish - keep up the great work!!

anoop
anoop

Yay for the gold bugs. And the digital currency bugs. And the weaker dollar bugs. And the ...

Quatloo
Quatloo

Totally agree that this hyperventilating about someone who brings a differing viewpoint is absurd. She is one person on a board; the ‘sky is falling’ editorial shows how terrified the establishment is to have ANY differing voices at the Fed.

That said, this op-ed is standard drivel from the New York Times. Diversity of thought is just not permitted there, and they simply cannot understand why anyone would want to hear viewpoints that differ from the views they espouse.

TaxHaven
TaxHaven

"Letting the market set interest rates" is a part of any improvement. You'd also have to end central banking, adjust reserve ratios, sharply reduce government spending (ending deficit spending) and very likely eliminate government borrowing via bond issuance. But yes, anyone who questions the need for a central bank is halfway there already.

TonGut
TonGut

Agree with most of the post but could someone please explain why a self-professed libertarian would want a gold standard again, of all things.

The gold standard was a government decree,was it not? They even made it illegal to own? So, it took coercion to get us to bring our gold in and exchange it for the paper. Then by another decree, they go off it by refusing to redeem. So, who ended up with the gold? And you want to do it all over again? Why?

Dodge Demon
Dodge Demon

Mish, I listened to the Schiff podcasts this week and apparently she’s already been brainwashed, “got her mind right”, as Cool Hand Luke said, and had retracted years’ worth of her opinions in central banks and gold.

Got Gold?

Also a good hedge may be a 30 year fixed rate mortgage at 3% on property to be held long term, as anybody holding that paper would be a complete idiot (The Fed), even if only 1970s type inflation occurs. Property should not be in high property tax financial basket case state or political subdivision, however.

Tony Bennett
Tony Bennett

"In a stunningly ignorant, yet hardly surprising op-ed, Steven Rattner"

...

Interesting that link no longer working.

Anyways, I assume this Rattner is the same dope who was O's car czar ... maestro of cash4clunkers.

I remember an interesting Godfatheresque story on Ratt.

Back in 2009 when GM on the ropes ... and subsequent recipient of taxpayer bailout. There was immense pressure on GM bondholders to take a haircut ... rather than union workers making big concessions. A hedge fund that held some GM bonds said no way. Well, good old Ratt met with the fund manager ... and in an expletive laden tirade threatened the manager with having the IRS crawl into his every orifice. Nice Guy.

AWC
AWC

And the international central banking cartel is simply going to step aside and allow real money to replace its fiat wealth and power strangle hold on the planet?

Fat chance.

Stuki
Stuki


The Federal Reserve is an indispensable player in managing our economy. Period. 
Wong. Period. 

It’s not wrong at all. Problem is, a “managed” economy, is the exact opposite of a free economy.
Antebellum lynching posses were no doubt indisputable players in managing “our” Niggas as well….. As are current day Minnesota cops/hobby-stranglers…..

“the rescue programs that are now helping to keep the economy afloat.”

And how did these “rescue programs” do that? By putting Washington’s head on paper pieces? Did doing so create any real value to rescue someone with? I’m sure this idiot can’t add and stuff, but for those who fancies themselves numerate: How do you go about rescuing someone, as in making them wealthier than they would be if not “rescued”, without 1) creating some value to hand them as part of their rescue, or 2) stealing the wealth required from someone else, who first had to create it?

“Between 1880 and 1933, the United States experienced at least five full-fledged banking crises; in the past 87 years, we’ve had two”

And again, where does Sir NotSoBright suppose the wealth required to hand a bunch of useless banksters enough funds to prevent them from having a “crises”, come from? Does printing faces on paper magically create it? Or, did someone else have to create it, only to then have it taken from them in order to prevent Mr and Mrs. Idle McBanksterTrash from having themselves (horrors-of-horrors) a little “crises” during bonus season? And what will the latter, one “crises rescue” at a time, inevitably do to the amount of economic resources under control by those with a proven competence to create some value with them, who now had to have it taken from them to “rescue” makeworking nobodies producing nothing at all?

“A few other weird ideas from Ms. Shelton: She has questioned the accuracy of government statistics.”

Like Stalin getting 102% of the vote?

“Until her confirmation hearing, she backed getting rid of federal deposit insurance, a key protection for individual savers. “

Pray tell where the payouts for that insurance would come from, if not specifically from “individual savers.” More magic wealth creation by printing faces on paper again? Or, are we just back to the same old rob-the-value-creators game, one more time?

“God help us if the next chair is Ms. Shelton or anyone else with her views. Senate Republicans must recognize this danger and show some backbone.”

As long as you limit “Us” to mean the gaggle of completely useless for any purpose garbage, which the Fed was founded specifically to slaughter everyone else in order to “protect”; no doubt. For the 90+, and rapidly rising, percent of people who are being robbed to “rescue the banks”, “ provide “liquidity” to idiot “billionaires” “ and protecting completely useless, zero economic purpose banksters and other FIRE nobodies from “having a crises” OTOH: Anything which is a danger to the current “system” is, a priori and without exception, an undifferentiated good thing. Doesn’t even matter what that danger is anymore. Even America going full on Mogadishu-in-the-90s feral, literally and for real, is a step in the right direction, compared to the current “system.” And compared to that, a Shelton nomination doesn’t even register as far as possible side effects go. Much more concerning, is that it likely won’t register nearly as effectively as far as changes, hence benefits, go, neither.

Rhett3
Rhett3

When WWI started they looked at their plans and executed Day 1 Item 1 - suspend convertibility to gold. Even when we were to a gold standard, it rarely survived a crisis? Why do you think that would change?

No deposit insurance? If the direct deposits don't come through on payday and people can't get their money they are going to be lynching congressmen on the steps of the capitol.

It's all so patently ridiculous to think this is even possible by any stretch of the imagination.

Webej
Webej

Actually if the currency were a gold coin, it would not be that crazy to share it between Canada and Mexico.

Jackn
Jackn

The Fed's allegiance is to their owners the banks!

Mish
Mish

Editor

I want a free market in money. When given a choice people have invariably chosen gold when available.

Mish
Mish

Editor

There should not be a dual mandate nor a single mandate because there should not be a Fed at all.

The idea that a group of central planners can fix anything is ridiculous in and of itself

tokidoki
tokidoki

Wanting a weaker dollar is really stupid especially since the US isn't really an export oriented country. The ones benefiting from a weaker dollar are our debt ridden companies, which should go to hell anyways. The rest of us will benefit from deflation.

Mish
Mish

Editor

Link to NYT fixed


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